China's Global Reach:
Markets, Multinationals, and Globalization (Book Excerpt)
Author: George Zhibin Gu
Publisher & webpage: www.Trafford.com/05-1822
Date: September 2005
All Players Are Important
Today China is the biggest new frontier for international
companies. In many ways, the Chinese market has a more
international flavor than many other markets around
the globe. Many unique characteristics have evolved
along the way. Countless international businesspeople
are singing their favorite songs and doing their traditional
dances-all in one theater. So far, some have danced
better than others.
Overseas Chinese Inc vs foreign multinationals
Up to now, the "Overseas Chinese Inc." has
been the biggest investor in Mainland China. The United
States is in second position, followed by Japan and
numerous European nations and South Korea.
Businesses from Hong Kong had an early start. Most
if not all of the factories in Hong Kong have moved
over the border. Today, about 240,000 Hong Kong residents
work and live in China.1 Their employers are mostly
small and midsize companies. They mostly focus on low-end
consumer products. Their strengths are best shown in
their vast numbers.
China's expanding market has created tremendous opportunities
for the global giants, especially in capital-intensive
and high-tech sectors. These giants have made a huge
difference in connecting China to the global markets.
US multinationals vs others
Overall, on a global basis, the U.S. companies as a
group are the biggest. The power of the United States
is the most influential in many markets. In China as
of now, U.S. players are just one among many foreign
Relatively speaking, the Koreans are more active today
than the Americans. To the Koreans, coming to China
is a necessity, for their home market is small. They
aim to use China as a new engine for growth. But the
U.S. companies have a huge market at home. They are
less willing to venture out. Except for a few large
players and high-tech companies, most sizable American
companies have only 10% or less international business.
This is quite different from the situation for many
leading companies in Europe, Japan, and South Korea.
They may have much bigger international sales than their
In China, many Korean companies have been latecomers
in relation to Japanese and Western companies. But they
have made great strides. Several are already household
names, especially LG, Hyundai, and Samsung.
LG has been a star performer. By 2003, LG had invested
$2.4 billion in China. The company has become a leader
in the consumer electronics and home appliances sector.
Its China business reached $8 billion in 2003 and $10
billion in 2004.2 LG is still expanding its investment
programs and hoping to make China its second home.
Samsung is another success story. Its product lines-semiconductors,
mobile phones, consumer electronics, and home appliances-fit
China's needs.3 By now Samsung has transferred most
of its personal computer manufacturing to China.
What underlies the success of Korean companies is a
combination of good timing and the right products. Above
all, the Koreans are committed to China for the long
term. The Korean success has inspired envy among international
In fact, Korean companies now treat China as their
own production center as well as a big market. The average
monthly salary for a manufacturing job is $1,524 in
Korea, but only $115 in China.4 In addition, China is
a huge market, much bigger than Korea-something the
Korean companies cannot ignore. They intend to move
most of their production from Korea to China, increasing
the efficiency and profitability of expanding around
It seems that the Korean giant Samsung has found jade
in China. Samsung intends to make China its biggest
market, hoping to reach $14 billion in sales by 2005.
To this end the company has been adding new programs.
This has already made Samsung a leader in China. The
Korean giant will become even more powerful, for it
has found a big space in China.
How do Chinese consumers view foreign players in general?
They seem to pay less attention to national origins
than one might think. In many ways, they are rather
indifferent to nationality. To consumers, all the foreign
players are important.
In the auto market, all the American players are in
China today. As is true internationally, GM and Ford
are only two players among many in China. The largest
player so far is Volkswagen. Volkswagen has been operating
in China since 1985. But GM set up its Shanghai joint
venture only in the late 1990s. Volkswagen has kept
its leadership role by expanding its programs and adding
joint ventures. In Volkswagen's global sales, China
now accounts for about 20%. Volkswagen is adding 10
billion euros and wishes to make China a center of its
Moreover, GM confronts numerous competing players in
its price range. Honda and Toyota are two of these.
Korea's Hyundai landed in China in 2002. Hyundai hopes
to make China its biggest market and is now in a hurry
to achieve this goal. So far, progress has been huge.
In 2004, Hyundai sold 150,000 cars in China, making
it one of the top four car makers here. Another U.S.
giant, Ford, does not want to be left behind. Its most
recent project was to build an auto factory in Nanjing
in partnership with Japan's Mazda and a Chinese company.
At the present time, all global auto players are busy.
They expect China's auto market to reach 10 million
by 2010, from 5.2 million in 2004.
All in all, China has become a new arena for global
business. All multinationals have taken their unique
roles. They are all important for now, and they all
want to become even more important. In order to do so
they must fight hard with one another, besides China
George Zhibin Gu is a commentator-business consultant
based in China.
Copyright: George Zhibin Gu