Autumn Child
Junior Member
We all know that China will eventually surpass the US in this field. The question is what is the economic impact that one chinese online users compared to one US online users?
Chinese Economics Thread
- Thread starter Norfolk
- Start date
RedMercury
Junior Member
I wouldn't say lead, but those are fields Chinese scientists are comparatively better at (than other fields).
Schumacher
Senior Member
The Nature article is 'interesting' in that it makes it sound like China's rise in science is new & not previously expected. I think this is reflective of a myopic view, unable/unwilling to see China's revolutionary contributions in science thru history, not to mention those of Chinese outside China in contemporary science as well.
Nothing magical abt it, the science & physics strength is always there, it's mostly the engineering part that's lacking. As the economy develops, the engineering shortcomings are being overcome.
Nothing magical abt it, the science & physics strength is always there, it's mostly the engineering part that's lacking. As the economy develops, the engineering shortcomings are being overcome.
The Nature article talks about China's shift away from manufacturing. That won't happen for a long time.
China still has hundreds of millions of people living just above the poverty line. While the middle class in China starts growing, these people living just above the poverty line will be the next generation factory workers and manufacturing labourers.
In America, their labourers just priced themselves out of competition. In China, that won't happen for quite a long time. So China will still be a high-tech country with what will be the largest middle class on earth, but it will also maintain it's low-cost manufacturing export sector. They won't price themselves out of competition for a while.
China still has hundreds of millions of people living just above the poverty line. While the middle class in China starts growing, these people living just above the poverty line will be the next generation factory workers and manufacturing labourers.
In America, their labourers just priced themselves out of competition. In China, that won't happen for quite a long time. So China will still be a high-tech country with what will be the largest middle class on earth, but it will also maintain it's low-cost manufacturing export sector. They won't price themselves out of competition for a while.
Schumacher
Senior Member
Mostly agree with you. It'll become clear in coming years that China will be able to move into innovation & design while maintaining a good grip on lower level manufacturing, something few if any can do. Some say India & Vietnam will be the 'China killers' in the low-level manufacturing. I disagree, the next few decades will not be the same as the last few. Those who build their economy in the hope of taking over China's low level manufacturing will find the wages they get for doing it will not be enough to feed their families. Look at the close to 30% & double digit inflations in Vietnam & India.
China has had deliberate policies with regard to minimum wages, pollution, resources to phase out these industries with the results of many people returning to the farm where the money is.
Markets for low consumer goods will shrink or their prices will have to rise which can help the many remaining Chinese manufacturers to maintain margin.
Good news is as China moves to higher level, industrial goods from power, alternative energy, transport & even space will start to benefit from the 'China price' enabling developing countries to gain access to these technologies.
Autumn Child
Junior Member
There won't be any China killers in the short term. It is very hard to copy China's macro control. Vietnam wanted to copy the China model but opened up too fast with little to support the huge investment and hotmoney flow, while India's economy and politics are very different compared to China. By the time they learned about their mistakes, China will also have a different economy, mostly based on higher-tech level industries. China is unique in that it opened up and have so far came up with the right solution to tackle the worlds economy.
Autumn Child
Junior Member
India is catching up fast...
In China, low-end industries give way to high-tech
By David Barboza
Friday, August 1, 2008
SHENZHEN, China: Few people have heard of the BYD Corporation — BYD for Build Your Dream — but this little-known company has grown into the world's second-largest battery producer in less than a decade of existence. Now it plans to make a great leap forward: "We'd like to make a green energy car, a plug-in," said Paul Lin, a BYD marketing executive. "We think we can do that."
Even in go-go China, such lofty aspirations may sound far-fetched. But BYD has built a 1.6-million-square-foot auto assembly plant here and hired a team of Italian-trained car designers; it plans to build a green hybrid by the end of the year.
No longer content to be the home of low-skilled, low-cost, low-margin manufacturing for toys, pens, clothes and other goods, Chinese companies are trying to move up the value chain, hoping eventually to challenge the world's biggest corporations for business, customers, power and recognition.
The government is backing the drive with a two-pronged approach: using incentives to encourage companies to innovate, but also moving to discourage low-end manufacturers from operating in southern China. That step would reverse one of the crucial engines of this country's spectacular economic rise.
But by introducing tougher labor and environmental standards and ending tax breaks for thousands of factories here, the government has sent a powerful signal about its global ambitions, and helped encourage an exodus of factories from an area long considered the world's shop floor.
President Hu Jintao hinted at China's Olympic-size ambitions during a meeting of China's scientific elite last June at the Chinese Academy of Sciences, where he called on scientists to challenge other countries in high technology. "We are ready for a fight," he said, "to control the scientific high ground and earn a seat on the world's high technology board. We will make some serious efforts to strengthen our nation's competence."
Government policies now favor high-tech economic zones, research and development centers and companies that promise higher salaries and more skills. A computer chip plant being built by Intel in the northern city of Dalian is welcomed; a textile mill churning out $1 pairs of socks is not.
"When a country is in its early stages of development, as China was 20 years ago, having an export processing center is good for growth," said Andy Rothman, a longtime China analyst at CLSA, the investment bank. "But there's a point when that's no longer appropriate. Now, China's saying, 'We don't want to be the world's sweatshop for junk any more."
Chinese firms are expanding into (or buying companies that work in) software and biotechnology, automobiles, medical devices and supercomputers. This year, a government-backed corporation even introduced its first commercial passenger jet, a move Beijing hopes will allow it to some day compete with Boeing and Airbus.
In some ways, the government is only riding the economic currents that come with development and high growth. For instance, many manufacturers in southern China — the country's biggest export zone — are moving to the interior because land and labor costs are cheaper, or expanding operations to include in lower-cost countries, like India, Vietnam or Bangladesh.
World-class brands that have grown dependent on outsourcing labor-intensive production to China are now searching for alternatives. Even the retail behemoth Wal-Mart, which moved its global procurement center here to Shenzhen in 2002, is going to be forced to find new sourcing channels to fill its 5,000 stores worldwide.
For millions of consumers around the world, experts say the policy shift could also mean higher prices for a broad array of goods, from pens and hammers to Barbie dolls and running shoes.
"Basically the cost of things China produces for Home Depot and Wal-Mart are going up," said Dong Tao, an economist at Credit Suisse. "But there is another side. In some areas that China's going to grab, like telecom equipment, they'll push prices lower."
Economists say China's development is following in the footsteps of Japan and South Korea, which successfully transitioned from low-skilled manufacturing to high technology, services and the creation of global brands.
There are still plenty of obstacles here, including weak intellectual property rights enforcement and a culture of copying or stealing technology from foreign companies or joint venture partners. But experts point to positives like a rising aggressive entrepreneurial class, legions of newly minted science and engineering graduates and a fiercely competitive domestic marketplace.
Peter Williamson, a professor of management at Cambridge University and co-author of "Dragons at Your Door: How Chinese Cost Innovation is Disrupting Global Competition," challenges the notion that China doesn't have technological know-how.
"They are some of the biggest in launching satellites. They have a lot of technology locked up in the military, and now the government is reducing budgets and pressing agencies to privatize," he said. "So suddenly, a lot of technology people thought didn't exist has come out from behind the curtain."
This is what China is betting on.
At BYD, executives are ramping up research and development spending, studying global marketing strategies. Founded in 1995 by a scientist who studied metallurgy, the company has made lithium batteries, cellphones, camera equipment, auto parts and other components for Nokia, Motorola and Sony, among others, gaining experience in producing high-quality goods.
"The technology for a car is not that sophisticated," Lin said. "It's big, but a lot of low technology." Five years ago BYD bought a state-owned carmaker to help make the transition.
Another company hoping to make the leap is Hasee, a fast-growing computer maker also based in Shenzhen, in an area that is home to Huawei, China's giant telecom equipment maker.
Founded just six years ago, Hasee is already selling 100,000 laptops a month and is the second biggest Chinese computer maker behind Lenovo, with revenue forecast to reach $800 million this year.
Hasee executives say the company is spending heavily on research and development, and that by focusing on innovative computers and laptops that now sell for just $370, it is on track to become the world's biggest computer maker within a decade.
"Our strategy in China is to always focus on innovation," said Zhang Xianyong, a Hasee vice president and sales manager for greater China. "We're now in the domestic market, but we'll spare no effort to grab overseas expansion."
Analysts say there are dozens of other little-known semiconductor, software and telecom equipment makers that could emerge as global companies over the next two decades.
The government is pressing companies to move up the value chain for economic, but also political reasons, analysts say. Promoting innovation and brand-name companies would probably bolster the economy and create better jobs.
The Hong Kong Small Business Association projects that by the end of the year, 20,000 factories in southern China will have closed or left China.
In April, Credit Suisse forecast that one-third of all export-oriented manufacturers could close within three years. And a study released in March by the American Chamber of Commerce Shanghai and Booz & Company, the consulting firm, says foreign investors are growing bearish on China and that rising costs are driving American manufacturing out of the country.
For many Chinese economists, that is just fine. "The low end industries used to make a great contribution to Guangdong," said Liang Guiquan, an economist at the Guangdong Academy of Social Sciences, a government think tank. "But an enterprise is like a creation. They must get used to changes in the environment. If the environment changes, they must die out."
By David Barboza
Friday, August 1, 2008
SHENZHEN, China: Few people have heard of the BYD Corporation — BYD for Build Your Dream — but this little-known company has grown into the world's second-largest battery producer in less than a decade of existence. Now it plans to make a great leap forward: "We'd like to make a green energy car, a plug-in," said Paul Lin, a BYD marketing executive. "We think we can do that."
Even in go-go China, such lofty aspirations may sound far-fetched. But BYD has built a 1.6-million-square-foot auto assembly plant here and hired a team of Italian-trained car designers; it plans to build a green hybrid by the end of the year.
No longer content to be the home of low-skilled, low-cost, low-margin manufacturing for toys, pens, clothes and other goods, Chinese companies are trying to move up the value chain, hoping eventually to challenge the world's biggest corporations for business, customers, power and recognition.
The government is backing the drive with a two-pronged approach: using incentives to encourage companies to innovate, but also moving to discourage low-end manufacturers from operating in southern China. That step would reverse one of the crucial engines of this country's spectacular economic rise.
But by introducing tougher labor and environmental standards and ending tax breaks for thousands of factories here, the government has sent a powerful signal about its global ambitions, and helped encourage an exodus of factories from an area long considered the world's shop floor.
President Hu Jintao hinted at China's Olympic-size ambitions during a meeting of China's scientific elite last June at the Chinese Academy of Sciences, where he called on scientists to challenge other countries in high technology. "We are ready for a fight," he said, "to control the scientific high ground and earn a seat on the world's high technology board. We will make some serious efforts to strengthen our nation's competence."
Government policies now favor high-tech economic zones, research and development centers and companies that promise higher salaries and more skills. A computer chip plant being built by Intel in the northern city of Dalian is welcomed; a textile mill churning out $1 pairs of socks is not.
"When a country is in its early stages of development, as China was 20 years ago, having an export processing center is good for growth," said Andy Rothman, a longtime China analyst at CLSA, the investment bank. "But there's a point when that's no longer appropriate. Now, China's saying, 'We don't want to be the world's sweatshop for junk any more."
Chinese firms are expanding into (or buying companies that work in) software and biotechnology, automobiles, medical devices and supercomputers. This year, a government-backed corporation even introduced its first commercial passenger jet, a move Beijing hopes will allow it to some day compete with Boeing and Airbus.
In some ways, the government is only riding the economic currents that come with development and high growth. For instance, many manufacturers in southern China — the country's biggest export zone — are moving to the interior because land and labor costs are cheaper, or expanding operations to include in lower-cost countries, like India, Vietnam or Bangladesh.
World-class brands that have grown dependent on outsourcing labor-intensive production to China are now searching for alternatives. Even the retail behemoth Wal-Mart, which moved its global procurement center here to Shenzhen in 2002, is going to be forced to find new sourcing channels to fill its 5,000 stores worldwide.
For millions of consumers around the world, experts say the policy shift could also mean higher prices for a broad array of goods, from pens and hammers to Barbie dolls and running shoes.
"Basically the cost of things China produces for Home Depot and Wal-Mart are going up," said Dong Tao, an economist at Credit Suisse. "But there is another side. In some areas that China's going to grab, like telecom equipment, they'll push prices lower."
Economists say China's development is following in the footsteps of Japan and South Korea, which successfully transitioned from low-skilled manufacturing to high technology, services and the creation of global brands.
There are still plenty of obstacles here, including weak intellectual property rights enforcement and a culture of copying or stealing technology from foreign companies or joint venture partners. But experts point to positives like a rising aggressive entrepreneurial class, legions of newly minted science and engineering graduates and a fiercely competitive domestic marketplace.
Peter Williamson, a professor of management at Cambridge University and co-author of "Dragons at Your Door: How Chinese Cost Innovation is Disrupting Global Competition," challenges the notion that China doesn't have technological know-how.
"They are some of the biggest in launching satellites. They have a lot of technology locked up in the military, and now the government is reducing budgets and pressing agencies to privatize," he said. "So suddenly, a lot of technology people thought didn't exist has come out from behind the curtain."
This is what China is betting on.
At BYD, executives are ramping up research and development spending, studying global marketing strategies. Founded in 1995 by a scientist who studied metallurgy, the company has made lithium batteries, cellphones, camera equipment, auto parts and other components for Nokia, Motorola and Sony, among others, gaining experience in producing high-quality goods.
"The technology for a car is not that sophisticated," Lin said. "It's big, but a lot of low technology." Five years ago BYD bought a state-owned carmaker to help make the transition.
Another company hoping to make the leap is Hasee, a fast-growing computer maker also based in Shenzhen, in an area that is home to Huawei, China's giant telecom equipment maker.
Founded just six years ago, Hasee is already selling 100,000 laptops a month and is the second biggest Chinese computer maker behind Lenovo, with revenue forecast to reach $800 million this year.
Hasee executives say the company is spending heavily on research and development, and that by focusing on innovative computers and laptops that now sell for just $370, it is on track to become the world's biggest computer maker within a decade.
"Our strategy in China is to always focus on innovation," said Zhang Xianyong, a Hasee vice president and sales manager for greater China. "We're now in the domestic market, but we'll spare no effort to grab overseas expansion."
Analysts say there are dozens of other little-known semiconductor, software and telecom equipment makers that could emerge as global companies over the next two decades.
The government is pressing companies to move up the value chain for economic, but also political reasons, analysts say. Promoting innovation and brand-name companies would probably bolster the economy and create better jobs.
The Hong Kong Small Business Association projects that by the end of the year, 20,000 factories in southern China will have closed or left China.
In April, Credit Suisse forecast that one-third of all export-oriented manufacturers could close within three years. And a study released in March by the American Chamber of Commerce Shanghai and Booz & Company, the consulting firm, says foreign investors are growing bearish on China and that rising costs are driving American manufacturing out of the country.
For many Chinese economists, that is just fine. "The low end industries used to make a great contribution to Guangdong," said Liang Guiquan, an economist at the Guangdong Academy of Social Sciences, a government think tank. "But an enterprise is like a creation. They must get used to changes in the environment. If the environment changes, they must die out."
Aug 5, 2008
Chinese banks hog top spots in financial Olympics
But Beijing's forays into overseas financial firms fail to pay dividends
TOP THREE BY MARKET VALUE: No. 1
View more photos
BEIJING - CHINA has already won most of the medals in the financial Olympics by avoiding the toxic debt investments that have devastated banks in the United States and Europe.
Chinese banks hold three of the top six spots among the world's largest financial companies based on market value, even though their shares have fallen by more than 20 per cent in Hong Kong trading since last October.
London-based HSBC Holdings, the biggest non-Chinese bank, is No. 3, trailing Industrial & Commercial Bank of China (ICBC) and China Construction Bank.
The Chinese banks owe their rankings in part to having avoided almost all of the US$480 billion (S$659 billion) in writedowns and credit market losses that have sent bank stocks tumbling worldwide, data compiled by Bloomberg show. Only two years ago, the world's biggest banks were led by Citigroup and Bank of America of the US and UBS in Europe.
ICBC's unaudited figures released on July 3 show its first-half profit has risen by more than 50 per cent. Three days later, China Citic Bank Company said its earnings jumped more than 150 per cent in the same period. China Construction Bank followed, saying its net income may have advanced by more than 50 per cent.
ICBC and China Construction Bank are the most expensive among the 15 largest global banks by market value, trading at 3.2 times and 3.4 times book value, respectively, according to data compiled by Bloomberg. That compares with Citigroup, which trades at less than 1 time book value. Bank of America, the world's fourth-biggest bank by market value, is at 1.07 times book value.
China considers starting state banks to cater to SMEs
CHINA is considering establishing state-backed banks focused on lending to small and medium-sized businesses to help boost economic growth, state media reported yesterday.
The proposal aims to help capital-hungry small and medium-sized firms through hard times and allow them to secure long-term financing, Guangzhou Daily reported, citing national development and reform commission officials.
... more
But China's success in growing its state-owned domestic banks has not been matched by its investments in overseas financial firms. Chinese funds and companies have spent US$19.3 billion buying stakes in Blackstone Group, Morgan Stanley, Barclays, Fortis and Standard Bank Group since May last year that are now worth US$7 billion less on paper.
The Chinese sprint into overseas financial stocks culminated last Dec 19 with China Investment Corp's US$5 billion purchase of a 9 per cent stake in Morgan Stanley. The firm has declined 18 per cent in trading since then.
The US$200 billion sovereign wealth fund invested US$3 billion in Blackstone, manager of the world's largest buyout fund, only to see the value fall 41 per cent since the firm's initial public offering in June last year.
China, unlike Singapore, has slowed its investments in overseas financial companies.
China Development Bank and Ping An's purchases of more shares in Barclays and Fortis were the only such investments this year.
Beijing blocked plans by China Development Bank to invest in Citigroup because of the US bank's mortgage-related losses, a person with knowledge of the decision said.
By contrast, foreign banks' investments in Chinese financial firms have fared much better, showing US$50 billion of paper profits, according to Bloomberg data.
BLOOMBERG
Chinese banks hog top spots in financial Olympics
But Beijing's forays into overseas financial firms fail to pay dividends
TOP THREE BY MARKET VALUE: No. 1
View more photos
BEIJING - CHINA has already won most of the medals in the financial Olympics by avoiding the toxic debt investments that have devastated banks in the United States and Europe.
Chinese banks hold three of the top six spots among the world's largest financial companies based on market value, even though their shares have fallen by more than 20 per cent in Hong Kong trading since last October.
London-based HSBC Holdings, the biggest non-Chinese bank, is No. 3, trailing Industrial & Commercial Bank of China (ICBC) and China Construction Bank.
The Chinese banks owe their rankings in part to having avoided almost all of the US$480 billion (S$659 billion) in writedowns and credit market losses that have sent bank stocks tumbling worldwide, data compiled by Bloomberg show. Only two years ago, the world's biggest banks were led by Citigroup and Bank of America of the US and UBS in Europe.
ICBC's unaudited figures released on July 3 show its first-half profit has risen by more than 50 per cent. Three days later, China Citic Bank Company said its earnings jumped more than 150 per cent in the same period. China Construction Bank followed, saying its net income may have advanced by more than 50 per cent.
ICBC and China Construction Bank are the most expensive among the 15 largest global banks by market value, trading at 3.2 times and 3.4 times book value, respectively, according to data compiled by Bloomberg. That compares with Citigroup, which trades at less than 1 time book value. Bank of America, the world's fourth-biggest bank by market value, is at 1.07 times book value.
China considers starting state banks to cater to SMEs
CHINA is considering establishing state-backed banks focused on lending to small and medium-sized businesses to help boost economic growth, state media reported yesterday.
The proposal aims to help capital-hungry small and medium-sized firms through hard times and allow them to secure long-term financing, Guangzhou Daily reported, citing national development and reform commission officials.
... more
But China's success in growing its state-owned domestic banks has not been matched by its investments in overseas financial firms. Chinese funds and companies have spent US$19.3 billion buying stakes in Blackstone Group, Morgan Stanley, Barclays, Fortis and Standard Bank Group since May last year that are now worth US$7 billion less on paper.
The Chinese sprint into overseas financial stocks culminated last Dec 19 with China Investment Corp's US$5 billion purchase of a 9 per cent stake in Morgan Stanley. The firm has declined 18 per cent in trading since then.
The US$200 billion sovereign wealth fund invested US$3 billion in Blackstone, manager of the world's largest buyout fund, only to see the value fall 41 per cent since the firm's initial public offering in June last year.
China, unlike Singapore, has slowed its investments in overseas financial companies.
China Development Bank and Ping An's purchases of more shares in Barclays and Fortis were the only such investments this year.
Beijing blocked plans by China Development Bank to invest in Citigroup because of the US bank's mortgage-related losses, a person with knowledge of the decision said.
By contrast, foreign banks' investments in Chinese financial firms have fared much better, showing US$50 billion of paper profits, according to Bloomberg data.
BLOOMBERG
China outsourcing to India now. Brilliant.
Huawei's perfect marriage
By Pallavi Aiyar
SHENZHEN, China - "I am so proud of my company," says Li Jian, also known as Amit Li, as he shows off the headquarters of Chinese telecommunication equipment maker Huawei, in Shenzhen. Li is a graduate of the Hindi department of Beijing University and has spent the past year based in Gurgaon, on the outskirts of Delhi, working as a public relations manager for Huawei's Indian subsidiary.
His pride in Huawei is understandable given that in the span of 20 years the company has gone from minnow to mammoth in one of the world's key industries: telecommunications gear. For long dismissed as an upstart with few sustainable prospects, Huawei has defied predictions, broken the virtual monopoly of Western firms in the sector and is today counted amongst the top five players in the industry.
At a time when established names like Ericsson and Alcatel-Lucent are reporting losses or plummeting profits, Huawei is aggressively expanding, its well-established position in emerging markets such as India proving to be an advantage.
Huawei's rise is a window into the aspirations of Chinese companies in the global market place. Not satisfied with China's emergence as the low-cost factory of the world, cultivation and support of selected "national champions" to compete against multinational firms is one of Beijing's stated objectives. However, it has not been easy going.
Huawei's growth has thus been dogged by accusations of murky finances, military links, and intellectual property rights violations. The company has been charged with opaque accounting and too-close government connections and support.
In India for example, the company's expansion plans have been regularly blocked by intelligence agencies on the grounds of potential security risks. Huawei India was also barred for a while from bidding for contracts from state-owned companies.
But after almost 10 years in the Indian market, George Huang, the chief operating officer of Huawei's research and development center in Bangalore, the company's largest outside of China, says that Huawei's troubles are a thing of the past. "Security is no longer an issue. It's never mentioned by our customers or even by the government any more."
Today, Huawei India boasts US$600 million in revenues. The Bangalore center employs 1,600 people, only 40 of whom are Chinese. The company has won multi-million dollar contracts with Reliance, and Tata Indicom in addition to a $150 million third-generation phone-network rollout for Bharti Airtel in Sri Lanka. Its relationship with public sector enterprises BSNL and MTNL is also improving. Huawei is in the running for securing a BSNL tender for 93 million GSM lines.
"In terms of market, India has the biggest potential in telecom and we want India to become our biggest market outside of China," says Huang. He adds, "We want our India research and development center to support our global operations, leveraging India's English-language skills and software expertise to our advantage globally."
Huawei's Bangalore center is one of the few tangible examples of the much touted, but rarely realized, potential for the coming together of Indian software with Chinese hardware. At the center, Indian engineers develop software for use in Chinese hardware, demonstrating "how Indian and Chinese comparative advantages can be combined for use globally", says Huang.
Given Huawei's relentless ascent on the global stage, this is not an empty boast. "I would say Huawei is China's most successful multinational; it is on the leading edge of China going international," says Duncan Clarke, head of Beijing-based telecommunications consultancy BDA.
Calling the company the "Wal-mart of global telecom" given its emphasis on volume and price, (Huawei has been known to undercut the price of competitors by as much as 70%) Clarke says he likes "the impertinence" of Huawei. "The sector needed shaking up and that is what Huawei has achieved."
Clarke attributes recent merger activity in the industry, such as the creation of Alcatel-Lucent and Nokia-Siemens networks, in part to competition from Huawei. The Chinese heavyweight today has a presence in over 100 countries, having recorded $16 billion in contract orders in 2007, over 70% of which were generated from international markets
Clarke says Huawei is still some five years away from being able to count itself as part of the exclusive top tier in the sector, given that it remains relatively weak in the area of network management and other more high-end tasks. Its inability thus far to break into the United States market is another handicap as is the lack of internationalization of its top management.
At the company's Shenzhen headquarters, Ross Gan, Huawei's global spokesperson, admits that many challenges remain to be overcome. He lists increasing transparency as one of them. Huawei's founder Ren Zhengfei, a former People's Liberation Army soldier, is noted for never having given an interview to a journalist.
But Gan rejects accusations of Huawei's "suspicious" government links. "Less than 0.5% of Huawei's total business is conducted with the Chinese government," he says.
Clarke concurs. "I think far from being beholden to the state, Huawei in many ways sees itself as above the state." He adds that Beijing's fingerprints are far stronger on Huawei's main domestic competitor, ZTE Corporation, as well as on other emerging Chinese multinationals, such as computer-maker Lenovo, which is partly owned by the Chinese Academy of Social Sciences.
Anxious to rid itself of a reputation for copyright violations - in 2003 Cisco sued the company for copying computer codes - Huawei's primary focus today is to invest in constant innovation. As a result, it spends 10% of revenue on research and development and almost 50% of it's more than 68,000 employees are engaged in research and development (R&D)activities. By the end of 2007, Huawei had applied for 26,880 patents of which 4,256 had been approved.
Back in Shenzhen, it is lunch time and employees come streaming out of the state-of-the art R&D facility that bears a distinct architectural resemblance to the White House. Among the hungry crowds that head for the cafeteria are dozens of Indians, the bulk of whom trot towards a special Indian canteen that serves up daal (dried bean) sand rajma chawal (kidney beans and rice.)
A short drive away from the R&D center, the Norman Foster-designed Huawei University rubs up against the company's European style employee housing complex, all of which Amit Li points out with visible satisfaction.
Later in the day, the boom town of Shenzhen recedes as Li's car speeds towards the airport. But very soon, Li will be in another boomtown: Gurgaon. "I feel equally at home in Shenzhen and Gurgaon," the young Huawei employee says chattily, wearing the mantle of his pioneering "Chindian" identity lightly.
(Copyright 2008 Pallavi Aiyar.)
Huawei's perfect marriage
By Pallavi Aiyar
SHENZHEN, China - "I am so proud of my company," says Li Jian, also known as Amit Li, as he shows off the headquarters of Chinese telecommunication equipment maker Huawei, in Shenzhen. Li is a graduate of the Hindi department of Beijing University and has spent the past year based in Gurgaon, on the outskirts of Delhi, working as a public relations manager for Huawei's Indian subsidiary.
His pride in Huawei is understandable given that in the span of 20 years the company has gone from minnow to mammoth in one of the world's key industries: telecommunications gear. For long dismissed as an upstart with few sustainable prospects, Huawei has defied predictions, broken the virtual monopoly of Western firms in the sector and is today counted amongst the top five players in the industry.
At a time when established names like Ericsson and Alcatel-Lucent are reporting losses or plummeting profits, Huawei is aggressively expanding, its well-established position in emerging markets such as India proving to be an advantage.
Huawei's rise is a window into the aspirations of Chinese companies in the global market place. Not satisfied with China's emergence as the low-cost factory of the world, cultivation and support of selected "national champions" to compete against multinational firms is one of Beijing's stated objectives. However, it has not been easy going.
Huawei's growth has thus been dogged by accusations of murky finances, military links, and intellectual property rights violations. The company has been charged with opaque accounting and too-close government connections and support.
In India for example, the company's expansion plans have been regularly blocked by intelligence agencies on the grounds of potential security risks. Huawei India was also barred for a while from bidding for contracts from state-owned companies.
But after almost 10 years in the Indian market, George Huang, the chief operating officer of Huawei's research and development center in Bangalore, the company's largest outside of China, says that Huawei's troubles are a thing of the past. "Security is no longer an issue. It's never mentioned by our customers or even by the government any more."
Today, Huawei India boasts US$600 million in revenues. The Bangalore center employs 1,600 people, only 40 of whom are Chinese. The company has won multi-million dollar contracts with Reliance, and Tata Indicom in addition to a $150 million third-generation phone-network rollout for Bharti Airtel in Sri Lanka. Its relationship with public sector enterprises BSNL and MTNL is also improving. Huawei is in the running for securing a BSNL tender for 93 million GSM lines.
"In terms of market, India has the biggest potential in telecom and we want India to become our biggest market outside of China," says Huang. He adds, "We want our India research and development center to support our global operations, leveraging India's English-language skills and software expertise to our advantage globally."
Huawei's Bangalore center is one of the few tangible examples of the much touted, but rarely realized, potential for the coming together of Indian software with Chinese hardware. At the center, Indian engineers develop software for use in Chinese hardware, demonstrating "how Indian and Chinese comparative advantages can be combined for use globally", says Huang.
Given Huawei's relentless ascent on the global stage, this is not an empty boast. "I would say Huawei is China's most successful multinational; it is on the leading edge of China going international," says Duncan Clarke, head of Beijing-based telecommunications consultancy BDA.
Calling the company the "Wal-mart of global telecom" given its emphasis on volume and price, (Huawei has been known to undercut the price of competitors by as much as 70%) Clarke says he likes "the impertinence" of Huawei. "The sector needed shaking up and that is what Huawei has achieved."
Clarke attributes recent merger activity in the industry, such as the creation of Alcatel-Lucent and Nokia-Siemens networks, in part to competition from Huawei. The Chinese heavyweight today has a presence in over 100 countries, having recorded $16 billion in contract orders in 2007, over 70% of which were generated from international markets
Clarke says Huawei is still some five years away from being able to count itself as part of the exclusive top tier in the sector, given that it remains relatively weak in the area of network management and other more high-end tasks. Its inability thus far to break into the United States market is another handicap as is the lack of internationalization of its top management.
At the company's Shenzhen headquarters, Ross Gan, Huawei's global spokesperson, admits that many challenges remain to be overcome. He lists increasing transparency as one of them. Huawei's founder Ren Zhengfei, a former People's Liberation Army soldier, is noted for never having given an interview to a journalist.
But Gan rejects accusations of Huawei's "suspicious" government links. "Less than 0.5% of Huawei's total business is conducted with the Chinese government," he says.
Clarke concurs. "I think far from being beholden to the state, Huawei in many ways sees itself as above the state." He adds that Beijing's fingerprints are far stronger on Huawei's main domestic competitor, ZTE Corporation, as well as on other emerging Chinese multinationals, such as computer-maker Lenovo, which is partly owned by the Chinese Academy of Social Sciences.
Anxious to rid itself of a reputation for copyright violations - in 2003 Cisco sued the company for copying computer codes - Huawei's primary focus today is to invest in constant innovation. As a result, it spends 10% of revenue on research and development and almost 50% of it's more than 68,000 employees are engaged in research and development (R&D)activities. By the end of 2007, Huawei had applied for 26,880 patents of which 4,256 had been approved.
Back in Shenzhen, it is lunch time and employees come streaming out of the state-of-the art R&D facility that bears a distinct architectural resemblance to the White House. Among the hungry crowds that head for the cafeteria are dozens of Indians, the bulk of whom trot towards a special Indian canteen that serves up daal (dried bean) sand rajma chawal (kidney beans and rice.)
A short drive away from the R&D center, the Norman Foster-designed Huawei University rubs up against the company's European style employee housing complex, all of which Amit Li points out with visible satisfaction.
Later in the day, the boom town of Shenzhen recedes as Li's car speeds towards the airport. But very soon, Li will be in another boomtown: Gurgaon. "I feel equally at home in Shenzhen and Gurgaon," the young Huawei employee says chattily, wearing the mantle of his pioneering "Chindian" identity lightly.
(Copyright 2008 Pallavi Aiyar.)