Feb. 24, Professor Hiroki Takeuchi, Associate Professor of Political Science and director of the Sun & Star Program on Japan and East Asia at SMU Dallas, for an op-ed outlining the steps China could take (emulate Japan) to become a more effective and profitable investor in U.S. manufacturing plants. Published in the South China Morning Post: http://bit.ly/2I3iEUi
China is a dominant player in world trade and economics. But to gain long-term traction and benefit from its position, it must work to become more appreciated and persuade other nations to follow its leadership.
How does China accomplish this? Start by emulating the quality management Japan has brought to manufacturing industries in the United States. . .
By Hiroki Takeuchi
China is a dominant player in world trade and economics. But to gain long-term traction and benefit from its position, it must work to become more appreciated and persuade other nations to follow its leadership.
How does China accomplish this? Start by emulating the quality management Japan has brought to manufacturing industries in the United States.
Four decades ago, when
When Japanese foreign direct investment accelerated in the US during the 1980s, Japanese firms brought their quality management to US manufacturing industries. In 1984, Toyota invested in the
in Fremont, California, and dramatically increased productivity at the underperforming facility by more than 50 per cent, by introducing Japanese-style quality management, called
to work within American regulations and with local suppliers and the union. Two years later, Toyota opened its first wholly-owned US plant in Kentucky. Today, there are some 40,000 Americans directly employed by Toyota’s 10 engineering and manufacturing plants in the US.
Foreign companies create US jobs because global value chains have developed all over the world. It is common to locate different stages of manufacturing production in different countries. Although Trump
However, China’s attempts to follow Japan’s lead with foreign investment in the US have not fared so well. The 2019 American documentary American Factory – which
The documentary tracks Chinese company
and workers’ complaints about company demands. Workers used to earn twice as much and had been out of work for a few years.
China must advance its domestic economic reforms if it ever hopes to prosper with its US investments. It will never earn public support if a plant’s success relies on low wages and predatory pricing. China’s state capitalist system subsidises state-owned enterprises and allows them to export at lower prices. Chinese investment might be better received if it committed to domestic economic reforms.
When a Japanese manufacturing company opens a new affiliate abroad, that company’s employment in Japan tends to increase, because a new production stage in a foreign affiliate also creates another production stage in Japan. China needs to realise that, as long as it is involved in trade based on global value chains, Chinese investment will benefit all countries connected along those chains.
Hiroki Takeuchi is Associate Professor of Political Science and director of the Sun & Star Programme on Japan and East Asia in the Tower Center at Southern Methodist University