Monday, September 25, 2006

Issues with China's Recent Success: Comments on Other Blogs

This week, instead of writing an entry on entrepreneurship pertaining to international business I have decided to post my thoughts on other blogs relating to China. There are many situations surrounding China’s rapid development which should be discussed and explored.

On the highly acclaimed blog by PSD (Private Sector Development) I have taken particular interest in an entry titled, “CSR stirrings in the Middle Kingdom.” This blog post deals mainly with Chinese manufacturers and the excessive damage manufacturing is doing on their environment.

I have also viewed an entry on a PSD blog, “Private sector public goods” which recognizes the large market the private sector of China has become. Many resources which previously had been used to manufacture and export goods are now being directed toward the private sector. The issue up for debate being should the Chinese Government aid private business in areas that are not fully sufficient yet?


"CSR Stirrings in the Middle Knigdom"
http://psdblog.worldbank.org/psdblog/2006/09/csr_stirrings_i.html

My thoughts:

Uniform Manufacturing Regulations Will Deter Externalities from Pollution

It is nice to finally see officials such as Victor Fung, chairman of the Greater Pearl River Delta Business Council embracing policies that put pressure on Chinese manufacturers to practice environmentally responsible operations. However in a society driven by wealth and affluence this may be a difficult task, unless the Chinese Government steps in and creates mandatory regulations for all producers.

It is hard to imagine these Chinese companies along the Pearl River Delta relinquishing their competitive advantage within the industry. Adhering to such regulations would require costly upgrades which would unfortunately increase the cost of production. If another company were to continue their fabrication process the advantage would now belong to their opponent. Although big investors can threaten to revoke contracts with large polluting manufacturers, their bottom line is without doubt their first priority. Without Government enforcement of this timely issue there is no real motivation within the Chinese companies to increase their costs and lower their margins to reduce pollution.






“Private Sector Public Goods”
http://psdblog.worldbank.org/psdblog/2006/09/this_years_prog.html#more.
My thoughts:

Government Interference will be a Step Back for China’s Free Market

Finding the correct balance between government involvement and privatization is a long standing debate throughout the history of business and economics. A free market economy will effectively allow China to correct problems which interfere with consumers’ demands. China’s private sector will benefit immensely through the free markets ability to recognize growing target markets.

The Chinese consumers have demanded that the private sector begin to pay closer attention to their wants and needs and this issue has never been more evident than in Visa International's triple digit growth. This rapid growth has been achieved by catering to Chinese citizens and offering low cost payments for its financial services. Amul diary’s distribution and marketing system would have never come into existence if it were not for the private sector recognizing a consumer demand existed between dairy producers and the urban market.

As for the female entrepreneur’s making textiles in India, if a demand exists for their product, companies will interfere and eliminate the restrictions the infrastructure now imposes. The private sector of China must realize that businesses are most efficient when not under Government regulation. China’s privatization of business has soared under a new free market economy; it would be a shame to involve their Government for problems which will ultimately be worked out through basic supply and demand.

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