Sunday, March 19, 2006

Manufacturing or Service- The Chinese dilemma

China is very aggressively pushing itself in terms of economic growth. It has emerged as a threat to many countries- both developed and poor because of China's ability to manufacture goods at a very cheap price. Labor is cheap, infrastructure is not bad and most of all Chinese people are famous world wide for their entrepreneurial skill. These factors combined have made China virtually irresistible in the manufacturing world. More and more rich multinational companies are relocating their factories in China. With a population of over 1 billion, the internal market of China is attractive too for any company. However, China's economy has one weakness- it is poor when it comes to the question of knowledge economy and knowledge based society. First of all, Chinese people are not famous for their good skill in English language and secondly, China has not focused on IT enabled services or software development as it focused on manufacturing. So, many experts are now thinking that the weakness in knowledge economy may become China's Achilles heel. On the other hand, if China now shifts from its strength in manufacturing, its economy may lose its vitality.