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

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Edy Wongconsumption of Western luxury goods confers 15 . However, cultural knowledge and familiarityshould allow Chinese firms to take advantage of the large pool of emerging consumers andbecome leaders of competitive value chains at home. This implies a strategy of developingvalue chain skills and competitiveness by cultivating and serving the domestic market as itgrows. The long-term effect would be production of sophisticated products and servicesthat are uniquely suited to the needs and lifestyles of the Chinese consumer. Second, producingfor the domestic consumer market helps China mitigate the constraint of existing valuechain relations. It allows Chinese firms to circumvent the difficult of competing with existingvalue chain leaders or brand names and accessing established international markets. Thedomestic market is where Chinese firms can exploit their productive capabilities to capturethe leadership of emerging value chains at home 16 .153To the extent that similarity in consumer preferences exists between China and other developingcountries, growth through the domestic market offers another benefit. It would allowChina to develop its own value chains that would also serve markets in the developing world.The relatively minor presence of multinational retailers in developing markets, where thefocus is on price competitiveness, creates a rather conducive environment for Chinese exports.China’s price competitiveness will be a significant advantage in promoting its ownvalue chains in these markets. Products from consumer goods to automobiles to electronicscan be exported to non-Western markets through China’s own value chains. In other words,exports to developing countries can offer another avenue for upgrading China’s global valuechain positions. In fact, this suggestion seems to be borne out by the activities of many Chinesefirms who have expanded their exports of consumer goods, motorcycles, automobiles,and telecommunications equipment to Africa and Southeast Asia.While the approach to value chain upgrade suggested above focuses on China’s strengths,it does not necessarily suggest a retreat from Western markets. It simply points out whereChina’s comparative advantages lie and where it may expect to acquire value chain leadership.Growth in the Chinese market should enhance China’s international competitiveness asChinese firms become more innovative and efficient over time.7. ConclusionsChina’s desire to upgrade its position in the global value chain is driven by both market forcesand policy impetus. It is natural that after two decades of economic growth, China hasdecided to try to move up the value chain and develop a more technologically advancedeconomy. This will allow it the opportunity to acquire and develop new technologies andbuild a foundation for a more advanced economy. China’s efforts to develop and upgrade itsproductive capability at both the micro and macro levels will undoubtedly go a long way inassisting Chinese firms to accomplish the objective of moving up the value chain. This pa-15. Western luxury goods have retained a following even in an advanced industrial economy such as Japan.16. The recent closure of Home Depot and Best Buy outlets in China is an indication of the strength of Chinese firms in their home market andhow they may leverage their local knowledge to compete with firms from abroad.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 Analysis154per proposes a framework to analyze the economic and policy issues pertaining to China’sefforts to upgrade its value chain position. The framework delineates the underlying factorsinto supply-side and demand-side factors and brings to bear the relevance of marketconstraints and value chain relations. Unless existing global value chain relations are part ofthe analysis, any prognosis of China’s value chain strategy based entirely on technical andendowment factors would be greatly incomplete. This approach points out the difficulty inovercoming existing value chain advantages enjoyed by the chain leaders and the need toremedy China’s deficiencies in functions further up the value chain. To the extent that governmentpolicies are unable to alter global business conditions, domestic growth in China andtrade with other developing countries will offer China a natural platform for future value chaindevelopment. This means policies to foster a more efficient domestic economy throughgreater domestic competition, a more efficient logistics system, and better allocation offinancial capital should all be part of China’s value chain strategy.Efforts by China to move up the value chain also contain lessons for countries in LatinAmerica. Inserting oneself into the global value chain can be a relatively expedient way toincrease income and employment, but countries must be aware of the long-term constraintsthis approach might entail. The building of supply-side capability should be accompanied bya strategy to address the aforementioned value chain constraints and the need to developa strong domestic economy over time 17 . China’s experience is admittedly most instructivefor countries such as Mexico and Argentina who have pursued a role in the North Americanvalue chain as an important growth strategy 18 . However, even Latin American suppliers ofraw materials and resources should be mindful of the long-term implications of global valuechain integration. Latin American nations must be cognizant of the long-term constraintsand vicissitudes that would accompany the short-term economic benefits of global valuechain integration.17. Should the current discussions to promote freer trade and greater economic integration among Latin American countries prove to be successful,it would have the same effect as strengthening the demand side of the value chain for the purpose of value chain development.18. The role of a low-cost, low-margin producer of manufactured goods for North America may render upward movements on the value chain anda high level of economic development difficult in the longer run.GCG 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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921. Introduction: Mexico and China
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Page 154: Edy WongReferences155Child, J.; Rod
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Vol. 6 Num. 1 - GCG: Revista de GlobalizaciÃ³n, Competitividad y ...

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