Don’t Coddle China’s Domestic Business

Which was the most rapidly growing country in the past decade years? If we collect 100 answers, there will be at least 99 answers saying China. China’s GDP increase rates were about 10 percent for years. What contributes most to China’s impressive GDP growth? If we collect 1000 answers, there will be at least 999 answers saying exports. Great exporting power has become a tag of China. “Made in China” can be found in apparels, groceries, toys, and electronics over the world. Low wage labors provided China an essential advantage on exports. Squeezing cost made Chinese firms be competitive on price war. Without doubt, exports did devote a lot for China’s development but problems also became more and more dazzling.

“Exports fell 3.3% in January from a year earlier, data from the General Administration of Customs showed Sunday. This was a sharp deterioration from December’s 9.7% rise and short of a 4% increase expected by economists polled by The Wall Street Journal”. This is a brief report about Chinese export in January this year. China experienced the slowest developing period last year with about 7 percent GDP increase rate. Though Chinese government proposed to bounce back to a high speed, there were some challenges in front of them. The essential problem is that China relied too much on exports. When losing price advantage and facing more competitions from developing countries, China had no enough effective ways. Taking car market as an example, we may found that China almost had no competitive independent domestic car business. “Even as China’s car sales grow at a 10% annual clip, many of its domestic auto makers are expected to report 2014 results that will be their worst in years. Great Wall Motor Co. , considered a rising star, projects a 2% decline in net profit for 2014, its first year-over-year drop since 2008. Geely Automobile Holdings Ltd. , whose parent company owns the Swedish Volvo brand, warned of a roughly 50% slump in last year’s net profit, its first year-over-year decline since 2002. Great Wall cited hefty research expenses and Geely blamed its drop on a 24% slump in its overall car sales”. Chinese government set a high tariff on foreign cars with the aim of protecting and developing domestic business. Thing went athwart, Chinese domestic car companies relied on government’s protections excessively that they failed to build up a true competitive independent domestic business. Along with China’s rapid growth, more and more Chinese people became having enough money to purchase importing cars, regardless the high tariffs. This caused a harmful consequence to Chinese domestic car business.

Car market is just a tiny view of China’s domestic business. “The domestic industrial sector is definitely under pressure and I don’t see much improvement this year,” said Guo Jinsong, deputy general manager at Beijing Stone Automation Corp Ltd, which imports automation equipment for the steel, power, machinery and petrochemical sectors”. As the global economy environment is in a gloomy period, China’s industrial exports has been punched heavily. While losing price advantage and turbulent world’s economy environment, China need to find a way to build up reliable independent domestic business. The most urgent mission for Chinese government is to encourage domestic firms discovering advanced techniques but not to protect them too much. China should not be treated as a coddling boy but a competitive soldier.

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