In chapter three of the book it goes back to discussing China. I find the chapters about China
more interesting because of its history and its rapid expansion. Although China has expanded
rapidly over the years, its rural areas has been slower to this change, but is still a huge
improvement. Poor urban families have seen an increase in lights in the average home go from
zero to three since china opened its economy. China’s modernization drive has combined with its
developing-world, low-cost labor with nearly state-of-the-art technology and an export-friendly
infrastructure has allowed China to get way ahead of India and other developing countries.
Cheap Chinese manufacturing has saved the U.S. $70 billion dollars with additional $100 billion
saving passed on U.S. consumers. I never realized how beneficial it was not only for companies
to build factories overseas, but also for the consumer. I doubt we would have such cheap laptops
and other product for sale if we didn’t produce them in these countries. China’s five-year plan
makes it extremely easy for western companies to know what new policies China will make.
This has benefited companies like Philips which has taken advantage of this. When China sets a
new five-year plan in motion, whether it be selling asphalt for new highways, airplanes for the
opening of new airports, or light bulbs. Phillips restructures it self to meet those needs by
investing in R&D in those areas. This has been hugely beneficial for Phillips. In 2005 they sold
$195 million worth of streetlights alone, one out every three streetlights in China. This was
surprising to me, but very smart for the company to see this opportunity. When China wanted to
update its medical facilities, Phillips reversed its business strategy for some of its products to
meet Chinas new demands. Chinese hospitals bought $1.25 billion worth of imaging equipment
alone. This just show how massive Chinas market demand can be. There have been some issues
with doing business in China, such as protection of intellectual property. China makes ninety
percent of the world’s DVD players, but for a decade they refused to pay Philips in royalties for
their DVD technology. Recently they finally one this battle, but only when China joined the
World Trade Organization. This is still in on-going issue with many other products. There is a
province in china that sell imitation clothing of popular brands. This clothing was also being sold
overseas where was being sold fraudulently as the real thing. In other provinces the same issues
are happening with people selling imitation Apple phones. I was surprised to know that a large
portion of Chinas trade deficit can be traced to goods made by western companies in China. Four
of China’s top twenty-five exporters are Chinese companies. China’s bank loans have created a
problem also for its economy. China’s banks are broke thanks to an estimated $911 billion in bad
loans in 2006. Corruption as one of the main culprits here and its been hard for China to move
away from this habit. I found this chapter to be interesting to see that China although its doing
good has been hitting some snags along the way.
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