China and the Multinationals - A Winning Combination

This article uses the Porter-Dunning diamond model of international competitiveness to explain the current situation and further development of the international competitiveness of mainland China's manufacturing sector. The emergence of a relatively wide range of labour-intensive manufactures as China's most dynamic exports conforms well to the country's natural comparative advantage of low costs and the restructuring of the Asian newly industrialized economies. However, since competitive advantage based on basic/ generalized factors is neither significant nor sustainable, the Chinese government needs to encourage the strategy of reaching beyond current factor endowments to plan for a future China which would be rich in skills as well as capital, and would have higher order competitive advantage. Greater participation of multinational business activity from the triad of the US, Japan and the European Union can speed up this process.