Only So Efficient
November 9th, 2009
A point came up recently during a conversation with a journalist friend in Shanghai: Chinese State Owned Enterprises (SOEs) can only be just so efficient. What with tens of thousands of employees at the state-run oil companies, railway companies and banks, and the State’s explicit pact to maintain employment levels, investing in labor-saving technologies is not the highest priority on company lists. In particular, we were talking about the wind industry, in which within the last five years the proportion of foreign investment fell from 70% of the market to 30%. Western arguments of superior technologies fall on deaf ears when the Chinese government is interested in market dominance, not labor productivity. Good enough will do just fine when it comes to pushing out the competition.
November 10th, 2009 at 8:16 am
Hi Bill,
It’s interesting you should mention this.
I was at a conference a couple of years ago and met with a government official who explained that for a great deal of the process of reform it was an active policy to take products manufactured in the west and then reverse engineer them as low-technology, labour intensive production processes – because labour was cheaper and much more abundant then technological solutions.
What was interesting was that this is exactly the opposite of what companies have been trying to do for in the west for the past twenty years.
The implication of this, is that China has actively sought to take established production cycles and reduce the amount of productivity per person.