Unlike the early Asian tigers, Chinese firms were unable to postpone their move into foreign markets and production until they had acquired a solid financial foundation, technical competence, a well-established brand and high profitability based on domination of their home market; the major motive for many Chinese companies going abroad, in contrast, has been their desire to escape the cut-throat competition – much of it foreign – and sparse profits of the domestic market following China’s accession to the WTO. [532] Peter Nolan, an expert on Chinese business, has argued that it will be extremely difficult for Chinese companies to make the A-list of multinationals precisely because they have not had the chance to build themselves up domestically behind a protectionist wall. He also suggests that over the last twenty years there has been a global business revolution, as a result of which Chinese companies, far from catching up, have fallen even further behind the top international firms, making their task even more difficult. [533]
If China fails to produce a cluster of major international firms it will stand in sharp contrast to Japan, South Korea and Taiwan. [534] But it is premature to think in these terms. However difficult and different the circumstances China faces, it is already busy inventing its own path of development, as Britain did as the pioneer country, the United States as the inventor of mass production, and Japan as the innovator of a new kind of just-in-time production. What might this be? In the Chinese car market, the more expensive sectors are overwhelmingly the preserve of European, American and Japanese firms, but emergent Chinese firms like Chery and Geely dominate the lowest segment. [535] Chinese firms are able to produce cars much more cheaply than foreign producers because they use a modular, or mix and match, approach rather than the integrated method of production for which Japanese firms are renowned. Firms such as Geely and Chery utilize a range of parts which are borrowed, copied or bought from foreign companies. The end product is of relatively low quality but extremely cheap. The Chevrolet Spark, which is very similar to the Chery QQ, sells for twice the price. A similar kind of approach can be seen with the Tata Nano in India, which sells for less than $2,500, half the price of the next cheapest car on the market. [536] Modular – or open architecture – production is extremely well suited to a developing country, being relatively labour-intensive and very difficult, if not impossible, for Western and Japanese firms to imitate. In the Chinese case, it was first developed by the motorcycle, truck and consumer appliance industries and then adapted by the domestic car firms. [537] The fact is that in China, as in most other developing countries, the low end of the market will remain by far the largest sector for many years to come. Despite fearsome competition from foreign producers, Chinese car manufacturers have very slowly been increasing their share of the Chinese market, currently the world’s second largest: in 2006 their combined market share was 25.6 per cent, just behind the total Japanese share of 25.7 per cent and ahead of the aggregate European share of 24.3 per cent, with Chery and Geely, the two largest, enjoying a combined share of around 10 per cent.
Figure 19. How to make a cheap car, Indian-style: the Tata Nano.
Figure 20. Sales of Chery cars, 2004-7.
