Caixin Global China Watch

Caixin Global China Watch

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Caixin Global China Watch
Caixin Global China Watch
Lessons From China’s Push to Go Global

Lessons From China’s Push to Go Global

To succeed in developing economies, companies shouldn’t hesitate to move manufacturing there to increase local incomes and create a wealthier customer base

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Caixin Global
Dec 18, 2023
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Caixin Global China Watch
Caixin Global China Watch
Lessons From China’s Push to Go Global
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Zhou Qiren, senior professor of economics at Peking University’s National School of Development, speaks at one of the sessions at the 14th Caixin Summit on Nov. 9 in Beijing. Photo: Caixin

Zhou Qiren, senior professor of economics at Peking University’s National School of Development, speaks at one of the sessions at the 14th Caixin Summit on Nov. 9 in Beijing. Photo: Caixin

In 2017, I coined the term “breakout theory,” which suggested that China’s economy was encircled. The question that remained was whether it could break out.

At the time, global competition looked something like a sandwich. On top, there were the countries that controlled original technologies and products, giving them unique competitive advantages. At the bottom, there were the emerging market economies with more competitive cost advantages. And stuck in the middle, struggling to ascend or descend, were numerous companies in China, where early reforms and years of rapid growth no longer conferred a cost advantage. These companies found it difficult to compete both with the low-cost rivals below them, and the innovative firms above them. They made the rapid-growth that China had become used to no longer tenable.

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In recent years, trade wars and tech wars, coupled with the pandemic, have not only exacerbated this “economic encirclement” but also suddenly added many non-economic pressures. Many regions, industries, and companies have suffered a type of hardship not experienced in many years.

If the new encirclement is real, the breakout is also real. Over the past few years I have researched Chinese companies’ attempts to break out, comparing goals with outcomes, and understanding the success or failure therein. I have witnessed several potential breakout paths.

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