The Myth Behind China's Miracle (Foreign firms dominate)

[Hannah Bell]

Foreign Policy
The Myth Behind China's Miracle
George J. Gilboy
July/August 2004


...China allows foreign firms to invest in its domestic market on a scale unprecedented in Asia. Since it launched reforms in 1978, China has taken in $500 billion in FDI, ten times the total stock of FDI Japan accumulated between 1945 and 2000. According to China's Ministry of Commerce, U.S. firms have invested more than $40 billion in more than 40,000 projects in China...

China's high-tech and industrial exports are dominated by foreign, not Chinese, firms....

Chinese industrial firms are deeply dependent on designs, critical components, and manufacturing equipment they import from the United States and other advanced industrialized democracies...

Chinese firms are taking few effective steps to absorb the technology they import and diffuse it throughout the local economy, making it unlikely that they will rapidly emerge as global industrial competitors...

A close look at the breakdown of China's exports by type of producing firm puts China's economic rise in perspective. FOREIGN-FUNDED ENTERPRISES (FFEs) accounted for 55 PERCENT OF CHINA'S EXPORTS last year.

In this respect, China diverges from the typical Asian success story... FFEs accounted for only 20 percent of Taiwan's manufactured exports in the mid-1970s and only 25 percent of South Korea's manufactured exports between 1974 and 1978. In Thailand, the FFEs' share dropped from 18 percent in the 1970s to 6 percent by the mid-1980s.

As shown in the figure on the next page, the dominance of foreign firms in China is even more apparent in advanced industrial exports.

While exports of industrial machinery grew twentyfold in real terms over the last decade (to $83 billion last year), the share of those exports produced by FFEs grew from 35 percent to 79 percent. Exports of computer equipment shot from $716 million in 1993 to $41 billion in 2003, with the FFEs' share rising from 74 percent to 92 percent. Likewise, China's electronics and telecom exports have grown sevenfold since 1993 (to $89 billion last year), with the FFEs' share of those exports growing from 45 percent to 74 percent over the same period. This pattern repeats itself in almost every advanced industrial sector in China...

The data featured in the figure highlight another trend that reinforces China's dependence on foreign investment and the growing gap between FFEs and domestic Chinese companies...

http://www.nytimes.com/cfr/international/20040701faessay_v83n4_gilboy.html?pagewanted=4&_r=1



The "Chinese Peril" is a cozy relationship between the ruling class in China & the ruling class of other nations, the US for one, for their mutual benefit, designed to better exploit their respective peasantries.


Patents = indicator of economic power. Read carefully:


World patent filings up, thanks to U.S., China, Korea


...the total number of patents in force worldwide at the end of 2006 was approximately 6.1 million...

Applicants from Japan (approximately 1.6 million) and the United States (approximately 1.2 million) owned the bulk of the patents that were in force in 2006...

While statistics reveal patterns of concentration in patent activity, they also point to a growing tendency for applicants to file their applications in multiple countries. This trend towards increasing internationalization of patent activity is demonstrated by the growth in international filings through the Patent Cooperation Treaty (PCT) and in non-resident patent filings. “The PCT is the most important route for international patent filings, with an estimated 49 percent of all international patent applications being filed through the PCT...”

The number of international patent filings submitted via the PCT in 2007 is estimated to be 158,400, representing a 5.9 percent increase over the previous year. The USA is by far the largest user of the PCT system, a multilateral agreement administered by WIPO which provides a simplified method for international patent filing. In 2006, 33.6 percent of all PCT filings originated from the USA, almost twice that of the next largest user, Japan, which accounted for 17.5 percent of all PCT filings....

The proportion of worldwide patent filings by non-residents increased from 35.7 percent in 1995 to 43.6 percent in 2006. In addition, between 2005 and 2006, total non-resident patent filings increased by 7.4 percent, in contrast to total resident filings which increased by 3.1 percent.

Non-resident filings originating from US applicants accounted for 21.9 percent of the total non-resident filings, followed by Japan with 21.7 percent and Germany with 10.8 percent.

The combined share of worldwide non-resident patent filings by the eight largest countries of origin (the USA, Japan, Germany, the ROK, France, the Netherlands, the United Kingdom and Switzerland) increased from 66 percent to 74 percent between 2000 and 2006.

The level of internationalization varies across countries and economies. The share of non-resident patent filings is very HIGH in the patent offices of HONG KONG (SAR) CHINA, ISRAEL, MEXICO and SINGAPORE – where more than 90 PERCENT of total filings are submitted by NON-RESIDENT applicants.

The share of total worldwide patent applications submitted by applicants from the top 10 countries of origin (i.e. the countries in which applicants reside) increased from 82.4 percent (2000) to 85.2 percent (2006).

Applicants from Japan (514,047 applications),

the USA (390,815 applications),

the ROK (172,709 applications),

Germany (130,806 applications) and

China (128,850 applications)

accounted for 76 percent of the total number of patent applications filed worldwide in 2006.

Applicants from Japan accounted for the largest number of applications in the fields of solar energy and fuel cells. Whereas, Germany and Japan were the top two countries of origin for wind energy technologies.


http://www.reliableplant.com/Article.aspx?articleid=12846



Remember this when the PTB push the line that, because of our debt to China & the need to "compete" with Chinese workers we must roll back social spending in the US, cut back Medicare & Social Security benefits, etc.

It's pure bullshit.

They want *everything*.

[Selatius]

1. No surprise there. American firms were simply looking for very weak labor/environmental controls.

So they move manufacturing operations to places like China where labor costs are low and environmental regulations are weak or unenforced. This isn't comparative advantage in action as proponents of free trade argue. What this is is absolute advantage instead. It's a form of absolute advantage that isn't mutually beneficial to both sides. It is a case of corporations in a country exploiting the cheap labor of another country.

[fasttense]

4. Under the guise of "free" trade, corporations are merely practicing labor arbitrage

What Does Arbitrage Mean?
The simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar purchases, on different markets or in different forms.

If a corporation buys cheap labor from China, it can then sell the product in the US at the same price (or slightly less), making a profit off the cheap labor.

But what right has any corporation to sell their crap in our US markets?

[Selatius]

5. You hit the nail on the head. They charge the same price but have lower labor costs.

If corporations were good citizens, prices would be falling, but inflation has been in positive territory for as long as I can remember. Somebody is keeping the difference in profit here, and it isn't the working class.

[Hannah Bell]

6. yes, labor arbitrage it is. just like when the venetians did currency

arbitrage, trading between the silver-using sector of the world & the gold-using sector & making money on the spread -- eventually turning the silver users to gold users & vice versa.

That's basically all finance capitalists do, split the world into finer & finer pieces so they can "arbitrage" more & more things...

carbon trading, for example.

imo.

[pa28]

2. An old piece but still worth reading.

China has been conducting what seems like a for cash "lend lease" program for quite a while now. The government pays for assembly line and production technology and I suspect when the time is right foreign firms will be systematically pushed out once Chinese capitalists have learned their production methods.

[Hannah Bell]

3. Since foreigners own the plants & patents, as well as domestic marketshare,

not sure how easy they'll be to just "push out".

From end of WWII to beginnings of Japanese strength in US market = <30 years.

From opening to China to present = 38 years. I'm pretty sure they already know the production methods. They're not stupid.

Foreign dominance is growing, not shrinking. Esp, as the article notes, in high-tech areas, where close to 100% of exports = foreign owned.

90% of Chinese-origin patents = non-resident.

"Lend-Lease" doesn't seem to me to apply.



The #1 car in China = GM: Buick. GM owns the plants.

http://www.time.com/time/photogallery/0,29307,1909818_1908558,00.html

#2: Hyundai

#3: Volkswagen

#4: BYD (Chinese)

#5: Volkswagen

#6: Hyundai

#7: Chery: state-owned corp, scheduled for privatization

#8: Tianjin FAW Xiali Automobile: state-owned/public

#9: Honda

#10: Toyota


Additionally, the Chinese corps have various joint-venture & other arrangements with the foreign ones.

[Hannah Bell]

7. kik

[Hannah Bell]

8. kik

[anonymous171]

9. K&R. nt