The forgotten sources of China's economic resilience

The forgotten sources of China's economic resilience

Many China observers are pessimistic about their perspectives, arguing that it still depends too much on Western technology.But thanks to a huge and interconnected market and an exceptional learning capacity, the business impulse that drives China's development is still strong.

Shanghai - In the last 20 years several technology companies that are very prosperous have emerged in China.This has raised many speculations about the country's scientific and technological skills, as well as on its ability to innovate.Some claim that China is already stepping on the United States in these areas and that it has become a world leader in some sectors.Others say that China is not as advanced as it appears to be and that the severe application of regulatory measures to technological companies by their government will prevent their continuous progress.

Those who doubt China's progress emphasize their dependence on Western technology, arguing that local technology companies are not yet as competitive as their US counterparts worldwide.But those who look at China with optimism point out that these companies continue their rapid international expansion, and that this is a reflection of the exceptional learning capacity that China has.

The group of optimists suggests something right.In fact.After all, technological innovation can be considered to a greater extent as a product of economic development promoted by entrepreneurs and to a lesser extent as an input.It is through the construction of prosperous companies that entrepreneurs obtain opportunities to develop new technologies and applications.

It is true that China has faced growing challenges from abroad in recent years, including the hinder of economies developed to share technologies.In addition, Chinese government efforts to maintain internal economic order and mitigate financial risks, such as greater regulation of technology companies, have been controversial in the market.There are even reports that some foreign manufacturing companies have retired from China.

However, the economy has not stopped.On the contrary, the business impulse that stimulates China's development is still strong.To this contributes positively the fact that it has a huge domestic market of 1,400 million people connected by transport systems, communication networks and flexible and efficient supply chains.

Las olvidadas fuentes de la resiliencia económica de China

While many foreign companies settled and left China, that has always happened and is not due to the fact that foreigners are unfairly treated in the Chinese market.Foreign companies simply struggle to compete with local businesses, which enjoy a significant advantage, which includes less bureaucratic procedures and a deeper knowledge of the market.Moreover, even though even foreign companies could have a slight technological advantage over their arrival in China, it is usually ephemeral, given the speed with which Chinese companies learn.

Today there is an overwhelming amount of small and medium -sized successful Chinese companies.Their names may not be known (in fact, they are known as "invisible" champions), but they are constantly innovating in the application of advanced technologies.Likewise, the number of these companies continues to grow.

There are also a lot of Chinese companies that provide services to foreign clients and many have a greater presence in Europe and the United States compared to what they have in China.These companies take advantage of the efficient storage, distribution and logistics systems of China, as well as their capacities in the design and manufacture of products in order to raise their competitiveness in foreign markets.

Shein, an online fashion -fashionable retail company that was established in 2008 in Nanjing, is a typical example of this type of companies.It started as an electronic and cross -border commerce company, selling clothes through platforms like Amazon and Ebay.However, in 2014 the company created its own brand and launched an application and customary website in markets around the world, covering from the United States and Europe to the Middle East and India.

By selling cheap clothes directly to consumers, Shein prospered.In a short time it has become the second most popular electronic commerce site for young Americans, standing only behind Amazon.According to Google trends, users in the United States (the main market for Shein) are looking for Shein with more than frequency triple compared to the one they are looking for to Zara.

Despite having an estimated value of 15,000 million dollars, Shein was not a necessarily known company in China until last year, when it was included in the list of the 10 main Chinese Unicorn companies (private companies with an assessment greater than 1,000 millions of dollars).This is because it does not provide services to the Chinese market.On the other hand, he has taken advantage of the advantages of China (which are the result of the huge government investments made over the past 20 years) to build its own and flexible supply chain, concentrated in Guangdong, the most developed manufacturing center in the country.

Thanks to this supply chain, Shein is documented, capable of carrying a product from the design stage to its production in ten days.Its competitors in the field of express fashion (whose products are generally designed in Europe, are manufactured in Southeast Asia and China, are sent to their European power plants for storage, and then they are sent to world markets) they simply cannot keep At the same rhythm.Shein has also begun to build warehouses in some key markets.

Shein is not an anomaly.China has a series of other cross -border electronic commerce platforms dedicated to express fashion, as well as a total of 251 unicorn companies, according to data until last year.The list includes social media applications such as Tiktok.The influence of Chinese Internet companies is large and continues to grow in European, American and Southern Asia markets.

In part, all this is due to the Government of China.After the 2003 Sars outbreak, the Chinese government worked to support the expansion of electronic commerce.Subsequently, he worked to compensate for the impact of the 2008 world financial crisis, made continuous investments in the Internet network, in communication and transport networks, mobile payment systems and logistics and storage capabilities, as well as in supply chains,the time he promoted links between sectors.These efforts have contributed to strengthening and sustaining the basic sources of innovative dynamism of the economy.

There is no doubt that although China's economy suffers due to their structural problems, they seem not to save correlation with their underlying dynamism.This apparent discrepancy is a reminder of the complexity of the Chinese economy.For example, because state -owned sectors capture a disproportionate portion of financial resources, they are often considered a source of bad resource allocation.However, recent studies conclude that state companies could have served as an informal channel to relieve financing restrictions on small and medium enterprises.

Many may underestimate the economic resilience of China, but the Chinese economy and its perspectives cannot be understood if attention to which its foundations are formed.

The author

Zhang Jun, dean of the Economics School of the University of Fudan, is director of the Chinese Center for Economic Studies, a Think-Tank-based Shanghai.

English translation: Rocío L.Barrientos

Copyright: Project Syndicate, 2020

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