Vol. 6 Num. 1 - GCG: Revista de GlobalizaciÃ³n, Competitividad y ...

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Edy Wongon ‘new economic geography’, business studies, regional science, and innovative studies(Humphrey and Schmitz, 2002). China must continue to develop these factors as it continueson its development path. Not surprisingly, government policies in China have activelyfocused on the cultivation of these factors both as a matter of developmental policy and assupport for Chinese firms to augment their competitiveness and move up the value chain 5 .1434. Constraint of Value Chain RelationsAs a matter of economic reality, government policies have been important in shaping economicand industrial development in China since the economic reform in 1978. The “GoGlobal” policy inaugurated after China’s entry into the WTO in 2001 has been instrumental infurthering economic openness, and is responsible for the impressive growth of the Chineseeconomy. To build on this economic momentum, China has implemented a host of policiessince 2005 designed to promote greater globalization and competitiveness of its firms 6 .They include construction of new infrastructural facilities in transport and communications,promotion of science and innovations through technology parks and the 10 Industry RevitalizationPlan, financial support and tax incentives for high-tech enterprises, establishmentof new domestic standards for goods and technology 7, greater direct foreign investmentabroad, and entry into new product markets. The aims of these policies are to maximizevalue-added production and advance China’s technological capability.While the aforementioned policy initiatives are undoubtedly essential prerequisites to China’smove up the value chain, many determinants of value chain relations are beyond the directinfluence of Chinese government policies. These include international demand factors, sourcingand supply chain strategies of multinationals, international distribution systems, andcompetitive market conditions. China’s move up the value chain will be affected by thesefundamentals of market forces and global value chain relations as much as by the force ofgovernment policies. One must recognize the realities and constraints of value chain relationsin studying China’s ambition of moving up the value chain.By focusing on value chain coordination, Humphrey and Schmitz (2002) have identified acontinuum of value chain relations we could adapt to our analysis. The continuum rangesfrom vertical integration at one end to a total arm’s length relationship at the other. In betweenlie networks value chain, where member firms are characterized by complementary competenciesand skills; and quasi-hierarchy, where a powerful partner, usually an international buyer,dominates the value chain. While a networks value chain typically denotes horizontal (ornon-dominant) production relations among suppliers of a given product, a quasi-hierarchy5. The role of government in promoting economic growth is seen in the study of regional economics in enhancing agglomeration economies andhuman resource development (Scott 1996 & Edquist 1997).6. See Schmittzehe & Partners (2009).7. For example, China has moved to adopt TD-SCDMA for its domestic wireless mobile 3G standard as a way to develop the domestic telecommunicationsindustry (Economist 2010).GCG GEORGETOWN UNIVERSITY - UNIVERSIA ENERO-ABRIL 2012 VOL. 6 NUM. 1 ISSN: 1988-7116pp: 136-155
China’s Move up the Value Chain. A Framework for Analysis144is defined by the asymmetrical power existing between local producers and internationalbuyers. Examples of quasi-hierarchy include large global retail chains such as Walmart,who enjoys tremendous power in its value chain, and the global computer industry, whereU.S. companies play the leading role at the top of the value chain with Taiwanese ODMsand OEMs in the middle and mainland Chinese manufacturers at the bottom. A hypotheticalquasi-hierarchy is illustrated in Figure 1. The most important aspect of this figure is seen inthe value chain leader’s ownership of a brand that is recognized by consumers, which allowsit to “own” and cultivate the relationship with the consumers.Figure 1: A Hypothetical Hierarchical Value ChainA network value chain, on the other hand, consists of producers who interact with each otherand work together to co-produce values for a particular industry. They represent differentnodes in the value chain network but each enjoy their own market power and brand equityin the market. Members of the network value chain work in a complementary fashion tomeet the needs of the final consumer. An example of a network value chain is the petroleumindustry, which works to meet consumer demands for gasoline as a final product. A networkvalue chain is shown in Figure 2.Figure 2: The Petroleum Industry as a Network value ChainGCG GEORGETOWN UNIVERSITY - UNIVERSIA ENERO-ABRIL 2012 VOL. 6 NUM. 1 ISSN: 1988-7116pp: 136-155
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CARTA DEL EDITOR IN CHIEFEditor in
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StaffDe la Torre, José, Dean, Chap
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Staff2. MULTINACIONALES, INVERSIÓN
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SELECCIÓN PROCEDURE PROCEDIMENTOIN
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Instrucciones para Autores y Proced
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INDEXACIÓN INDEXING INDEXAÇÃOInd
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Economic Relationships between Lati
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Miguel A. MontoyaThe rest of the pa
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International Joint Ventures among
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36Japanese Foreign Direct Investmen
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Japanese Foreign Direct Investment
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561. IntroductionClusters and indus
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Entrepreneurial Clusters in China a
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Page 91 and 92: 921. Introduction: Mexico and China
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Page 134 and 135: Zhu Hongbo5. Conclusions135China an
Page 136 and 137: 1. Introduction137China’s emergen
Page 138 and 139: Edy WongTable One: Compositions of
Page 140 and 141: Edy WongTable 2: China’s R & D Ex
Page 144 and 145: Edy WongIn today’s global market,
Page 146 and 147: Edy Wongdemand-side factors in the
Page 148 and 149: Edy Wongterms of quality, reliabili
Page 150 and 151: Edy Wongindustry. Second, value cha
Page 152 and 153: Edy Wongconsumption of Western luxu
Page 154: Edy WongReferences155Child, J.; Rod
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Vol. 6 Num. 1 - GCG: Revista de GlobalizaciÃ³n, Competitividad y ...

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