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  • The Renaissance of GM Beginning in China and BYD which has Overtaken Toyota: “Wealth of Nations” China

The Renaissance of GM Beginning in China and BYD which has Overtaken Toyota: “Wealth of Nations” China

|China

Regarding Shanghai’s traffic congestion I recollect the Bangkok and Manila of the past. The fact that the infrastructure construction for the World Expo opening on 1 May, such as the subway, is continuing, is making the traffic congestion worse. Shanghai people’s advice for the means of transportation to use from Shanghai Pudong International Airport was to take the Maglev and change to the subway, and not to go by car.

On 24 March, when I visited one of the huge bookstores close to Nanjing Road in Shanghai’s commercial district, copies of the Chinese language version of Adam Smith’s “Wealth of Nations” were stacked up. The attention-attracting economic theoretical work, being a book on classical economics stressing the role of the government in the market, symbolizes the needs of Chinese people and in particular of Shanghai people who have already enjoyed the benefits of growth. It is in contrast to Japan, judged as “becoming socialist”, where “Kanikosen [The Crab Canning-Ship]” became a bestseller in 2008. If you average out the last 20 years, Japan, with its nominal growth rate close to zero, and China, with its above 10%, then the speed of growth and speed of change are clearly different. Consequently arguments over the economy in both countries too are in strong contrast, with Japan sloughing off deflation as against China reining in inflation. This is probably reflected also in the books gaining attention.

There are two main kinds of trend analysis for the continually-changing Chinese economy. Traditionally there is the method focusing on a central government-led framework. The other is a method that focuses on state-owned, foreign-invested and privately-run enterprises, and corporate activity. I would like to consider the fact that regarding the role of China’s local governments, they have more power than those in Japan, senior officials excepted. Viewed from the current state of authority, regrettably for Japan’s prefectures it is difficult to form equal relationships with China’s local governments—the provinces and municipalities. For the promotion of interregional exchange, systemic reforms, such as a regional governmental system and special economic zones, are a prerequisite. Furthermore, within those same provinces and cities, there remains the registered permanent residence system, which can restrict in stable fashion place of residence between urban and rural areas. Consequently, within the two above perspectives, consideration of local governments as key players will also become important. To gain an understanding of the actual situation in more detail, rigorous analysis of local economies is also becoming indispensible.

So what about management analytical methods? Business to business (B to B) and business to customer (B to C). Comparing transactions between companies and transactions with consumers, the one where it is easy for market mechanisms to function is clearly the latter. Moreover, in China’s case, transactions between businesses and government (business to government: B to G) are a key focus. The establishment of joint ventures with state-owned enterprises, for which local governments, through owning shares, have the right to manage, is designated as of the B to G type.

In its macroeconomy there is the potential for China to surpass the economic scale of the United States in only ten years time. Moreover, in such a China, in terms of sales of products to individuals and consumer services, there is the promise of new markets with units running to the millions, tens of millions, and hundreds of millions. The interest of overseas firms and the policies of the Chinese government also are greatly transforming the country from the world’s factory into the world’s market. In China which champions socialist market-economics, it will be a case of a more capitalistic situation arising through B to C and a consumer-oriented market.

In 2009 the Chinese automotive market became the world’s number one, surpassing that of the United States. The China Association of Automobile Manufacturers publishes monthly the “China Automobile Industry Newsletter” with the sales figures of ten major companies. In the cumulative totals of February 2010, SGMW was in first place, Chang’an (Chana) in second, and Shanghai GM in third. Two companies affiliated to the US company GM are in the top three positions. Following in fourth place is Shanghai Volkswagen, and in fifth place FAW-Volkswagen, affiliated to the German company Volkswagen. The privately-managed enterprises Chery and BYD Auto, in numbers of vehicles sold, have overtaken Dongfeng Nissan and FAW Toyota, respectively, and in BYD’s case sales of hybrid and electric vehicles are also advancing. The share of the ten companies is less than 60%, however. In addition to gauging the depth of market formation, fixed-point measurement of China’s automotive industry is vital.

[Translated by ERINA]