Regional specialisation, considered to be a source of sustainable competitive economic advantage, is a main focus of research on China being carried out at The University of Hong Kong (HKU).
Two economic strongholds, the Pearl River Delta (PRD) which includes Hong Kong, and the Yangtze River Delta (YRD) which includes Shanghai, are being studied in particular. Analysing China’s competitiveness is a complex task,” said Prof Y C Wong, director of the Hong Kong Institute of Economics and Business Strategy (HIEBS) at HKU.
“On the one hand, many Chinese companies have teamed up with international multinationals to become part of the global value chain and therefore traditional measures such as export shares may not reveal their true competitiveness.
“On the other hand, much of China’s industrial sector remains protected as state-owned enterprises and, despite their inefficiency, still show high profit margins.”
Previous research has shown that regional specialisation has been hindered by regional governments with fiscal incentives to protect local companies and industries.
But HIEBS research shows that, as China’s economic reform continues, market competition in manufacturing has begun to overcome market protectionism.
Research into the PRD and YRD covered the overall environment such as legal, institutional, regulatory, cost, and natural resource issues, and specific industry studies such as the automobile and telecommunications sectors.
HIEBS researcher Dr Zhigang Tao said: “The two regions are very different. The Pearl River Delta provides low-cost production for export, but the Yangtze River Delta has a lot of consumption power so if a multinational company is interested in tapping the China market that’s the place to be.
“When we designed a template for the two regions, about 50 percent of the questions were common so that should give us a basis for comparison down the road.” The research project is scheduled for completion at the end of the year.
Common question areas included all aspects of business operations such as sources of capital for investment, human resources issues, business dispute arbitration channels, and transportation choices.
Prof Wong said: “Finding out a country’s competitiveness in relation to others is theoretically easy, but empirically difficult. When you try to make cross-country comparisons, you must use common information that is available for each country.
“This is not easy to put together and very soon you are looking for a set of proxies that can provide a reasonably comprehensive approximation to theoretical constructs.”
He added: “What is relevant for companies is both the overall environment and details of specific sectors so they can determine if a country or region is a good place to invest in.
“China is complicated because it’s a transitional economy and a very big nation so we did regional studies.
“The insights we have gained from the analysis should help us formulate economic policies for governments and business strategies for corporations.”
Prof Richard Y C Wong : email@example.com