The China of 2012 is a China that is priming itself for a new era. Change and development have been ubiquitous in China for over three decades now—during all this time China has been changing itself and the world in many ways. But what is about to happen is a Chinese evolution on a different level. It is imperative for every company in the world to change their perception of China.

The China Analyst - April 2012

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China is changing. While this simple statement could have been uttered at any time in the last three decades, in 2012, it is beginning to take on a new meaning. Although China has become the second-largest economy in the world, it has now reached the point where its ambitions are no longer satisfied with being second-best, with being merely an imitator, a follower, and a user of foreign technology. It is now aiming to be a leader in its own right, an industrial giant renowned not only for its scale but also for its pioneering spirit.

To some companies around the world this may sound odd. Many would still not mention 'China' and 'innovation' in the same sentence. There are indeed various reasons why the type of innovation that has taken root in China in the last few decades has in large part relied on imitation and reproduction. But to maintain this impression of China would be a costly error of judgement.

Today, the best way to look at China is to use a little imagination, to project current trends into the future and to imagine what such a world might be like. Farsighted individuals will do this now, not in two, five or ten years down the road. Those who delay this assessment indefinitely will at some point in the future find, to their dismay, that Chinese competitors have approached a higher level of competitiveness.

In 2012, as China transitions to new political leadership, this process is starting to go into a higher gear. The main battleground for market share in value-added industries is currently ongoing in developing markets. In countries like Brazil, South Africa and India, Chinese heavy and construction machinery manufacturers have made substantial gains in recent years. While competitively-priced product offerings have long been a core element of China's competitive advantage, Chinese manufacturers are now progressively fabricating products that compete not only on price but also on quality and after sales services. It is an extended process for Chinese companies, involving years of imitation, alteration, adaptation, and innovation. Yet it is a process that is very much underway in China, progressively impacting various markets around the world.

Thus, it is essential not to underestimate the change that China is still capable of. Hence, in this edition of The China Analyst, we have undertaken the task of assessing China's current level of competitiveness and to consider the future implications of a more competitive China. We have highlighted China's leading companies that are approaching the 'technological frontier' in their respective industries, and have assessed the options that are available to foreign firms in the face of a more competitive China.

What is required is for foreign companies and observers to start changing their perspectives on China. A more competitive China will bring new challenges as well as new opportunities. It is imperative that companies be informed, the first step towards being able to act preemptively.

I trust our readers will enjoy this edition of The China Analyst, and as always we welcome your feedback.

Kobus van der Wath
Founder & Group Managing Director
The Beijing Axis
kobus@thebeijingaxis.com