Sunday, January 31, 2010

The Chinese Car Industry is Not a Threat – It’s an Opportunity

In this Gapminder chart you can compare the infant mortality rate vs the income per capita over time. China is today at the same level as Sweden was just after the Second World War.

It’s only natural that Volvo will be a Chinese company and Saab is transformed to a luxury high-tech sportscar company. In 2008, China surpassed the United States to become the world's second largest auto-making nation behind Japan. And in December 2008, for the first time ever, there have been more cars sold in China than the United States.

Reading Swedish news articles on the Volvo-Geely deal, you get the impression that most journalists, politicians and governmental agencies still picture the country as “developing”. To call China a “developing” country is absurd.

The majority of the world’s inhabitants now have higher average income than they ever had. Unlike a few decades ago, most people today live in mid-range income countries. Half of the world’s population lives mainly in Brazil, Russia, India and China. They accounted for about 22 percent of the world economy in 2008, up from 16 percent a decade earlier. Real economic growth from 1999 through 2008 averaged 9.75 percent in China, 7 percent in both India and Russia, and 3.3 percent in Brazil.
Today, Chinese earn on average as much as the typical Swede did in 1945. It was at that time Volvo car production got full stream in Sweden. It is not a surprise that Volvo Cars today is bought by a Chinese company. Few would claim that Sweden was a developing country after the Second World War.
Even in terms of education, several low-income and most middle-income countries compare with the richest countries. For example you find the world’s best chemists in India, where labor costs also are lower than here. And it makes sense for the pharmaceutical industry to locate their operations where the best chemists are.

Should we still compete with these countries, or should we try to find out what they need, that we are good at? Duh!


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