Beyond the Great Wall


Written by Saad Hasan • Special Features • September 2010

neighbor1 China's manufacturing sector is zipping past most other world economies at a speed faster than its new super train - and there are no brakes!

Chinese products are swarming Pakistan's biggest city of Karachi. Wading through one of the busiest bazaars in Saddar, one encounters hundreds of sellers of stereos, watches, calculators, mobile phones and so many other things that it is hard to keep track. These gadgets may enjoy little respect when it comes to quality because Japanese and Taiwanese gadgets are better but they are affordable, nevertheless. Duplicate copies of some of the latest mobile phones of companies like Nokia and Samsung are available at much lower prices than the original brand. The body might be fragile, but the options and the experience that these clones offer is good enough. The same is the case with a lot of other electronic appliances, ranging from television sets to computer processors.

Seeing the influx of Chinese products, the picture that comes to mind of mainland China is that of a congested alley lined on both sides with large factories where hundreds of thousands of workers come daily to find a job at minimum pay, which helps the factories manufacture products at the lowest cost. The country has a large workforce that works in most unfavorable conditions, easily creating economies of scale.

It is arguable that close proximity and weak customs check have resulted in increasing import of Chinese goods into Pakistani markets. However, China has not just dumped its products in other developing countries. Its exports have been part of a well thought-out plan that targets millions of customers. And the reality is far from this!

China's economy has grown exponentially in last two decades. State-run banks poured trillions of Yuan to set up factories, which make everything for every kind of customer - even those at the bottom of the economic strata.

But it is no longer the exports of cheap textiles that leads growth model. It is technology that drives the economic potential. The country of over a billion people has made the fastest train in the world. It has become the manufacturing hub for green technology and now is on way to becoming the future trend setter.

This climb up the technological ladder has come on back of the low-tech manufacturing, which has set the foundations for its rise. China stands fourth in race for invention patents granted to a country, just behind U.S.A., Japan and Korea. It is just a matter of time before the giant leaps every other country as it encourages innovation.

Local Chinese manufacturers were able to introduce clones of Apple's iPad three months before its international launch. The local variants were cheap, came in much larger variety and in some cases had more options than the original gadget. Steve Jobs might have said he doesn't care about the Chinese. But the world does. neighbour2 For decades the Communist regime snuffed individual thinking, which fosters innovation. Controlling the fate of its subjects, the government literally decided where to place the graduates. Small businesses were just the shops and stalls on the streets. Nevertheless, the tight control meant the nation moves in one direction.

The West still looks at China with contempt. They see just the Great Wall and beyond it millions of people without slippers covered in coal smog! When it comes to Chinese technological advancements, the perceptions have not really changed especially in United States of America.

It is said that China's hi-tech goods use imported raw material so the status of the country remains as just a cheap destination for assembling high tech products. There is some truth to this. The country has used imported components to make telecommunication and information technology products in recent years.

But a deeper look suggests that the growth pattern is shifting fast. China's high speed 968 kilometer rail line that runs from Wuhan, in the heart of the country, to Guangzhou, on the southeastern end, is made locally. Encouraged, a lot of multinationals have started to shift their research operations to the mainland.

China's high tech trade has surged to over 300 billion U.S. dollars and makes up 30 percent of the total foreign trade. Couple of months back, IBM announced plans to invest 40 million U.S. dollars in energy and utilities solutions lab. IBM was not the first multinational to invest in R&D facility in China. In 2009, Dow Chemical Company launched a 100,000 square meters research center in Shanghai.

These investments follow a concrete plan of the Chinese government to focus on clean energy technology. Where the United States of America has left the job of investment in hands of private sector, the Communist China has stepped up public investment.

Chinese government did not let the banks hoard the finances. As The Economist noted, "While American and European banks have been busy blowing up, China's have been transformed from communist bureaucracies crippled by bad debts into something resembling world beaters."

The tightly controlled Chinese banks were made to divert finances to the priority industries, notwithstanding the bad debts of the 1990s. This allowed small businesses to pop up as the economy opened up to the world.

Government itself continued to invest in big industrial projects. The most evident example of this is the carbon capture and storage technologies. China remains the only country to be trying to practice the project on a commercial scale.

Unlike a lot of other countries, the Chinese government has constantly invested approximately 1.42 percent of its GDP as Gross Domestic Expenditure on R&D over last decade.

Since 1980s, when the Chinese economy started to open up, the government has invested extensively in building world-class educational institutions. Every year the country enrolls over 17 million new graduates. Though this number looks miniscule in comparison to overall population, the strength is formidable.

In just the disciplines of science and engineering, more than seven million students were enrolled in 2006, according to Ministry of Science and Technology. By now this number would have easily surged to 10 million.

The opportunities being offered to start-up businesses and the money that is coming into the country have also encouraged overseas Chinese students to return. This is marked difference in the perception about a country, which young people use to escape for being too rigid!

However, the world still remains in confrontation with China on a host of issues, something that threatens to undermine its rise as the technological giant. It still seems that the Chinese government does not hesitate to decide to what extent its public is free.

Just earlier this year, Google announced wrapping up its operations from China after refusing to bow down to the government's excessive censorship of web content. The controversy goes back to allegations that hackers based in the mainland broke into the Gmail accounts of human rights activists.

It has been reported that not only Google but 20 other large companies around the world were targeted by Chinese hackers. The incident was seen as a scar on the rising reputation of the Chinese. But the outcome of this controversy has not slowed China's ascend. The West, bogged down in the quagmire of debt, is looking towards the East for growth.