Questions 1. Do you think China will continue to achieve record growth? What factors could hurt its prospects? 2. Because of an abundance of cheap labor, China has been called “the workshop of the world.” Do you think this will still be the case a decade from now? Why or why not? 3. What communication and negotiation approaches are likely to work best when foreignMNCs experience demands from Chinese workers for higher wages?
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China, with more than 1.3 billion people, is the world’s most populous country and has a rapidly growing economy. Economic development has proceeded unevenly. Urban coastal areas, particularly in the southeast, are experiencing more rapid economic development than other areas of the country. By 2011, just 10.1 percent of the GDP consisted of agriculture, while industry constituted 46.8 percent. China has a mixed economy, with a combination of state-owned and private firms. A number of state-owned enterprises (SOEs) have undergone partial or full privatization in recent years. The Chinese government has encouraged foreign investment—in some sectors of the economy and subject to constraints—since the 1980s, defining several “special economic zones” in which foreign investors receive preferable tax, tariff, and investment treatment. Since 2003 Hu Jintao has been the country’s president and he also has the chairmanship of the Central Military Commission.
With China’s entry into the World Trade Organization in November 2001, the Chinese government made a number of specific commitments to trade and investment liberalization that have substantially opened the Chinese economy to foreign firms. In telecommunications, this means the lifting or sharp reduction of tariffs and foreign ownership limitations, although China retains the right to limit foreign majority ownership of telecom firms. There has been increasing concern on the part of foreign MNCs that China has not moved fast enough in opening up previously protected sectors and generally favors Chinese firms for large government tenders such as those issued as part of the government’s US$586 billion stimulus package, designed to counteract the effects of the global economic crisis. China’s successful hosting of the 2008 Summer Olympics in Beijing reinforced the country’s pride and position as a global leader in economics, culture, foreign relations, and sports.
China’s real GDP grew by 9.2 percent in 2011, an impressive performance given the global economic crisis. This growth brought China’s GDP to US$7.3 trillion and boosted per capita GDP to US$8,500.
Despite this impressive growth, employees are increasingly demanding higher wages and better working conditions. Widespread strikes at firms such as Foxconn (a large contract manufacturer that assembles Apple’s iPhone, along with many other products), Honda, and Toyota underscore the desire by workers to receive a greater share of company profits and to have a stronger voice in decisions that affect them. In June 2010 a plant of Toyoda Gosei, a car parts manufacturer affiliated with Toyota, was forced to halt production in Tianjin due to a strike. The cause of the strike was the workers’ demand for higher wages.
Some analysts believe that the era of China’s reliance on low-cost labor to fuel its economic growth may be coming to an end. Increasingly, the Chinese government and Chinese industry are investing in higher value-added products such as clean energy technology, aviation and avionics, and health care equipment. China’s growth has been unparalleled and China will no doubt play an increasingly important role in global economic affairs in the future.
- Do you think China will continue to achieve record growth? What factors could hurt its prospects?
- Because of an abundance of cheap labor, China has been called “the workshop of the world.” Do you think this will still be the case a decade from now? Why or why not?
- What communication and negotiation approaches are likely to work best when foreign MNCs experience demands from Chinese workers for higher wages?