The electronics industry cannot afford to ignore China's major economic challenges.
IHS iSuppli does a great job of tracking how China is wending its way through the electronics supply chain. It reports that Chinese OEMs will ship 350 million smartphones next year. This is in addition to the country's dominance of the PC, networking/communications gear, and other high-tech equipment sectors.
"China's PC shipment growth is exceptional, especially when compared to the tepid growth anticipated this year in PC shipments for the rest of the world," Elaine Zhi, an analyst for China electronics research at IHS, said in a press release in July. "Shipments to commercial enterprises are leading the consumer segment in both the desktop and notebook segments by several million units in 2012."
However, industry observers and economists have identified major economic challenges for China that I believe we should all keep on our radars. Entrepreneurs and executives are largely aware of many of these challenges, but they need to move beyond awareness and develop a vibrant and flexible risk mitigation program. I compiled a list of the potential challenges to China's economic growth from different sources:
How will it handle the transition to a world-class economy while dealing with slowing Western demand?
Should China float its currency?
How will political events and a leadership struggle affect the economy?
Can China control inflation?
How will it find the right workers and deal with rising wages?
Can it improve labor conditions and avoid the ire of international consumers?
How can it sustain local demand created by its middle class/aging population?
Can it sustain the electronics supply chain while dealing with urbanization (manufacturing locations and the interior of China)?
How accurate is its economic data?
Will China completely agree to international intellectual property protection, and how will its decision impact its economic development and global alliances?
In a followup to this blog, I will provide more details and identify how I believe they can pose problems for electronics manufacturers. The list is not exhaustive, and I would welcome additions. Your comments will further the discussion.
I'm surprised at something huge being left off the list - admittedly a political hot button, but still very important.
As a result of China's population control efforts, they now have a generation with a large dearth of women. What will the impact of this be? Right now the imbalance is around 20 million and rising. Combine that with a population that is expected to rapidly age and shrink over the coming decades...
The Chinese era of economic dominance may be rather short.
Economic interdependence isn't a bad thing, provided it truly is two way. We hear plenty of talk of our over-dependance on China and the economic vulnerabilities that come with that. I don't hear so much about, as you wrote: " it can no more do without China than the country itself could disengage from world markets and revert to a closed socialist economy."
The more interdependent we all are, the smaller and safer the world is. There is a lot of fear of China (both economically and militarily) in the US. How much is truly justified, I don't know, but the fact is it's there.
If we need them and they need us, and we all understand that we both need each other, the level of fear can drop and we cal all spend more time focused on building cool stuff.