It surely seems as though the headlines every week relate to China taking a dominant manufacturing position in another industry. What the US will do about the continuing loss of global manufacturing market share might be of concern to every student in an OM class. Today’s front page New York Times story is called “To Conquer Wind Power, China Writes the Rules”.
As we have blogged recently, the pattern is repeating: Chinese firms acquire the latest Western technology by various means, then take advantage of government policies to become the world’s dominant, low-cost suppliers. This is the case in high-speed trains, drones, jet fighters and commercial jets, solar power, nuclear reactors, cell phones, and desktop computers.
Gamesa, a Spanish firm, and a world leader in wind energy turbines, has just learned that the competing for China’s lucrative business means playing by rules stacked in Beijing’s favor. Gamesa’s share of the Chinese market dropped from a third in 2005, to 3% today. The Chinese now 
control half of the $45 billion global market for wind turbines, and are taking direct aim at the US, where GE has long been the leader. Sinovel, backed by $13 billion in Chinese government loans, is opening offices across the US.
How has this happened? Four reasons, according to the Times: low -interest loans, cheap land from the government, preferential contracts from state-owned companies, and dramatic “local content” laws. The latter, trade lawyers say, are direct violations of the WTO. But the Chinese government has bet–correctly–that Gamesa, GE, and other multinationals, are unwilling to risk losing a piece of the Chinese pie by complaining. Says one wind industry CEO anonymously, “Everybody was too scared”.
Discussion questions:
1. What is the US government position regarding such Chinese dominance?
2. What other industries have followed this pattern?
3. Why is China so successful with this manufacturing strategy?