Chinese enterprises respond to social challenges

Transcription

1 Chinese enterprises respond to social challenges Dr. Zhan SU Professor of Strategy and International Business Director of Stephen A. Jarislowsky Chair in International Business Director of GERAC (Research Group on Contemporary Asia) Faculty of Administrative Sciences Université Laval

2 Plastics China price One of my top customers recently got bids from a Chinese producer that were 26% less than what I was selling the product for. That s 26% delivered, after shipment all the way from China. Tool & Die Chinese prices are frequently 50% of what US counterparts charge, and in some instances are 75%. Furniture China is undercutting US manufacturers prices (of wood case-goods furniture) 20-40% Electronics Asian suppliers in China and Taiwan have a 30-50% cost differential vs. US plants

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6 New Chinese development strategy: climbing up the value chain More added value More efficiency More socially responsible More environmental Objectives: - Growth: by 2010 double the GDP per capita in regards to Efficiency (consumption of energy resources for each unit of GDP): 20% less in 2010 than in Innovation capacity: In the top 20 by Standards of living: be a developed country by 2050

7 Evolution: Chinese Demographics

8 Evolution of Working and Total Population (China)

9 Evolution of Working and Total Population (India)

10 China: an old country before a rich country? Towards the middle of this century, more than 33% of Chinese will be 60 years or more, which represents more than 400 million people. In 2030, 40% of people in Shanghai will be 60 years or more. Today there are 5.4 active people against one pensioner, this will be 2.5 persons against 1 by 2030 and 1.6 against 1 by From the year 2030, reduction of the active workforce will lose 0.7% of GDP per year.

11 Rural vs Urban Population ; 18% Rural Urban Rural Urban 379; 5% 72750; 55% 79014; 82%

12 Chinese «Black Collar» They come from the rural areas, but they are now - not farmers (they no longer work on the fields) - nor city workers (without Huko, without social welfare for city citizens). They occupy dirty, poorly paid and poorly protected jobs: - 58% of employment in the secondary sector and 52% in the tertiary sector: - Manufacturing, 68%, - Construction, 80% - Restaurant and domestic household, 90%

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16 Workers from Rural Regions (10,000) ,5% ,2% 28,2% ,6% 18,1% ,1% 6,4% ,0% 40,0% 30,0% 20,0% 10,0% 0,0% A B

17 Rural Workers in Different Domains ; 29% 2741; A 41% B 67; 8% 2938; 14% 6243; 31% 63; 7% 434; 6% 1130; 17% C D E 3653; 18% 6011; 29% Others Industry Construction Transportation Commerce

18 Accidents (Coal Mining) in China No. Of Deaths No. Of Accidents 2,5 2 1,5 1 0,5 0 2, ,09 0,13 China Holland South Africa. 0,03 USA

19 Labour Conflict No. Of Case No. Of People Concerned

20 Chinese Population: Education Level ,8% 6,6% 0,6% 39,6% 12,6% 6,2% 37,8% Others Primary 3,5% Secondary 35,4% High School University 29,9%

21 Productivity Improvement (Yuan per Person)

22 Countrywise Productivity (USD per Person) USA Italy GermanyCanadaAustralia Japan Korea Mexico Russia China

23 New Chinese development strategy: climbing up the value chain Since 2004, especially since 2007, the Chinese government adopted a new economic strategy that aims towards a more efficient, more socially responsible and more ecological development. Although it is still early to evaluate the real impacts, it seems to initiate a new phase of Chinese development. Objectives: - Growth: by 2010 double the GDP per capita in regards to Efficiency (consumption of energy resources for each unit of GDP): 20% less in 2010 than in Innovation capacity: In the top 20 by Standards of living: be a developed country by 2050

24 Consensus of Beijing vs. Consensus of Washington: A Clash of Civilizations? «Choose your own path, based on your needs and characteristics» - the principle of non-interference and sacralization of the concept of sovereignty; - pragmatism and abandonment of ideology, rejection of the idea of uniform solutions for all situations rather put on trial and error, gradual change, step by step - economic growth and political stability prevail over individual right, the first basic component of human right is the right to survive. «Asianism» The collective interest prevails over individual interest, respect for authority and order, value of work, frugality,...

25 Motors for future Chinese economic growth? - Growth in domestic consumption (especially by the rural population) - Urbanisation (40% vs. 60% in Asia) - Growth in service sectors (40.7% vs. 70% and more) - Development of high technology sectors - Development of green sectors - Improving the competitiveness of Chinese products on the international market (productivity, quality, labour costs )

26 Composition of GDP 100% 90% 80% 40,1% 70% 60% 76,7% 68,1% 69,4% 72,8% 76,9% 70,8% 64,0% 56,4% 67,2% 54,8% 57,2% Tertiary 50% Srcondary 40% 30% 20% 10% 0% 22,0% 1,3% USA 30,2% 1,7% 48,6% 29,7% 11,3% 0,9% 26,2% 1,0% 20,9% 2,2% 26,9% 2,3% 30,9% 5,1% 38,0% 5,6% 27,7% 29,5% 17,5% 3,3% 39,6% 3,2% Japan Germany China England France Italy Brazil Russia Spain India Korea Primary

27 Employment: Chinese Economic Structure % 1978 Primary % ; 17% 4890; 12% Secondary Tertiary 24917; 32% 31444; 41% 28318; 71% 20629; 27%

28 Reform of employment system in state-owned enterprises 1: 1982 to 1986: workstation according to performance, remove non-performing employees 2: 1986 to 1992: End of lifetime employment and implementation of employment contract 3: Since 1992: Lay-off and creation of the labor market 4: Since the end of 90 s: transformation of enterprises into stock companies and workers became employees protected by the social protection system and were recruited into the labor market

29 Employment: Different Category of Players 451; 19% 2048; 2827; 15; 5% 0% 7% % ; 20% % 2007 Peasant State Owned Individual Private Others 20% Rural 32550; 43% 27811; 69% 317; 19% 4581; 6% 3310; 4% 6424; 8%

30 Growth of Annual Average Salary

31 Chinese Family Income (Yuan) , , ,2 343,4 477,6 739,1 133,6 191,3 397,6 686, , ,4 3254, , A B

32 Usa EnglandGermany Italy India Family Consumption as Percentage of GDP ,0% 60,0% 40,0% 70,3% 65,3% 59,3% 58,9% 58,3% 57,4% 57,1% 55,3% 50,0% 20,0% 37,7% 0,0% Japan France Canada Russia China

33 Average Medical Expenditure per Person (USD) China India Japan Korea Canada USA France Germany England Australia

34 Total Medical Expenditure as % of GDP. 16% 14,60% 14% 12% 10% 8% 6% 5,80% 6,10% 7,90% 5,00% 9,60% 9,70% 10,90% 7,70% 9,50%. 4% 2% 0% China India Japan Korea Canada USA France Germany England Australia

35 Expenditure per Student as % of GDP per Habitant 90,0% 80,0% 85,5% 86,4% 70,0% 60,0% 50,0% 40,0% 30,0% 20,0% 10,0% 12,1% 23,2% 20,9% 17,1% 15,2% 7,3% 41,2% 31,7% 29,6% 26,2% 25,3% 24,5% 29,0% 21,7% 23,2% 16,2% 25,8% 14,1% Secondary University 0,0% China India Japan Korea Italy USA France GermanyEnglandAustralia

36 Major Chinese labour law Labour Contract Law Employment Promotion Law Law on Mediation and Arbitration of Labour Disputes

37 SA8000 vs HM3000 SA8000 is based on the Universal Declaration of Human Rights of the UN, on the International Convention of Child Rights and other conventions of the International Labor Organization (ILO). SA 8000 covers the following areas of social responsibility: Child labor Forced labor Health and Safety Organizational practices Discrimination The right of assembly and speech (unions) Working time Remuneration The HRM (human resource management)

38 Challenges of Global Governance Legality Illegality Legality Illegality 38

39 Is China s manufacturing dominance sustainable? Some of China s advantages are not sustainable China is going to reevaluate its currency. China s government will be required to focus on costly social and environmental measures. The influences of the Chinese government on economic activities should be reduced. But the basic export-oriented, mercantilist model appears sustainable

40 China s labour cost advantage will remain China has a very large pool of skilled and unskilled Low labor cost workers (20 million young urbanites enter the workforce each year; a surplus of 200 million people in rural areas) In 2003, the average urban Chinese worker had an average annual income of 1708 US$. Even if salaries raised by 10% a year, it would take 30 years to reach the average American salary in 2003 (17.75 US$ per hour). In fact, the average annual raise in salaries is 6% in China and 3% in the United States, therefore it would take 100 years for the cost of Chinese labour to equal that of the United States. China is an atypical developing country, because it has at the same time the absolute advantages with regards to costs, the comparative advantages with regards to productivity and the competitive advantages in several high-tech sectors. According to a study by McKinsey (2002), in several industrial sectors, the productivity of Chinese workers is already 20% greater than most European countries.

41 China: an atypical developing country The absolute cost advantages, the comparative productivity advantages and the competitive advantages in several segments of the technology sector 29% of the products exported in 2005 were high-tech, of which 90% were produced by foreign firms working in China; Investments in R&D: 0.6% GDP in 1996, 1.1% in 2001, 1.4% in 2005, 2% in 2010 and 2.5% in 2020 (3.13% in Japan, 2.7% in the United States, 1.8% in the EU in 2004); More than 1 million Chinese students are studying abroad; From 1985 to 2000, the first million patent applications in China, in March 2004, the second million; in June 2006, the third million 253 high technology development zones Increasingly, MNE are setting up their R&D centres in China (already more than 900).

42 Motors for future Chinese economic growth? - Growth in domestic consumption (especially by the rural population) - Urbanisation (40% vs. 60% in Asia) - Growth in service sectors (40.7% vs. 70% and more) - Development of high technology sectors - Development of green sectors - Improving the competitiveness of Chinese products on the international market (productivity, quality, labour costs )