There is this flippant yet popular joke that goes like this: if you clone yourself four times, one will be Chinese! That says it all about the manner in which the world perceives the ubiquitous Chinese – populated and copycats. There’s no doubt, China has become numinously overpowering and has integrated itself into the lives of people all across the globe by their sheer human power and the power to produce goods and services at a prodigiously unprecedented pace and volume.
So much so that from Greenland to Antarctica, and from Middle East to Europe, if one were to try and search the origin of the products used in these countries on a daily basis, in all probability the ‘origin’ would turn out to be China. Be it your cell phone or the laptop, or even the engine of your car, everything turns out to be made in China. An original iPhone or even its look-a-like (with similar or more features), both are made in China. In fact, all this is known. But what is mostly unknown is the infrangible might that the Chinese have garnered today with their home-grown products and brands.
Not only is China manufacturing almost all goods for Western companies, but it also has gained a huge impelling momentum with its own domestic production. Today, stellar Chinese companies are topping various global lists in terms of revenue, market share, size and scale; but more than that, their sterling products are also acting as alternatives – or even better replacements – for Western products within and outside China. Today, the Chinese have a “Made by China” option with similar features and quality for almost every known Western brand, which are also anyway made in China.
Against the populist perception of China being a nation of cheaplabour export and copycats, China has emerged as one of the most innovative nations as well! When one goes to a top designer store in America or to the Disney Stores in Disneyland, all products in these stores are made in China, totally dispelling the myth that Chinese products mean coarse or low quality fakes. Everything, everywhere seems to be made in China, especially in the West. So much so that post 9/11, when the Americans had their national flag flying up and about almost everywhere, it was found out that most of these flags had been made in China! Obviously, as an Indian, it hits one hard since there is absolutely no such concept like “Made in India”, though as a nation we have some of the best talented individuals, many of whom are even running the world’s topmost companies now.
That is why when Hillary Clinton comes to India and gives a motivation pill to Indians that they should look at a parallel role in this region along with China, and when the Indian media goes ga-ga over that, I feel like rolling with laughter! One reason why I started writing on China – and plan to write often – is so that Indians know where we could have been and where we actually are, shamefully. This piece actually doesn’t merit an Indian mention at all – so much is the telling Chinese superiority when it comes to “Made in China” as well as “Made by China”! In the latest World Intellectual Property Indicators 2010 (WIPO) report, China figures as the third largest nation in terms of patent applications.
China has applied for 203,481 patents in 2009 and around 492,008 between 2003 and 2007. To further their supereminent entrepreneurial endeavours and strengthen domestic companies, the Chinese government launched an “indigenous innovation” scheme and further declared it a national priority in 2006. This whole program was aimed towards encouragement of technological innovation in Chinese domestic firms and motivating them to own their proprietary Intellectual Property rights. Moreover, all science and technology based production has been continuously aided with huge tax incentives, credit facilities and budgetary support. On top of that, the products thus developed under the “indigenous innovation” program also featured as a priority in the government procurement lists.
A 2010 US Chamber report titled ‘China’s drive for indigenous innovation’ states how China has climbed the ladder swiftly and made itself prominent in the field of science and technology. The Thompson Reuters Science Citation Index (CSI) placed 122,998 Chinese scientific papers in 2009, thus making them the third largest contributor. China also features as the largest contributor in the areas of engineering, genomics and nanotechnology. Let me start the China story with an interesting anecdote. All those who followed the Beijing Olympics closely would have surely been impressed by former Chinese gymnast Li Ning, who lit the cauldron during the opening ceremony.
But then, knowledge about the fact that this 45-year old, triple gold medallist of the 1984 games is actually the founder and owner of China’s biggest sporting goods manufacturing company – Li Ning Company Limited – is quite limited. Li Ning Co. is not only the biggest in China, but also has stores across the globe. During the 2008 Olympics, the company sponsored many sporting teams, besides sponsoring the Chinese teams. Today, it is the biggest competitor to Adidas and Nike in China and clocked in staggering revenues of $1.354 billion in the last year. As per the China Market Research Group Survey 2009, Li Ning and Adidas both had a 14 percent market share in China, which was just 3 percent behind the market leader Nike.
Well, that was just one prototypal example to indicate what the predominant Chinese are capable of. On a macro level, it is a well established fact that no economy can flourish with-out a formidable financial sector. To that effect, Chinese banks have acquired monstrous proportions when compared to their Western counterparts. The Industrial and Commercial Bank of China Ltd (ICBC) is one of the strongest pillars of the Chinese industry and this is evident from the fact that it’s the 7th biggest public company in the world, as per the Forbes list 2011.
The top four banks of China – ICBC, People’s Construction Bank of China, Bank of China and Agricultural Bank of China – manage around 80 percent of Chinese financial portfolio. These banks are the biggest banks globally in terms of their market capitalization and today feature among the top five banks on most of the global lists. ICBC today has over 200 million customers and over 6000 branches across the nation. Compare this with HSBC, which has 100 million customers worldwide! While the Construction Bank of China deals in credit for property and real estate, it also controls China’s multi-billion dollars foreign reserves. All in all, there are over 100 commercial banks in China.
In 1998, numerous commercial banks of China were asked by the government to lend money and provide credit to state-owned enterprises while small credit cooperative banks were instructed to help private companies with credit facilities to step up their production facilities . Thanks to majestic Chinese banks, today most of their home grown companies stand portentously tall against any foreign competition – both within and outside China. The numbers prove it all – the market share of foreign banks was a mere 1.71 percent in 2009, which rose to 1.83 in 2010.
This strong a financial pillar and a credit regime with low interest rates have allowed many industries to thrive; one of them being the Chinese automobile industry. The inenarrable thirst of China’s automobile demand is well fulfilled by over 45 Chinese automobile manufactures. Today, China is the largest car market and most of the cars manufactured in China are consumed by the country itself, thus leaving a very small fraction for exports. Domestic Chinese auto-manufactures like Chery, BYD, Shuanghuan Noble and a few others are the most sought-after Chinese brands.
Not only because they are one of the leading manufacturers, but because they are also China’s empyreal answer to the Toyotas, Hondas, Mercs, GMs, and the Porsches of the world. So much so that these domestic companies have been sued by many global brands for copying their designs (yes, their designs look similar to those of Mercedes and BMW; but then, designs are not protected by patents and this much of a design inspiration is indeed fair for the developing world when it’s about coming at par with the developed world, which even today fights the bloodiest of unethical wars wherever it can smell money).
China Association of Automobile Manufacturers (CAAM) in its 2010 report declared Shanghai Automotive Industry Corporation (SAIC) as the largest auto manufacturer selling over 3,558,400 cars in just one year. SAIC is followed by Dongfeng, FAW, Changan and Beihing Auto. Domestic car manufacturers control over 85 percent of the total car market in China. China’s top ten companies sold over 15 million cars in 2010. These companies make all types of cars ranging from low cost cars to high end cars.
What’s more – Toyota, Honda, Nissan and Hyundai are sitting on a mere 6 per cent market share each, and that too on account of the fact they have local Chinese manufacturing tie-ups. Coming over to aviation – China’s domestic airline Air China is one of the biggest and the largest airlines carrying over 60 million people in 2010. On a global scale, it is one of the most profitable airlines in the world with a net profit of $1.83 billion in the year 2010. It connects China to almost all parts of the world viz. South America, Europe, Asia, Middle East and North America.
Supporting this airline is the China Southern Airlines, which flew 76.5 million passengers in 2010, thus becoming the world’s fifth largest and Asia’s largest airline in terms of passengers carried. The airline marked a profit of $883 million in 2010. The third in the list (and in the Chinese skies) is China Eastern Airlines, which is the biggest and most-connected airline in China. Carrying 64.93 million passengers, the airline netted a profit of $807 million in the year 2010. Along with passenger airlines, China has also developed fleets of cargo airline companies. China Cargo Airlines, Great Wall Airlines and Shanghai Airlines are three big cargo companies that have made China self-sufficient in transporting cargo across the world.
With its 1.3 billion population, China is a goldmine for retail giants. Their huge consumer base literally made global retail giants salivate and forced them to enter China. When Carrefour, Walmart and Tesco were all queuing up to enter into China, a Chinese retail giant was already waiting to welcome them. One of China’s biggest retail chains, Wumart Stores (phonetically similar to Walmart), started their operations in 1994, led by an iconic individual, Zhang Wenzhong; today, the chain has over 500 stores in China. Trying to match Walmart – which today has over 300 stores and 90,000 employees – Wumart is on a massive expansion spree and has managed to achieve annual sales of $2 billion.
This is $5 billion less than Walmart in China – but then, given the fact that the retail sector is clocking an 18 percent growth, Wumart could well bridge this revenue gap soon. Then there are topflight hyper-marts like Bailian and Hualian, which operate on the same model. Even in the white goods market, the Sonys, LGs and Samsungs of the world get dwarfed in China. China’s home-brand Haier today has made its prepotent presence felt across the world. After being the most coveted brand in China, it’s now all set to market itself strongly in the global markets too. Obviously, it has topped all lists, indexes and surveys that define superlatives in China, but today it is also the 4th largest white goods manufacturer worldwide.
Started in 1920 as a refrigerator factory, it went on to become a $6.31 billion (40.6 billion Yuan) company by early 2000. Last year, it declared revenues of $20.9 billion (135 billion Yuan) and today manufactures an array of white goods with manufacturing units dotted all across the globe! In 2010, the Euromonitor International ranked Haier as the number one white goods brand in the world with 6.1 percent of the retail market share. Haier is also in the process of consolidating various domestic whitegoods enterprises and is also building industry parks in order to ease international acquisitions.
Sharing the market and winning ranks with them is TCL Corporation with revenues over $7 billion. Currently, the Eros Group is spearheading the promotion and brand building exercises of TCL in the Middle East. TCL for that matter is one of the leading brands in China and also is spreading its reach to other Asian nations! Amidst all these, one of the most significant sectors, which is another backbone for the Chinese growth story, is energy.
China not only boasts of a couple of massively huge petro-chemical producing and refining companies, but it is also one of the largest oil consumers in the world. For that matter, PetroChina is the biggest oil producer in China and also features prominently in global 500 lists of biggest oil producing companies. PetroChina recorded revenues of $221.57 billion in 2010. In the first quarter of this year, it produced 219.1 million barrels of crude oil and processed 250.1 million barrels of crude oil. Fortifying the sector is the parent company of PetroChina, namely China National Petroleum Corporation (CNPC). CNPC is the largest oil and gas producing company in China and the second largest in the world.
But surpassing this all is the behemoth of Sinopec – the Chinese energy giant, which is also the highest ranking Chinese company in the Fortune 500 list. Sinopec recorded revenues of $297.33 billion (1,913 billion Yuan) last year. Sinopec imports and exploits petroleum products craftily – 20 years back, Sinopec was the world’s 5th largest oil producer and exporter, while in a sharp contrast today, it is the second biggest importer! Keeping almost everything at bay, an economy in the 21st century is deemed powerless without a strong information technology backbone and a stronger information technology control.
China has always been the favourite destination for outsourcing of technological services; but today, it is giving steep competition to those very companies that a couple of decades back had entered China with an intention of making their presence felt. Take for instance Huawei Technologies, the largest networking and telecommunications equipment manufacturing company of China. Huawei, along with being the largest in China, has its presence spread across the world.
Today, it is the third largest mobile telecommunication company in the world, competing with the likes of Ericsson and Siemens, apart from being a company that has access to detailed information of internet usage patterns across the globe as an add on. Huawei declared revenues of $28 billion in 2010. It is also the second largest telecom equipment manufacturer and the largest network equipment maker as per 2011 rankings. The company has over 17,000 patents and also features as one of the World’s Most Respected 200 Companies, in Forbes 2007 lists.
Huawei upgraded itself to be a part of the World’s Most Influential Companies listing in Businessweek in 2008. Extending the market is China’s leading mobile brand – China Mobile Limited. With more than 600 million subscribers, it is the largest mobile phone service provider of the world. Its reported revenues in 2010 was $73.36 billion. China Mobile has more than 70 per cent of the Chinese market under their kitty, followed by China Unicom (revenues of $23.2 billion) and China Telecom (revenues of $34.16 billion).
Taking the propaedeutic league forward, China has been giving stiff competition to Western technological products – if not worldwide, at least in China. As per the data released by market research firm IDC, at the end of the fourth quarter of 2010, Chinese PC maker Lenovo topped in terms of market share in China (around 32.2 percent). Though globally, Lenovo has a market share of around 10.2 per cent, the computer giant has a strong hold on its home turf with the closest competitors being Acer, Dell and HP – all of them having almost equal market shares i.e. 7.8, 7.5 and 7.4 per cent respectively.
Lenovo’s worldwide revenues in the fourth fiscal quarter (Jan-March 2011) amounted to $4.8 billion – the revenues generated inside China aggregated $2.2 billion, almost 50 percent of the total revenues, an impressive growth rate of 13 percent on an year-over-year basis. Lenovo also gained the rights to use IBM’s ThinkPad and Think Centre trademarks in 2004 for five years which provided them with a well-recognized brand in the developed world, which they combined with low-cost manufacturing in China. Today, Lenovo is an answer to all personal computer brands in China and even worldwide.
The company has emerged now as the 449th largest company in the Fortune 500 list, after having been just an OEM a few years ago. Moving from Lenovo to Google; a year back, the news about Google’s exit from China made waves – but then it made little difference to the Chinese market. Globally, Google with a market share close to 86 percent (as per global website traffic reported by SeoMoz, Compete, Nielson-Net, Alexa and Karma Snack), almost enjoys a monopoly as far as the search engine market is concerned; Yahoo! comes a distinct second with a market share of around 6.5 per cent.
The situation in China is completely the opposite – as per data pertaining to Q2 2011 search engine market share by revenues, Google China plays second fiddle to Baidu, which has a market share of 75.9 percent while Google has a market share of 18.9 per cent. Baidu’s revenues in the second quarter of 2011 (April-June 2011) soared to $531.56 million (3.42 billion Yuan) – a 78 percent rise over the last quarter. Similar is the case with Microsoft in China. Microsoft’s acquisition of Skype has meant that now they control around 68 per cent of the instant messaging market (as per OPSWAT’s latest Q2 2011 report).
But in China, QQ (an instant messaging product by a Chinese company Tencent) has a market share of around 77 per cent (more than the worldwide market share of Skype), whereas MSN has a market share of around five per cent, ranking fourth in China. To top it all, if one looks at supercomputers, China’s Tianhe-1A also became the fastest supercomputer surpassing Cray Jaguar (located in Tennessee).
What’s more, commonly known as China Cola in the West, Future Cola manufactured by Hangzhou Wahaha is giving tough competition to Pepsi and Coca Cola within China today. And ‘Country Style Cooking – a Chinese restaurant chain, modelled on KFC – has recently even got listed in NYSE! Beating the West in almost all sectors and answering them in their language, China has come a long way in creating splendent replacements for all the biggest American and European giants. Once tagged as a mere proemial one-stop manufacturing solution, an effulgent China today has emerged as a cutting edge nonpareil innovator.
With a myriad of patents, acquisitions, joint ventures and indigenous design & technology developments, China is all set to change the way the West does business in the mainland, if not in the world, to say the least. In fact, government support and access to easy credit have allowed budding Chinese companies to become the world’s biggest and to challenge premier organisations. This is unlike India where, post liberalization, hundreds of Indian companies got buried in sumptuary history. Today, in continuing bravura, Chinese brands have become so strong, visible and convincing (in terms of quality and standards), that an average Chinese prefers lambent Chinese brands over Western ones.
Walking into Wumart, purchasing Haier, driving Roeve, flying Air China, using Lenovo and searching on Baidu is seen as being nationalist and globalised too! If numbers tell it all, then there are 61 Chinese companies in the Fortune 500 list of 2011 (behind US with 133 and Japan with 68), with the Chinese company Sinopec at 5! “Made in China” to “Made by China” – that’s the kind of visionary growth that coordinated planning can achieve. That’s the veridical Chinese answer to the West!
- 05 August 2011 |
- Dr. Arindam On China