'Firms must innovate to create brandnames'

03/18/2003
China Daily

Chinese enterprises should build themselves into Motorolas, Coca-Colas and even General Motors through technological innovation.

The call has come from National People's Congress (NPC)
legislators. These deputies said China should aim to become an international creativity centre - a rung up from being a world factory providing the global market with "made-in-China" products.

"Currently most domestic firms suffer poor competitive edges in the world market due to a lack of core products," said Lin Jian, an NPC deputy.

Unlike Chinese firms, large multinationals have long been concentrating on developing and producing only core products while outsourcing sideline businesses, said Lin, who is also deputy director of China Enterprise Management Association.

The Boeing Corporation, for instance, has its aircraft spare parts and accessories manufactured by Chinese factories to save on labour costs.

The lion's share of its capital and work is put into research and development and production of plane engines with huge added value.

Lin said the country's lack of brandname products is best illustrated by the fact that only 11 mainland enterprises were put on Fortune's Top 500 Companies List in 2001. Almost all of them were State-monopolized firms in the power, banking and petro-chemical sectors.

Capital shortage and talent drainage for research and development tend to result in poor returns for quite a large number of Chinese firms, Lin said.

In the United States, the development of a new car model can help an automobile company earn about a 20 per cent profit margin, in stark contrast with less than 1 per cent for a Chinese counterpart, according to Lin.

Echoing Lin's views, Dong Mingzhu, general manager of the Zhuhai-based Gree Air-Condition International Corporation Ltd, said an increasing number of domestic firms have blindly taken the move to diversify their products despite poor technical research forces and capital shortage.

"Isn't it better to become a market leader by concentrating on developing and producing a single product than fruitlessly scattering your money into various products," said Dong, also an NPC deputy.

Citing her own company as an example, Dong stressed that start-up Chinese firms with little economic strength should "put all their eggs into one basket" so as to grow much stronger.

By standing firm on the principle, Dong said, Gree has become the country's biggest air-conditioner-maker and aims to be the world's number one in two years.

NPC deputy Jiang Hong, also mayor of Yangjiang in Guangdong Province, stressed that domestic firms will never be strong enough to go global if they are satisfied with manufacturing business based on the orders of foreign counterparts.

"More domestic firms should have their self-developed products and change the label from 'made-in-China' to 'made-by-China'," he said