Emerald Group Publishing Limited
Copyright © 2007, Emerald Group Publishing Limited
“Made in China”. These are words we see on almost everything these days. At one time it was confined to low-cost, high labour content items such as toys, luggage, clothes and shoes destined for sale in chain stores. However, during the last 20 years or so it has progressively been extended to include more complex products with a higher technical content such as electrical and audio-visual goods, computers, motor cycles, kitchen appliances, clocks and watches. At the same time China has also moved further up-market in the manufacture of its more traditional products, making clothes and shoes for some of the top designer brands.
Although most of the goods coming out of China are manufacturing in the factories of joint ventures or wholly owned operations of foreign companies many commentators still see this situation as presenting a warning to the traditional industrial economies of Europe and North America. Coupled with this, China has recognised that it lacks indigenous technological capability, so it has embarked on trying to improve its position by increasing investment in research and acquiring more foreign technology for R&D rather than for production. Consequently, there has been a massive increase in domestic research expenditure and foreign companies are being urged to conduct real R&D in China rather than adaptation work aimed at localising products for the Chinese market.
It is with this last ambition, on the other hand, that China is bound to find the greatest challenge. Despite Government proclamations to the contrary the country has weak and confusing laws on intellectual property rights, while enforcement is only sporadic. Well-known brands of watches, pens and clothes are regularly pirated, and counterfeit CDs, DVDs and software are openly available for sale on the China's streets. Occasionally there is a symbolic burning or crushing of these copied products with photographs taken for the media, but this probably serves to advertise the existence of the practice rather than solving the problem.
Given this situation, it is difficult to envisage foreign companies rushing to entrust the research for their most commercially sensitive products to Chinese subsidiaries. Indeed, many Chinese companies do not even file patents for their products and processes in China because of a mistrust of the national patent protection system. It is also interesting to note that Hong Kong Special Administrative Region is in the process of setting up a number of new science and technology parks because it is known that firms would prefer to conduct their most sensitive work there before moving the output to mainland China.
The next few years are therefore bound to be interesting for the game of global manufacturing. Will China succeed in its attempt to progress from being the “workshop to the world” to also being the “R&D centre of the world”? And eventually will the world's workshop even move somewhere else?