Sunday, November 29, 2009

China- Rise of Dragon

China, Communist country - the rise of Dragon

lets get back to late 1970, China was communist country and lack of proper infrastructure and growth limited to big cities like Beijing, Shanghai, etc

To face the world competition and stand up to the world demand, China made a remarkable survey to rejuvenate the country itself. In 1978, Chinese delegation shown up to India and they studied the Special economic zone. From then China never look back. The delegation, back at China made representation of Special Economic Zone Model. The Chinese government liked and approved the proposal to set up the Special Economic Zone covering all Coastal line from Shanghai to Tianjin, Beijing, etc. This opened up the door to set up the business and liberalised economy without change the political system.

These gave a immense opportunities to the development of China in terms of Infrastructures. If we take a look at the figure then it will be : -
Road: more than 50000 kms of road. (just take a example of Maruti Udyog Ltd.: MUL is located at Gurgaon, Haryana. To export Cars, MUL needs take it to the Port of Nhava Sheva to load the Ship. The transit time from Gurgaon to Nhava Sheva Port, Mumbai took more than 24 hours to reach. The same distance if traveled in China, it will take just half a time i.e. 12 hours.)
railways: more than 75000 kms. (yes China overtake the India railways i.e. 62000 Kms.) (India is in the process of developing Freight Corridor from India's Capital i.e New Delhi to Nhava Sheva, Mumbai by participation of PPP (Public Private Partnership). But.. its stuck between the finalisation of development from Baroda to Nhava Sheva port. As government governing at Centre and State of Gujarat are different and the same is stuck in between to complete)
Ports: Shanghai, Tianjin, Beijing, etc
Provinces: Hangzhou, Guangzhou, Hebei, etc
Please note that one SEZ in China is equal to state of Gujarat if compare in terms of Sq miles.

All these lead to improvement of lifestyle of people of China.

China: World's factory!
its a cheap to source a components/parts/textile/electronic parts, etc from China.

FDI's: Since liberalization till date China attracted more than US$ 300 billions of FDI's.

Cheap Labourer: The only reason to get it sourced to China is cheap labourer. I just remember one interesting case in USA against Wal Mart. Actually the manufacturers in USA sued Wal Mart for sourcing the manufacturing to China rather than USA manufacturers. In defence, the Wal Mart argued that just imagine how much USA manufacturers are expensive, if we import goods from other part of world and sell it in USA cheaper than USA manufacturers products. Its because of Labour cost in USA is much higher than in China.

another incidence from Europe: China nearly dump more than 200 containers of ladies undergarments to European port couple of years back. Chinese companies negotiating with European authority to clear the cargo for more than 2 months. Its very difficult for European Authority to clear the containers as the per unit price of ladies undergarments are so cheap that it will nearly closed down the business / shops of European manufacturers.

Banks in China: We are proud of State Bank of India having branches more than 9000 all over India and also in terms of market capitalisation. But if happen to merge three big banks in India, still market capitalisation is much less than China's big bank.
But because of slowdown of economic growth and recession, banks have large NPAs (non-performing assets) and bad shape of balance sheets.

north or west of China: its happened to be that people from north or west of China remains poor and depends on agriculture the most and these parts are remains the true picture of communist China still today.

but the fact that "its happened to be China is world factory and rest of world are consumers."

1 comment:

  1. Good Experience & knowledge in economics of China.