Op-Ed Contributors

Economy of brawn and brain

By Handel Jones (China Daily)
Updated: 2010-09-10 07:44

China has had excellent success in building a large industrial base, which enables it to export more than 50 percent of its output and also meet a high percentage of its domestic demand. Its companies are proud of their factories and the goods they make. Larger and more efficient factories are being built in China, with its auto industry becoming the largest in the world - in April 2010 alone, it made 1.73 million.

To achieve such an industrial growth, Chinese workers and managers have made huge sacrifices. The more than 200 million migrant workers have given up their family lives, and many get to see their children only during the Chinese lunar new year.

Many Chinese entrepreneurs are very wealthy. The country now has the highest number of billionaires after the US. Many of these billionaires are under 40, and in most cases, owe their success to the country's large market and demand. Examples include Baidu, Alibaba, Tencent and other Internet-centric companies.

Though Huawei, Haier, and some other companies have begun experiencing success in the global market too, most of the successful Chinese companies have to thank the domestic market for their success.

But the times are changing. The children of migrant workers want to go in for higher studies and lead a life different from their parents', and workers are becoming less passive. The strikes in Honda, Omron, Denso and other factories were called not only to demand higher wages, but also to protest against the poor treatment of workers. There's a new awakening among workers. One worker has even been quoted as having said: "Are we not as good as the Japanese workers?"

The strikes should thus be seen as an expression of workers' frustration. It should be a reminder that workers need to be treated with more respect.

The special economic zone (SEZ) concept has been successful in building a large industrial base in many Chinese cities and provinces. A World Bank analysis says that the existence of about 3,000 SEZ projects in 120 countries indicates the effectiveness of such zones in stimulating the economy.

But a key problem with China is that many of the products (for example, iPhone 4, iPad and HP personal computers) its companies make are designed abroad. Chinese companies can take an existing design and make a product, and even improve it, at a lower cost.

What China needs to do to continue prospering, however, is the ability to design new products. It needs original ideas and the brains to design and develop new products and set up SEZs of "brainpower". It has to maintain its efficient manufacturing base, but that should only provide the foundation for a new knowledge-based economy.

The country has to recapture the creativity and innovation so common to its past. The skills that would be needed to build its innovative phase are strategic planning, marketing and innovation. Chinese history is full of examples of clever strategies, many of which helped the country win battles. Today, China needs to devise strategies to win the battles in the global market.

China spends huge amounts amount on producing engineers and scientists. But many of its graduates cannot find suitable jobs, because its market mainly demands low-paid manufacturing workers. To overcome this problem, China has to build its next industrial phase based on brainpower that would enable it to conceive and design new products.