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China: Closing for Business?
8/1/2010
Overview:
In March, 2010, after four years of investment in the Chinese market, Google closed its site in China citing a cyber attack and challenges presented by Chinese censorship. This event may be emblematic of growing difficulties for U.S. firms in China. An emerging Chinese policy of “indigenous innovation” favors domestic enterprises at the expense of U.S. firms via a web of patent laws, product standards, and licensing requirements that many say are putting non-Chinese firms at a significant disadvantage. Join Active Minds as we examine how China’s single-party communist rule has impacted its path to economic development and how this emerging conflict is viewed by the international business community.
Key Lecture Points:
• In the past 10 years, China has been the fastest growing economy in the world. In 2009, at a time of global economic malaise, China’s GDP grew at a rate of 8.4% to $8.8 trillion, second only to the US at $14.2 trillion.
• China’s rise, while alarming to many in the US, is not a surprise. Its history stretches over thousands of years with periods of isolation followed by expansion. China has used its population of 1.3 billion people and workforce of over 800 million it as a lever to encourage outside companies (including but not limited to American ones) to invest and employ in its burgeoning industrial cities.
• China’s rise has prompted concern in America on a number of issues. The loss of US jobs in the industrial sector has in part been a result of outsourcing to China. The US’ growing trade deficit is largely associated with the flood of inexpensive imports from China (and the US consumer appetite for them). For years, US manufacturers and labor leaders have accused the Chinese central bank of manipulating the Chinese currency, the yuan or RMB, as a means to keep Chinese goods cheaper. In the recent past, concerns with China’s censorship of the Internet and its policy of “indigenous innovation” which targets higher level intellectual property have been added to the list of concerns about the price of doing business in and with China.
• China’s rapid economic growth has not been without its problems: disparity between rural and urban incomes; environmental damage; and unrest over labor conditions are all issues that the Chinese government faces on its domestic front.
Exploration Questions:
• What are the major trade issues in the US/China relationship?
• What are the major socio-economic issues China will have to address to continue its high growth rate?
Reflective Questions:
• Do you think China can continue to sustain high levels of economic growth? Why? Why not?
• Name the consumer goods you purchased in the last 30 days that were made in China. Are you surprised at the number?
More to Explore:
• China’s official news agency: www.xinhuanet.com
• Government of China web site: http://english.gov.cn
• NY Times coverage of Google in China: www.nytimes.com
• Business Week coverage of “Indigenous Innovation” issue: www.businessweek.com
Books For Further Reading:
• Karabell, Zachary. Superfusion: How China and America Became One Economy and Why the World’s Prosperity Depends on It. Simon & Schuster. 2009. 352 pages. Karabell argues that the US and Chinese economies have fused to become one integrated system. He suggests that how China and the US manage their relationship will determine if the world will have continued prosperity or increased instability. Click here to order.
• Edward, Tse. The China Strategy: Harnessing the Power of the World’s Fastest-Growing Economy. Basic Books. 2010. 256 pages. Walks the reader through the intricacies of the Chinese business environment. Click here to order.
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