How Long Can The Dominant Position Of "Made In China" Remain?

Proud achievements can not conceal the murmurs behind prosperity.

The hidden trouble of "made in China" is not strong enough to remind China's government and enterprises.

People keep asking such questions: how long can China's dominant position remain?

China's low labor cost of "made in China" without making money has become the main support for low price in China.

Many famous international brands give production orders to Chinese enterprises.

It is said that Nike produces more than 60% of sports shoes in China, and most of the world's top ten brand shirts are given to Chinese enterprises.

However, the low labor cost has brought a large number of production orders to China, but how much money can Chinese manufacturers ultimately make?

Someone has calculated such a bill: a child toy sold in the US market, and the retail price of the mall is 100 dollars.

The designers and distributors of the toys are all American companies, and the manufacturers are Chinese enterprises.

After the toy design was finalized, the US company placed an order for a Hongkong trading company at a price of 50 US dollars; the Hongkong trading company pferred the order to a Chinese foreign trade company at a price of $22 each; the foreign trade company ordered goods from two factories in Guangdong and Jiangsu at a price of $15, including artificial and raw materials, and the production cost of the factory was 12 dollars; the US company sold the toys to the shopping malls at the price of $82 per piece.

Roughly calculated, the gross profit of China's manufacturing enterprises is 3 dollars per piece. The gross profit of China's foreign trade companies is 7 dollars per piece, Hongkong trading company's gross profit is 28 dollars, the US company's gross profit is 32 dollars, and the gross profit of the shopping mall is 18 dollars.

In this chain, the total number of manufacturers and foreign trade companies in mainland China was only $10, only 10% of the retail price, while the remaining 90% were taken away by overseas businessmen.

Moreover, in recent years, many Chinese manufacturers have adopted prepaid and post paying ways to maintain the US market.

Some American retailers and middlemen pay only half a year after delivery, or even pay after the goods are sold, which means pferring the inventory to the producers.

The quality manager of a machine tool factory in Shanxi told the reporters about his own experience.

The factory imported a set of equipment from abroad. At that time, though the equipment was expensive, there were raw materials and necessary tools in the country, and the products were still very competitive.

At that time, they approached the manufacturers of raw materials in China, and the manufacturers said that their products were definitely no problem. However, when they started, they found that the quality of the same type and same standard materials as the United States and South Korea was not guaranteed at all, but the tools could not meet the requirements.

He said that one of the most serious problems of domestic enterprises is "improvise", especially those small and medium-sized processing enterprises.

In the American and Japanese enterprises he contacted, the quality of the customers was five grade, and they would reach the level six.

And Chinese enterprises are often you want five levels, I am better than grade four, barely qualify on the line.

This concept seriously restricts the upgrading of Chinese enterprises' products.

And when the big manufacturing enterprises in Europe and the United States are moving to China, Chinese enterprises are still at the level of their own competition, and still deal with customers with a consistent attitude. How can they cope with the competition between big enterprises in Europe and the United States?

Many experts and scholars have pointed out that the problem of product quality has become an important factor affecting the competitiveness of China's manufacturing industry.

The low efficiency of China's manufacturing industry and the lack of innovation have seriously restricted the upgrading of quality, but the quality is not high and the added value is small, and it is difficult to increase profits, and there is no money to invest in R & D to improve the quality.

Many Chinese enterprises have been in such a vicious circle in recent years.

It is a workshop, not a factory. Although China has become a big industrial production country that attracts worldwide attention, but because of the lack of deep competition resources such as technology and brand, China's manufacturing industry is only an important workshop in the world manufacturing and production chain, and it is far from becoming the "world factory".

Long Yongtu, Secretary General of the Boao forum for Asia, said that in the manufacturing chain of the global manufacturing industry, Chinese enterprises are in the middle and low end. Compared with China's comprehensive national strength, the quality and competitiveness of manufacturing industry, especially its own core technology, there is still a big gap compared with the United Kingdom, the United States and Japan, known as the "world factory" in the history of world economy.

As a matter of fact, because of their own exclusive production technology, many key components need to be used by other brands. "Made in China" simply can not match the foreign brands, so they have to make "OEM" production and only create 1%-2% profits for themselves.

Yin Mingshan, chairman of Chongqing Lifan Group, gave an example. Shenlong Fukang and Dongfeng Citroen are all made in China, but the French have never taught the technology to the Chinese people. They have to replace a screw and give it to the French. All the technical details are controlled in the joint venture, and China can not hatch Chinese technology.

In terms of China's color TV industry, the key components such as pure glass shells and electronic guns are also dependent on imports.

Under such circumstances, Chinese manufacturing enterprises only earn "processing fees", even less than 10% of the commodity price.

Without the independent brand in the international market, it has become the "made in China" weakness and become a shackle for Chinese enterprises to become bigger and stronger.

Over the years, the performance of Chinese commodities in the international market has made western consumers form a fixed concept of "Chinese goods = low quality and low price commodities".

Some traditional old brands are gradually shrinking and dying out. The birth of new national brands is slow and difficult, making quite a lot of Chinese products export only by others' brands.

International brand analysts have seen the current situation of Chinese enterprises. They point out that Chinese enterprises have problems of overcapacity and insufficient investment in innovation.

At the same time, multinational corporations are becoming more and more influential in the mainland of China, and foreign brands continue to be popular in China.

Since 2004, share prices of many Chinese consumer brands have fallen.

The popularity of Chinese enterprises in European and American consumers is still very low. An advertising agency professional said: "if Chinese enterprises want to export their brands to the world, there is still a long way to go."

Technology will be the ultimate advantage. In the face of fierce market competition, the competitive pressure faced by Chinese enterprises is mainly from the lack of R & D investment.

Multinationals usually invest 5% or more of their income in research and development.

Chinese enterprises can achieve this international standard.

In terms of innovation, the gap between Chinese enterprises and European and American enterprises is still widening.

A recent US survey shows that 90% of European and American multinationals have integrated innovation into their enterprise strategy, and 80% have established the R & D center of the whole company.

Most enterprises have invested at least 10% of their profits in research and development.

55% of the innovation comes from cooperation with universities, research institutes and other enterprises.

Most Chinese enterprises have little R & D investment, and many small and medium-sized enterprises do not even have R & D.

According to statistics, the invention patents of Chinese enterprises are only 1/30 from Japan and the United States.

Many enterprises rely heavily on foreign imports for their core technology and equipment.

In China, more than 60% of the investment in trillions of equipment is imported each year.

At the same time, the penetration of foreign brands has gradually increased.

In the past few years, the domestic mobile phone has gained nearly 50% market share with its low price and luxurious appearance.

But over the past year, the situation has changed. While Motorola, NOKIA and Sony Ericsson have launched new mobile phones to the market at the same time, they have also lifted the banner of substantial price cuts, resulting in the market share of domestic mobile phones falling from 42% in 2003 to 37% in the first half of 2004.

Similar situation has also appeared in China's household electrical appliance industry and automobile industry.

Hitachi, Samsung and other foreign manufacturers have gained market share in advanced fields such as plasma TV and LCD TV by virtue of advanced technology.

Today, the comparative advantage of China's processing and manufacturing industry is increasingly being imitated by foreign enterprises in China and neighboring countries and Latin American countries. Relying solely on the comparative advantages of labor costs, raw material costs and other resource costs, it has been unable to win the future for Chinese enterprises.

China's manufacturing low-cost advantage will face competition from Russia, India, Brazil and other countries, and there is no room for development.

If "made in China" still stays at the simple processing level such as OEM, and is satisfied with creating profits for 1%-2%, China will eventually become the lowest value of the global industrial value chain, and only gain meager profits and lose the ability of sustained and rapid development.

With the acceleration of globalization, manufacturing industries in developed and more developed countries such as the United States, Europe and Japan are constantly shifting to China. At the same time, the technological level, innovation ability and product quality of manufacturing industry in these countries and regions are also constantly improving, which poses a more severe challenge to China's manufacturing industry.

With the massive influx of foreign capital, can Chinese enterprises invest more in technology, improve their innovation ability and improve product quality faster, which will directly relate to the survival and development of China's manufacturing industry, and whether we can ultimately change the inferior position in the downstream.

When will China's manufacturing turn into China?

Technology will be the ultimate key.

This is a big test facing many entrepreneurs in China.

The text was originally published in May 12, 2005.