Walk into any store. Pick up the nearest item on the shelf and you’ll see a “Made in China” sticker. What comes to mind?
I’ll tell you what most Americans imagine. They think of shoddy workmanship or knockoffs. They think of run-down cities and broken infrastructure. They imagine a society without the resources to create the type of innovative companies and technologies that we can.
Unfortunately, for many: “Made in China” means “cheap.”
If you believe this, one visit to Shanghai will change your mind for good. You’ll find an unending sea of glass and steel, with a skyline to equal any you’ve seen. In many ways, it’s a city out of the future – bullet trains, modern architecture, and glowing crowds of people talking on mobile devices.
The changes that have occurred in the last twelve to fifteen years, even the last five, are unbelievable.
China Has Shifted
In the last decade, wages for the average Chinese worker have more than doubled. Chinese companies like Tencent and Alibaba are the world’s 10th and 12th most valuable, respectively. They adapt new technologies with a speed unmatched by anything on this side of the world.
China is no longer a place for the West to outsource cheap labor. In recent years, people have become wealthier, more urbanized, and more modern. In fact, Chinese companies are now the ones outsourcing their labor to lower cost economies like Vietnam and Mexico.
This shouldn’t come as a surprise: history is cyclical.
In the 1960s Japanese-made cars weren’t taken seriously. No one doubts the quality of a Honda today. Taiwanese electronics were considered inferior, and now dominate the market. Despite their power in the market today, even South Korean products were once thought unreliable.
The reality is that China has been going through that very same transformation. They’re rapidly transitioning out of the “low cost” mentality and have the ability to compete globally with quality products. These companies can win against the world’s best-known brands.
The Unseen Advantage
It’s important to understand that Chinese companies have something most American companies don’t.
Something that we used to have.
For decades, America has dominated the international market with our entertainment, technology, and incessant drive to innovate and change the world. It’s not an exaggeration to say that life everywhere would be drastically different, and worse, if not for American ingenuity. The key to much of that dominance?
An appetite for risk.
We’ve been on top for so long, with no true peer competitors, that there’s no reason to take the kind of outrageous gambles that lead to either incredible success or bankruptcy.
However, Chinese companies are hungry. They work harder and work more, as people who want to prove themselves tend to do. Just as we did during the Cold War era.
The cutthroat business environment on the mainland breeds only the most adaptable, capable companies.
Most importantly, they’re willing to take tremendous chances to reach their goals.
Chinese companies know they have to succeed in an environment long dominated by more established players, and that means doing things differently. For some, those risks have paid off.
More than a few tech publications have ranked Lenovo as the #1 brand in laptops, beating out established brands like Apple, Asus, and Dell. Huawei has quietly become the world’s second largest smartphone brand, with a vast range of five-star products on Amazon. If you’ve heard of “Clash of Kings,” then you’ve heard of the Chinese app giant, Elex Tech.
On a business trip to Shanghai in 2006 I visited a popular market displaying hundreds of Chinese-built phones. Barely anyone would touch them. Back then, the Chinese preferred brands like Nokia, Samsung, and Apple.
When I asked why, they said it was because they were worried about the quality of local products.
When I visited again in 2017, it was now local companies like Xiaomi, Oppo, or ZTE that dominated the mobile market. And not just in China, but all across Asia. Walk into a mall in Thailand and you’ll find Huawei phones next to LG.
Today, Chinese consumers demand quality, and Chinese companies have delivered. Expectations have changed.
Businesses that don’t take them as serious competitors, are going to regret it when they see where the customers are going.
The Future Consumer Market
Five years from now, don’t be surprised if “Made In China” means “quality.” If we cover our eyes to this new reality, we will not only miss the threat of these newcomers, but also the vast potential in working with them.
This is a turning point. Many businesses are still afraid of doing business with China due to the perception of their build quality, copyright issues, and government interference.
The severity of these problems have been eroded, or even eliminated, in recent years.
Build quality has evolved. Copyrights are now actively protected as Chinese companies seek to gain international legitimacy. And the government, far from inhibiting them, is bullish on joint ventures.
It’s an incredible opportunity for those who can recognize this and act quickly. We must have the courage to take risks again.
Chinese companies are actively looking for partners on this side of the pond. The synergistic possibilities are both widely varied and potentially game-changing.
Traditionally, America has partnered with Chinese companies only to gain a leg up in the local market. This isn’t about that – it’s about working together to help them move out of China and compete globally in a mutually beneficial arrangement.
The first to do so will reap the rewards. Brands like AMD, HP, and Qualcomm have already bet big on joint partnerships with China.
America must regain that mindset of challenging the status quo instead of perpetuating it.
China has changed – and so must we.
About the author: Tony Tan is Chairman and CEO of StoAmigo, a leading innovator in “going beyond the cloud” technology solutions with patented, advanced applications for file sharing, access, security/privacy, transfer, streaming and integration.
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