How Some Industries Are Responding to Growth Opportunities in China

China’s ongoing conversion from sleepy giant to economic powerhouse has opened the door for Chinese companies across a number of different industries to take advantage of the growing domestic market for goods and services. In this special report, we look at the rise of digital music in China and its threat to the traditional music publishing business, recent progress in the expansion of China’s fast food industry, government and private sector efforts to increase the presence of microfinance in China, challenges posed by privatization, and unease over the country’s growing labor shortage. In addition, we include an interview with Shao Ping, vice president of China Minsheng Bank Corp. (CMBC), on such topics as competition in the banking industry, the importance of innovation and customer service, the challenge of non-performing loans and the ongoing controversy over the RMB exchange rate.

Will Digital Music in China Overthrow the Traditional Music Publishing Business?

In early April, Aigo Music announced that it is partnering with Warner Music to jointly explore China’s digital music publishing market. In mid-April, Shanda Interactive Entertainment said it plans to introduce its own online music store to provide paid music listening and downloading services. The market for digital music publishing is ripe for development in China because of the popularity of the Internet, personal computers, digital music players and music mobile phones. Industry experts differ in their opinions about partnerships between music websites and big record companies and about the strategies adopted by the nascent digital music businesses, however, and it remains to be seen if digital music publishing will mean the end of the traditional music publishing industry. China Knowledge at Wharton asked several industry leaders for their opinions.(more)

Success and Failure in the Chinese Fast Food Industry: It’s All About Standardization

The Chinese fast food industry has seen both successes and failures over the past decade, but one thing stands out — the importance of standardization, in everything from purchasing raw materials to preparing food to ensuring quality service. As Chinese fast food chains take advantage of standardization processes in their drive to expand throughout the country, the industry is also attracting an increasing number of foreign investors, whose appetite for fast food shows no signs of waning.(more)

Microfinance in China: Growth and Struggle

Microfinance in China is poised for a significant expansion as the government, Non-governmental Organizations (NGOs) and commercial banks begin to explore ways to provide the country’s most impoverished people with greater access to credit. According to Bai Chengyu, secretary general of the China Association of Microfinance, microcredit has entered a transition phase and is now moving “from experiment to large-scale commercial development.” But bottlenecks remain, created by the lack of policies in the past to encourage involvement by commercial financial institutions, the failure to open the financial market to the private sector and artificially low interest rates.(more)

The Long and Winding Road to Privatization in China

China’s sweeping economic reforms, which have lifted the country to a starring role in the global economy in only a quarter-century, are marked by a more gradual transition from state control to private ownership of firms than in other countries that have also made the transition, according to Wharton faculty. Indeed, privatization in China has come slowly as government officials weighed the prospect of massive layoffs necessary to restructure bloated state-owned enterprises, known as SOEs. Privatization was also met with resistance from influential company managers, many of them Communist party officials. Despite these obstacles, however, a vibrant, entrepreneurial private sector has managed to survive alongside state-controlled firms.(more)

Does a Growing Worker Shortage Threaten China’s Low-cost Advantage?

Early this year, at a job fair held in Fuzhou, the capital of Fujian province in China, more than 50,000 positions designed to encourage farmers to move to urban areas went unfilled. A 2005 survey conducted in Guangdong province shows that although a third of the manufacturers there have tried to solve the country’s labor shortage by raising wages and benefits, overall demand still exceeds supply by more than one million positions. This year, the labor shortage has further extended into other cities, including Beijing and Tianjing, leading to concerns that China may eventually lose its low-cost labor advantage. Against this backdrop, Knowledge at Wharton interviewed several experts for their opinions on China’s labor issues.(more)

An Interview with China Minsheng Bank’s Shao Ping: Innovation Is the Key

Founded in 1996 and headquartered in Beijing, China Minsheng Bank Corp. (CMBC) is the first nationwide joint stock commercial bank with non-state-owned enterprises as shareholders. Over the past decade of development it has become a leading player in China’s banking sector. Faced with heated competition from four big state-owned banks that have lately begun to introduce strategic foreign investors, and from the aggressive initiatives of international banking groups, what specific strengths, in management and strategy, does CMBC have to take on challenges at home and abroad? With these questions in mind, Wharton management professor Marshall Meyer held a dialogue with Shao Ping, vice president of CMBC, at the bank’s Shanghai branch office on April 18, 2006. During the talk, Shao also expressed his ideas on the reform of China’s banking industry and on the revaluation of the RMB. Following are excerpts from the interview.(more)