The­World Cup made in China

China Daily (Canada) - - COMMENT -

Chi­nese soc­cer fans have to sim­ply ac­cept that the chances of the na­tional men’s team play­ing in the­World Cup fi­nals again (af­ter 2002) is at best slim. Per­haps a joke do­ing the rounds best il­lus­trates this fact: A fairy prom­ises Chi­nese people to make their one wish come true. Some people ask her to make the world a peace­ful place, free of wars. The fairy seems em­bar­rassed and doesn’t re­spond. Then some soc­cer fans re­quest her to send “our men’s soc­cer team to the­World Cup fi­nals”. The fairy says: “Well, let’s talk about world peace!”

But the Chi­nese team’s ab­sence from the­World Cup in Brazil (and pos­si­bly the next fewCups) has not stopped Chi­nese en­ter­prises from us­ing the soc­cer craze to make “big” money.

A num­ber of do­mes­tic en­ter­prises have dipped their fin­gers in­World Cup-re­lated busi­ness. For ex­am­ple, Yingli Green En­er­gyHold­ing, a leading re­new­able en­ergy com­pany and of­fi­cial sec­ondary World Cup spon­sor, is in­stalling so­lar pan­els in some sta­di­ums. Like other big brands, such asMcDon­ald’s and Visa, Yingli’s name can be seen in the hoard­ings around the pitch in the­World Cup sta­di­ums.

Chi­nese man­u­fac­tur­ing com­pa­nies have been busy pro­duc­ing au­tho­rized prod­ucts, such as the of­fi­cial match balls, called Brazuca, and miscellaneous other com­modi­ties, such as mas­cots and na­tional flags. Wagon En­ter­prise in Dong­guan, Guang­dong prov­ince, which is au­tho­rized to makeWorld Cuprelated prod­ucts, has pro­duced more than 1.5 mil­lion mini-repli­cas of the­World Cup tro­phy and 400 types of other prod­ucts.

Given the soc­cer craze, Chi­nese en­ter­prises are ex­pected to make good profit from the gala in Brazil, with some re­searchers, in­clud­ing those with Moody’s In­vestors Ser­vices, say­ing that the Chi­nese econ­omy would ben­e­fit more than Brazil’s from the World Cup. Per­haps their con­tention is based on Chi­nese en­ter­prises’ all-round in­volve­ment in the World Cup. A closer look into the role of Chi­nese en­ter­prises in the pro­duc­tion chains ofWorld Cuprelated prod­ucts will, how­ever, show that they are wrong.

Most of the Chi­nese com­pa­nies ben­e­fit­ing from the­World Cup are from the man­u­fac­tur­ing sec­tor, and, as orig­i­nal equip­ment man­u­fac­tur­ers of ma­jor in­ter­na­tional brands, their gains are small com­pared with the brand own­ers. For ex­am­ple, for 2010 World Cup, Chi­nese com­pa­nies made the vu­vuze­las, which were heard across South Africa, and sold them to for­eign deal­ers for 2 yuan (32 US cents) each, which were ul­ti­mately re­tailed by ven­dors in the host coun­try for 40 yuan a piece (and as high as 100 yuan each in spe­cialty stores). The Chi­nese man­u­fac­turer, there­fore, made only a tiny pro­por­tion of the to­tal profit.

This year, the Brazuca, the of­fi­cial (Adi­das­branded) balls made by Shen­zhen-based com­pany YaYork Plas­tic Prod­ucts, cost 1,299 yuan each, ac­cord­ing to a com­pany em­ployee. No one knows for sure what per­cent­age of that amount will go to the Shen­zhen com­pany, but, based on pre­vi­ous cases, it is likely to be tiny.

An oft-cited case il­lus­trat­ing Chi­nese man­u­fac­tur­ers’ poor stand­ing in the global di­vi­sion of la­bor is that only about 2 per­cent of the prof­its from sales of the much sought af­ter and ex­pen­sive Ap­ple iPhones goes to the Chi­nese orig­i­nal equip­ment man­u­fac­tur­ers.

In mar­ket econ­omy, most of the prof­its come from links such as de­sign­ing, brand, re­search and de­vel­op­ment, and ser­vices— not man­u­fac­tur­ing. For higher re­turns on added value, en­ter­prises must up­grade their de­sign­ing and R&D abil­i­ties, cre­ate their own brands and pro­vide other prod­uct-re­lated ser­vices— this is the suc­cess mantra of Ap­ple.

Most Chi­nese en­ter­prises are yet to go that far. The Chi­nese econ­o­my­may have be­come the sec­ond­largest in the world, but its over­all eco­nomic in­flu­ence across the globe is largely based on low-end man­u­fac­tur­ing and con­sump­tion of re­sources. It has be­come the “fac­tory of the world”, which is not the same as a real in­dus­trial power that con­trols the com­pet­i­tive pro­duc­tion chains.

If China suc­ceeds in its ef­forts to re­struc­ture its eco­nomic model and make it more tech­nol­ogy- and in­no­va­tion-driven, its en­ter­prises will hope­fully play a more ac­tive role in the global di­vi­sion of la­bor. For now, only a small num­ber of Chi­nese en­ter­prises are climb­ing up the lad­der of global pro­duc­tion chains.

Re­new­able en­ergy gi­ant Yingli is one of the leading Chi­nese com­pa­nies to shine at the­World Cup. Al­though it paid as much as $17 mil­lion to be­come a sec­ondary spon­sor, the deal is likely to yield pos­i­tive re­sults by mak­ing Yingli known to mil­lions of people across the globe.

More­over, China’s elec­tric ve­hi­cle mak­ers won the con­tracts to pro­vide hy­brid buses and elec­tric mul­ti­ple-unit trains to help soc­cer fans travel in­World Cup host cities and con­nect sta­di­ums with dif­fer­ent ar­eas. If this trend continues, more Chi­nese play­ers — not soc­cer play­ers, though— could be seen dis­play­ing their skills at the nex­tWorld Cup. The au­thor is a se­nior writer with China Daily. xinzhim­ing@chi­nadaily.com.cn

WANG XIAOYING / CHINA DAILY

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