john-sutton-china-2009
China’s Industries
• Preliminaries: industry characteristics
• The new industries
• Adjusting: the established industries
• How far has China come?
• Current Trends
σ
Linkages Across Submarkets
β
Effectiveness of Capability
Building
Low
Concentration
Low R&D intensity
High
Concentration
High R&D intensity
Low concentration
Low R&D intensity
Figure 1: Industry Characteristics
σ
Linkages Across Submarkets
Automobiles CNC Lathes
Figure 2: Industry Characteristics: Example
The New Industries
• Some well known patterns
• Excess entry (Klepper et al)
• Shake-out/escalation (Klepper, Sutton, etc.)
20
0
80
60
40
20
10
0
80
60
40
20
200
80
60
40
20
100
80
60
40
20
Fridges
W/Machine s
60
50
40
30
100
90
80
70
20
10
Color TVs
78 9 80 1 2 3 4 5 6 7 8 9 90 1 2 3 4 5 6 7 8 9 00 1 2 3
The Established Industries
• Cement
• Steel
• Clothing
• Machine Tools
• Beer
Cement
• High Transport Costs Segment Market
• Regulatory Regime Strengthens This
• A Quiet Life … The BBMG Company
• A Turnaround at Sunnsy
Clothing and Textiles
• Key to Turnaround is Not Privatisation but
Permission to Export Directly (Lanyan)
• Hangsu in Silk: Capability Building and
Direct Exporting
• Ever Glory: Fast Growing Private Firm
Steel
• Slow but Steady Technical Progress
• Key Role Played by Equipment Suppliers
(Jiangsu link with Fuchs)
• Joint Ventures: Jiangsu with Posco
(Korea)
• Still ‘High Volume Moderate Quality’… with a Large Fringe of Small Producers
Machine Tools
• Slow but Adequate Adjustment Towards
CNC Machines
• Transition Cushioned by Profits from
Conventional Machines
• Joint Ventures Established over Past Few
Years are Building Capability in Advanced
CNC Machines (Dalian Company with
Index of Germany etc.)
Beer
• First Moves towards Classic Pattern become Evident
• Interaction of Scale Economies and
Advertising
• Foreign Stakeholders Move In
How Far Has China Come?
• Two Methods –
1. Benchmarking in Autocomponents
2. Trade Statistics by Product Line
0 ppm -3
00
-1500 -3000 -7000 -12
000 00
0
Figure 4: Component Suppliers to Multi-National Car Makers
Figure 5: Component Suppliers to Steering Gear Firms
Current Trends
• Seeking a Foothold: Air Conditioners for Saudi
Arabia
• The Nineties see a Move in FDI Away from Low wage Seeking Towards the Pull of the Large
Domestic Market. Illustration from DVD Market etc
• Chinese Firms seek Low Labour Cost Locations
… Ever Glory …
• Making Fridges in Italy … A Reverse Process
