GAO Xudong: Sustainable growth at the bottom in China

Sustainable growth in China through resource integration to serve the high end market 高旭东清华大学技术创新研究中心研究员

Agenda
What is Sustainable growth
Sustainable growth: the literature
A new model
Case illustration

What is Sustainable growth
Resource and environment Sustainability
Green technology
Alleviating poverty
Bop/Inclusive growth
Survival of local firms after WTO
Indigenous Innovation

Inclusive growth: The literature
BoP : sell more to the poor or supporting marginal entrepreneurs; pays little attention to turn the poor into producers or high salary employees (Prahalad, 2004; Karnani, 2007)
Role of MNCs vs. “embedded innovation” based on transformational stakeholder engagement (Prahalad, 2004; Prahalad and Hammond, 2002; Simanis and Hart, 2009)
China: development with TVE and private firms but resource consumption and low end market (Kaplinsky, 2005; Simanis and Hart, 2009)

Our study
The team
Data collection
Theory development
International collaboration

A new model
Resource divide between the city and the country
Farmers: important resources/LAND; high quality education
Advanced tech + management in city
Competitive advantage through Resource integration
Low cost plus differentiation (advanced tech + management) to serve high end market
The role of entrepreneurs in inclusive growth
Not recognizing the opportunity of resource integration
The majority of TVEs and private firms are based on local rural resources
The role of the government in inclusive growth

· Resource divide · Resource integration Targeting the high end market Cost leadership + differentiation Roles of entrepreneurs and governments High performance + inclusive growth

Case illustration
ZPMC (Shanghai Zhenhua Port Machinery Co., Ltd
Shunhua (Hunan Linwu Shunhua Duck Development Co., Ltd
Jiukang (Nanjing Jiukang Science and Technology Development Co., Ltd

ZPMC
Established in 1992 with $1 million, making large-size port container cranes.
The largest large-size port container crane maker in the world, having a market share of 70%+.
One of the three firms in the world that are able to make spiral bevel gears, making it well positioned in the ocean engineering equipment industry.
Has more than 35,000 workers, more than 90% of them as “blue collar” workers-people in the manufacturing and supporting functions (rather than management, technology, and marketing functions), and the majority of them are originally farmers.

Shunhua
Established in 1999, raising and processing Linwu Ducks
The largest shelduck raising and processing firm in China, with 169 duck-raising farms, supporting 3,260 duck-raising families, and 23,000 families to supply materials such as peppers, which are use in the processing of Linwu Ducks.

Jiukang
Established at the end of 2003 with Mr. Zhou, Weibing as the CEO and focusing on growing seedlings of grafted azedarach trees, planting grafted azedarach trees, and making toosendainin (extracted from grafted azedarach trees) based bio-pesticides, biodiesel and organic fertilizer.
Still at its early stage of development but has developed a capacity of growing 5 million seedlings of grafted azedarach trees, and have worked with farmers near the firm and other parts of the country to plant grafted azedarach trees.

Important characteristics: Serving the high end market
Numerous numbers of crane makers in China, but most of them are making simple cranes, either selling in the domestic market or exporting
Price of Shunhua’s Linwu Ducks is much higher than that of other firms: for ordinary cold spiced ducks, the price is about RMB36~56/kg, and for Shunhua’s Linwu Ducks, it is about RMB 94~118/kg.
More than 200 firms making bio-pesticides, but most of them are very small private companies that do not have much technological capabilities and could only offer low end products.

Important characteristics
Integrating stakeholders to integrate resources
ZPMC: Shanghai government; farmers
Shunhua: local government; farmers
Jiukang: local government; farmers
The role of entrepreneurs, who usually come from the city, is of critical importance
Jiukang: the development of core technologies and core products is the precondition to involve rural resources

Conclusion
Importance of Sustainable growth
Possibility of a new model in China
Sustainable growth in China through resource integration to serve the high end market
Implications of Chinese practice

谢谢各位 !

GAO Xudong: Sustainable growth at the bottom in China

by STEPS Centre on Aug 17, 2010

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GAO Xudong: Sustainable growth at the bottom in China — Presentation Transcript