When Nixon and Kissinger went to China it was a nation still suffering from the upheaval of the cultural revolution with an economy that only marginally qualified as industrialized. Over the past 40 years it has followed a path from being a farm team for western industrialist to becoming a major economic power in its own right. The initial phases involved providing a place for US and European manufactures to outsource low skill production in a low skill economy. The products made in China were imported back into the US and Europe under familiar western brand names. Since then China's industrial capacity has gone through a dramatic expansion and it infrastructure and labor have steadily moved up the technology chain.
At this point China has a somewhat larger volume of trade with the EU than it does with the US. It is a global player in every possible sense of the word. They are now at a point that holds both symbolic and practical economic importance. They have achieved the ability to establish their own brands in the countries for which they were once only part of the supply chain.
The name Haier, a leading Chinese brand for household goods, originates from Liebherr, the German company that set up a joint venture with a Chinese company almost three decades ago. Liebherr taught its partner to build modern fridges. It needed to, because 20 percent of the Chinese manufacturer's output at the time was faulty.
Haier boss Zhang Ruimin started out by handing his surprised workers sledgehammers to destroy all the malfunctioning fridges they had made. The shock therapy worked. The state-owned business started to expand its market share in China, where it acquired many smaller competitors. Then it went international, and now it has an 8 percent share of the world market for household appliances.
The Chinese government is encouraging the expansion of its companies because it wants to shed the country's image as a cheap, low-tech manufacturing location and to turn it into a center of innovation. "Zou chu qu," loosely translated as "go out," is the message the country's Communist planners are sending to the Chinese business community.This article is about the situation in Germany and the EU. However similar things are happening in the US.
Who says China can't build brands? You might not be able to name more than a handful today, but you will in 10 years (and you might even be working for one - in the US).
It means Chinese companies will be directly courting US and European moms, pops, and the occasional 7'1" Miami Heat hulk, and it means they'll also be launching a mass effort to acquire viable franchises with consumer loyalty in the West.For people who are inclined to wear their nationalistic pride on their sleeves this news might be the cause of raising competitive hackles. However, it raises some interesting questions about where the global economy is headed. Are we going to see an increasingly forceful China trying to take over the sort of dominant role that was previously occupied by the US? There are certainly nationalist voices in China that like to make noises along such lines. However, there is also the possibility that national identities could lose their hold.
China needs more than just manufacturing muscle to keep its businesses healthy and its macro growth trends on track - something that we're betting to see by 2020.
Capital is certainly well down the road to becoming fully internationalized. Where a major company has its formal headquarters no longer means much in terms of a national identity. They will follow the markets and the tax havens. There are certainly things about such developments which tend to raise concerns. One example is the information that has leaked out about the negotiation of the Trans Pacific Partnership treaty. Whatever happens the clock is not going back to 1945 and we will be living in a world that continues to change.