China 3.0: The Shift Toward Advanced Industries and Implications for the West

Ravi

Faculty member Ravi Madhavan

China is facing massive pressures – internal and external – regarding environmental issues, resource availability, social and economic inequality and more. In many ways, the People’s Republic is facing an imperative to change its economic model and advance not only its methods of production, but what it’s producing. Two examples are China’s foray into nuclear energy and its imminent entry into the commercial aerospace sector.

If Mao’s China was China 1.0 and today’s low-cost manufacturing powerhouse is China 2.0, this new China will be China 3.0. As Chinese policy-makers confront the prospect of slowing growth and the middle-income trap, more business leaders and policy makers are noting everything China buys is becoming more expensive and everything China sells is becoming cheaper. This is one reason why the imperative to master advanced industries is gaining strength: the promise of higher value addition combined with the desire to demonstrate national capability. These developments are significant in their respective industries, but in a more fundamental sense, they are symbolic of a new emerging China – one that is focused on mastering advanced industries that embody complex technology and systems integration. Continue reading

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How Political Pressures Help Firms Move Beyond Merely Seeming Socially Responsible

Faculty Member Audrey Murrell

Faculty Member Audrey Murrell

Recently, the Chinese central government initiated the idea that China should pursue a more “harmonious society.” Since then, the central government has issued a number of guidelines promoting positive social change, including among them efforts to encourage more socially responsible business practices. Although compliance with these new goals is not mandatory, the government can put political pressures on Chinese firms to report on their business practices – especially practices focused on social, environmental, and human rights.

Since compliance to these new goals is not mandatory, what is the incentive for Chinese firms to try to reach them? The firms that conform to the new guidelines can gain an enhanced reputation, be viewed as politically legitimate, and can gain access to valuable governmental resources. Not surprisingly, we have seen an increase in the number of Chinese firms that are voluntarily providing formal reports on their corporate social performance. Used frequently in the U.S., this type of reporting is one strategy that companies use to manage their relationships with governments, build more positive reputations, and, in some cases, appear more positive to customers and business partners. Many people, however, have raised concerns about the increase in these reports as merely a tool for companies to appear socially responsible in much the same way that some firms that promote environmental sustainability are labeled as “greenwashing.” Continue reading

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