Increasing International Competitiveness of Chinese Industries Xiuli Chao ( ) Department of Industrial Engineering and Interdisciplinary Operations Research.

Increasing International Competitiveness of Chinese

Industries Xiuli Chao (赵修利 )

Department of Industrial Engineering and Interdisciplinary Operations Research Programs,

North Carolina State University

Raleigh, NC 27513, USA

Chinese Industry Chinese industries have made tremendous progress

since China opened its door to the world. Export steadily increasing. China’s national economic competitiveness has

been improved significantly over the past 25 years. What are the things that should be done to make

Chinese industry stay competitive in the future world market?

Chinese Industrial Products Since early 1980’s, we observed a steady increase of

“Made in China” products in world market. Products range from shoes, toys, low-end clothing in

80’s, to electronic, computer, etc. in the 90’s and now. Majority of toys in world market are “Made in China”. Some people view China as the “Manufacturing floor of

the world”. This is very much in parallel, e.g., to Japanese products in

1950’s, and products of Taiwan, Hong Kong, etc. in 1960’s and 1970’s, in the US market.

Some Observations How do “foreigners” view Chinese products? Labor advantage (cheap labor). Most of the products, however, are designed overseas, and

manufactured in China. This is not a healthy phenomenon if it stays for long. We

all observed the transitions of manufacturing from Taiwan, Hong Kong, Southeast Asia, etc., to other parts of the world.

Competition only based on lower labor cost will not put Chinese industry in a competitive position in long run.

Two Main Points

创新 : Competitiveness Through InnovationResearch and science parks focusing on “Research and

Development”高质量产品 : High quality products.

Create a culture of “Total Quality Management”, and this cannot be achieved without government playing a key role.

Research & Science Parks

“Organizational entities that sell or lease spatially contiguous land and/or buildings to business or other organizations whose principal activities are basic and applied research or development of new products and services” (Luger and Goldstein, 1991, page 5).

This definition excludes “Silicon Valley”.

Research & Science Parks

A science park is an organization managed by specialized professionals, whose main aim is to increase the wealth of its community by promoting the culture of innovation and the competitiveness of its associated business and knowledge based institutions – International Association of Science Parks (IASP).

A Historic Look First “Industrial Park” is the Central

Manufacturing District in Chicago, 1905. First “Research Park” established in 1948 in

Menlo Park, CA. The most renowned Research Parks were

developed in the US in 1950’s. Today there are over 150 Research Parks in North

America, including 136 in the US.

US Research Parks

In 1950’s the most renowned research parks were developed.Stanford Industrial Park, in CA. 1953.Research Triangle Park, in NC. 1958Waltham Industrial Center and other developments on

Boston’s Route 128, in MA. 1954. All research parks are affiliated with one or more

major research universities.

Research Triangle Park (RTP) Developed in 1958 by leaders in business, universities,

and government. Three research universities, constituting a Triangle– UNC

at Chapel Hill, NCSU at Raleigh, and Duke at Durham, giving the name of the research park.

7000 acres of land, over one hundred major research organizations, employing more than 40,000 employees.

It has had and is having a tremendous impact on the US economy in general, and North Carolina economy in particular.

Why RTP in NC NC’s traditional industry is Tobacco, Textile, Furniture,

etc. Leaders in NC realized the need to transform from

agriculture and traditional industry to modern and high tech industries in early 1950’s.

Today, as we all know, traditional industries throughout the US are facing serious challenges.

RTC has put NC in very competitive position in the modern economy.

Why Research Parks Stimulate regional economic development. Reindustrialization. Quickly get into high-growth industries. Creating synergies between firms and industries. Research parks have been portrayed as “the

catalyst for moving into the next generation of industry and helping a region establish itself within the emerging global economy”.

Making Chinese Industry More Competitive

For Chinese industry to stay competitive in the world economy in the next 20 years, China must continuously improve its industry through innovation.

Developing research and science parks is a vehicle to reach this goal.

Government should play a key role in helping industry by promoting innovation and funding applied research.

Innovation Is Not Sufficient Research and Science Parks only create prototype, not the

product itself. For Chinese products to stay competitive in today’s world

market, one issue of uppermost importance is quality. As is well known, Japanese products stand out for its top

quality. Japan did not get to that position without elaborative

effort.

TQM in Japan In 1950’s, Japanese products in US market were perceived

by consumers as “cheap stuff”, and its“quality” is not well regarded.

As Japanese automobiles entered US market in the 60’s, Americans did not believe it would be good product.

However, as Americans gradually started to purchase Japanese automobiles, they found that it was very reliable. (Oil crisis in early 1970’s also helped the Japanese.)

But, how did they get there?

It’s been a long way! Japanese economy was at its bottom after WWII. Realizing quality problems, they invited Dr. Edwards

Deming in 1950 to lecture on statistical quality control to executives, managers, engineers, and researchers throughout the country. It had a tremendous impact!

Deming prize was established to award companies who have achieved distinctive performance improvements through applications of TQM and individuals who have made significant contribution to the study of TQM.

Deming Prize in Japan

Deming prize has become so esteemed in Japan that each year, much like America’s Academy Awards, millions of Japanese watch the Deming prize ceremony aired live on TV.

This process developed a culture in the society to build high quality products – A worker would be ashamed to produce defects.

Competition on Quality Quality of Japanese products, and the reputation it

developed, made it possible to spread world market. In mid 1980’s, MIT made a “5-Million-Dollar 5

Year Study” on quality of Japanese automobiles (The Machine That Changed The World, by Womack, et al).

Public was made aware of quality issues more than ever before.

Malcolm Baldrige National Quality Award in USA

In 1987, President Reagan passed the Malcolm Baldrige National Quality Improvement Act.

Since 1988, Baldrige ward is given annually. Some observers refer the Baldrige award as “Nobel Prize

for Business”. Today, the difference in quality become Japanese and US

automobiles has been significantly shortened.

How to Achieve TQM in China? Quality has to become part of culture. It has to be

emphasized by each and every level of an organization, by each and every level the private and public firms, but each and every level of the government.

TQM is going to be crucial in improving Chinese industry’s competitiveness in the future.

Question: How to develop TQM culture in China?

Recommendations Establish national prestigious quality awards

directly by top central government. Use every possible means (e.g., media, etc.) to maximize the public awareness of TQM and this award.

Encourage and support the development of R&D focused “Research and Science Parks”.

Increase international collaborations on these and other issues.