Competitive Advantages of China

China has five largest distinct competitive advantages that edges its rival countries in the global market.

1. Market Size

According to statistics by the World Bank, the population of China stands at 1.379 billion in 2016, firmly holding the top spot. China is also ranked number four in terms of land mass. A large population with the availability of land means a potentially large market. In addition, investors should take note on the market potential as the spending power of the Chinese continues to increase. China has a rapidly rising middle class that already exceeds the entire population of the United States. And Mckinsey forecasts that by 2025, 7.6 million Chinese households will account for 44% of the total global luxury-goods market.

Chart 1. The growth of Chinese consumers spending on global luxury goods

Source: Mckinsey&Company

2. Industrial system

China has the world’s largest manufacturing industry. At present, China’s manufacturing industry accounts for more than 25% of the global manufacturing industry. China is the leading producer of 220 of the world’s 500 major industrial products. In breadth, China has 39 industrial categories, 191 classes and 525 subclasses, and is the only country that has all the industrial categories in the United Nations Industrial Classification. In addition, China has marked advantages in the supply chain and supporting industries. Taking the consumer electronics industry as an example, the world’s most cost-competitive and largest electronics industry supply chain has taken shape in Shenzhen, China. There are more than 700 suppliers of Apple’s mobile phone and computer products in the world, nearly half of which are in China.

3. Labor

Many companies choose to relocate operations to China due to the comparatively cheaper and readily available labor. For example, the infamous Foxconn has more than a dozen factories in China, churning out products for global brands such as Apple, Blackberry and Sony. Despite being a sought-after destination for cheap labor, the literacy rate of China is also improving. Millions of students graduate from universities countrywide annually and are beginning to embrace English as their second language of choice. This diminishes the language barrier and increases the pool of an educated workforce to tap into.

4. Transportation

China has developed their transportation and infrastructure since late 1970s. Improved transportation has led to a booming travel and air cargo industry in the country. Boeing, China’s leading provider of commercial airplanes, projects a demand for 7240 new airplanes in the country over the next 20 years valued at nearly $1.1 trillion, which means almost 20% of global new airplane demand will be from airlines based in China. In addition to air transportation, China has an extensive and highly connected network of roads, highways and railways (more than 98000 km). According to the Rail Journal, the Chinese government is targeting a massive increase of the rail network to 120,000 kilometers by 2020.

Chart 2. Regional contribution to the size and share of demands on new airplanes

Source: www.boeing.com/cmo

5. Global Cooperation

Through the ‘Belt and Road’ initiative, China can cooperate with governments, institutions and corporates outside China to unlock bottlenecks in global infrastructure development, which will help boost trade and investment, and make a real contribution to sustainable, inclusive growth for dozens of emerging economies. During 2015, contracting projects along the ‘Belt and Road’ accounted for 45% of Chinese contractors’ international revenue and 44% percent of the value of China’s newly signed contracts. This activity is set to continue and increase.