Chapter 4 Comparison Of Bicycle Industry in China and Taiwan
4.3 Public Bicycle Policies
4.3.2 Chang on Governmental Cycling Policy
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pedestrian lanes on sidewalks at both sides of the road. Moreover, in 2004, the Zhengzhou Bureau of Education prohibited primary school students and restricted middle school’s students from bicycling to school. In 2007 bicycles were prohibited on trunk roads in Shanghai (Baeumler et al., 2012).
4.3.2 Chang on Governmental Cycling Policy
Following with the growing number of car owners in the urban cities, only 9% of the urban area is composed of road surface in Shanghai compared with 25% in London or 40% in Los Angeles (World Bank, 1996). Constructing more road space is getting more and more costly and harder for the government.
Table 4-5 Number of New Bike Sharing Projects
Year Number of Bike Sharing Projects
Before 2009 3
2009 4
2010 16
2011 18
2012 till now 4
Source: Tang et al. (2012).
On top of the increasing private cars, there were also traffic problems caused by motorcycles. Chinese local policy makers believe that motorcycles disrupt traffic and are prone to accidents. The booming number of motorcycles was also one of factors which caused the decreased bicycle ownerships. There were nearly 100 Chinese cities passed the law of banning motorcycles. Beijing’s bicycle mode share reduced from 50% in 1986 to less than 23% in 2007.
Hangzhou, from 43% in 2000 to 33.5% in 2007, it’s only seven years. It rose again to 37.74 in 2009 (Yang, 2010).
Attitudes toward cycling are changing, and increasingly cities and higher levels of government are again recognizing the important role of those activities in urban life. In 2010 the Green Beijing Plan released by the Beijing Development and Reform Committee ruled bicycle usage in the municipal transport planning. The rules include more spaces for pedestrians and cycling, expanding more bicycle parking places, and providing a better connection between cycling and public transit (World Bank, 1996).
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Shanghai has launched a bike sharing program during the opening of the 2010 WorldExpo. The program was run by Shanghai Forever Bicycle Company. Shanghai government plans to set 3,500 bicycle hot spots throughout the whole city by 2010 (ITDP, 2010).
In 2008, Hangzhou initiated the first public bicycle rental system in China. Up to June of 2012, Hangzhou had 60,600 shared bicycles and 2431 stations.
Hangzhou plans to expand the shared bicycles to 200,000 in 2020. After 2009, the newly-established bike sharing projects were increasing as shown in Table 4-5. Till June of 2012, there were 45 established projects, containing 170,680 bicycles, and there were other 22 projects on going (Tang et al., 2012).
4.4 Summary
Bicycle industry clusters formed and have been integrated horizontally with SOEs and then vertically with foreign owned enterprises, and especially with Taiwanese firms. It was noted that vertical disintegration and the clustering of small plants increase the productivity of labor-intensive industries and that subcontracting is an important organizational strategy for lowering wages and deflecting industrial disputes.
Thus the share of Phoenix, Forever, and Flying Pigeon decreased from 48% in 1979 to 27% in 1983 since they were horizontal integrated with other parts firms. The deterioration of profits at state-owned enterprises, the biggest source of tax revenue then, was nothing short of the "fatal blow" to the county's finances. There was the high frequency of protest actions by workers in ailing public enterprises for substantial delays in salary payments, but the government simply lacked financial means to bail out these enterprises.
A whole Bicycle industry has been a buyer driven commodity. The distinction between buyer-driven and producer driven value chains usefully highlighted the role of retailers and brand name companies (the buyers), as well as Gap and Nike, in structuring global trade in labour intensive. Branded enterprises hold a key position in the market. This model of industrialization, successful as it might have been in its earlier phase, has kept some local industries and firms in a dependent and even disconnected mode in relation to the global economy.
More and more self-augmented Chinese local industrial clusters are jointing into global value chain. Being a part of an international production network, Bicycle industry in China
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continued involvement in the network and upgrading opportunities might depend on the strategies decisions of the global lead firms.
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C HAPTER Conclusion and Suggestion 5
Bicycle users and pedestrians are key beneficiaries of the low-carbon mobility agenda in urban China. International experience suggests that there is potential for significant gains in addressing congestion if people who have choices can be persuaded to use bicycles and walking as modes of transport, especially for short trips. On top of that, bicycle industry is also one the industry who benefits from the policy. Green policies are pursued to achieve the goals in long term and will be failed if policies were taken in short term. One or three-year carbon reduction is not the pursuing goal for the governments. The sustainable urban mobility and the promotion of cycling policies supported by central and local governments offer the bicycle industry a long term and prosperous future. The following section is to focus policies on the promotion of cycling adopted by China government and the final section is the conclusion and suggestion for the bicycle industry in China.
To cope with global warming, every nation makes commitment of carbon emission reduction by adopting green policies. The United States has adopted new fuel economy standards; the European Union has committed to a cut of 20% in its 2020 energy demand; and Japan targets on cutting 10% from electricity consumption by 2030 (IEA, 2012). Following the 12th Five-Year Plan China is expected to achieve its target of a 20-percent cut in energy use per unit of gross domestic product (GDP) in the five years to 2010, which promotes the use of public bicycle and e-bicycles in urban cities. Ministry of Industry and Information Technology of the People’s Republic of China announced that the industry standard of specification on lithium-ion battery on electric bicycle will be put into practice starting from 1st January of 2013.
5.1 Conclusion
China has been a pronoun as world’s factory and “sweat shop” as well. The country gained orders mostly based on the low cost of cheap and unlimited labor. The economic growth
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has been accelerated by the abundance labor. The laid off workers from the SOEs had a chance of set up their own companies through financial support from government or mostly from foreign companies. Through studying historical bicycle industry development of China we can conclude as following.
1. SMEs of bicycle industry emerge from the transformation of planned economy to free market economy
Transforming from planned economy to free market economy, the overview on bicycle development in southern, central and northern region in China gave evidence that Chinese bicycle industry grew with following the state owned enterprises and foreign funded enterprises.
Different labor division, strategies and market orientation adopt by enterprises can be seen in the three regions. Business decisions and costs are made in response to market signals, and without significant state’s interference.
After privatization of state-owned companies and introduction of foreign investments, the small and medium enterprises (SMEs) in China have achieved rapid and sustainable growth in the past two decades. SME clustering is critical to addressing social and economic objectives, the achievement of which can make them more competitive in the global economy; generating and spreading innovations; creating employment; and distributing income and welfare. Convergence of production, market and production chain comprises the main patterns of SME clusters. This essentially reflects the “one village, one product” and “one town, one industry” concept.
Many small and medium enterprises are doing affiliated production for large enterprises.
Some of them sell products in the local market, while some cater to the export market. SMEs facilitate development. Adequate infrastructure such as information technologies, excellent geographical location, favorable investment policies, cheap labor, and rich natural resources have collectively enabled the SMEs to coordinate their production to global standards and attract foreign capital and technologies. Moreover, they receive support from the local government and benefit from the collective efforts of all enterprises to pursue growth.
2. China’s bicycle industry maneuver to gain an invincible position in the global market Many Chinese SMEs are currently acting as outsourcing partners, mainly for multinational corporations (MNCs) from Europe or the USA, which represents a form of external cooperating for the SME. There is some evidence to show that these outsourcing relationships
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have promoted technological competencies in Chinese SMEs as well as providing competitive intelligence for the MNC who have invested in this relationship and acquired knowledge from the overseas SMEs. External linkage with MNCs would be more effective in transferring technological know-how from the external knowledge provider to the recipient company obtaining the knowledge.
Many MNCs see in China a manufacturing base where products can be assembled and manufactured at low costs and then shipped to customers worldwide, but it has been rare so far for both domestic and foreign companies to consider China as a host for indigenous product development or even technology research.
The three agglomerations in the Northern, Central and Southern China, combining with the local or foreign funded enterprises, continue the progressing in the industry. The competition in the regions also is created by the local and foreign funded enterprises. Xideseng is a good example which struggles to expand its brands under the sever competition from two Taiwanese brands, Giant and Merida in the local market. It is also widely recognized that many local bicycle companies design the brand with a few key components which are made by famous branded companies and then sell to the market to upgrade its design.
Taiwan bicycle manufactures moved the low end production line to China and brought in investment on facility, technology, and special knowledge to China. Taiwan benefited from this labor division and gave China a chance to build a more defined bicycle industry cluster. After the implementation of ECFA, the labor division between China and Taiwan will be more subtle, concrete and clear. China benefits from knowhow from the Taiwan funded enterprises while Taiwan enterprises make profits from gaining the share of Chinese home market.
3. Marketing strategies of bicycle firms in China turn from domestic market to a global market
Before economic reform bicycle marketing channel in domestic was held by hardware stores which distributed the bicycles to the retailers. Soon after globalization, mass marketing no longer catered the appetite of consumers. The sales on the department stores or supermarkets were decreasing. The specialty stores rose and as another channel offered more choice instead of bicycles with standard specification in the traditional supermarket. Moreover the entering of branded bicycle companies, such as Taiwanese brand, Giant or Chinese local brand, Xidesheng accelerated the competition on the sales of bicycles. These branded companies established their
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own specialty stores to promote their branded bicycles and offer more after service to consolidate their marketing strategy.
Instead of home market, the overseas market is important as well. Because China’s private bicycles companies entered the global market late China’s bicycle companies aimed at OEM orders to cooperate with foreign branded companies. This can give local companies to have a sheer understanding of global market and to precisely catch the trends of overseas market.
The invention of internet and great openings of international exhibit of bicycles and parts every year, local sellers have more contact with overseas buyers without intermediate parties to cut the profit of the sales. Global market offer China’s bicycle companies more sales opportunities and more competition.
4. Skilled labor of bicycle industry in China is mainly from state owned companies
Different from Taiwanese bicycle companies, the technical personnel were trained by the state owned companies. Especially in Tianjin, the laid off employee from SOEs in Tianjin are or have been recruited by the private or foreign funded companies because of their experienced knowledge about bicycle industry and sales marketing in China. Their long term contact with bicycles parts factories and close affiliation with sales channels are the keys for getting recruited by the bicycle companies. Tianjin is a province where located many state owned companies of heavy industry and overseas branded car manufactures. The car manufactures trained engineers who can learn from working for years and have specialties in producing battery for car, motorcycle and of course, for electric bicycle. This is one of factors that bicycle and electric bicycle industry cluster formed quickly in Tianjin. Now Tianjin can produce the largest volume of bicycles and electric bicycles production in China.
5.2 Suggestion
The bicycle industry in China has dramatically expanded industrial production capacity and economic scale. “Catch-up,” “leap forward,” and “upgrade,” has become the most popular buzzwords. There is a widespread cultural phenomenon that has percolated through all facets of social life: “seeking an eye-catching result from an extremely compressed process.” That is to say, when impatiently seeking eye-catching results, you could ignore the importance of the process and even attempt to bypass the indispensable process. The path and process are
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indispensable long-term goals of the industry. A viable path and an indispensable process is of crucial significance to determining and implementing a correct strategy.
1. Bicycle firms in China should meet the needs of the market and avoid overstocking Just like garment or shoes industries, Chinese bicycles manufactures focuses on OEM orders and tired of fighting against anti-dumping charge from overseas countries. Due to be dominated by the state owned enterprises before, Chinese bicycle manufactures didn’t have motive or pressure to build their own bands or new designed bicycles. Those state owned firms have become inflexible bureaucracies and therefore they have difficulty in coping with the new competitive circumstances. They often fail to meet requirements like short delivery times, are not aware of new trends in the market and ignore niche specialization.
Since China performed economic reform, bicycle hadn’t enjoyed its prosperous future.
Although bicycle production was managed by the state, the production can’t meet the requirement of the consumers which triggered the overstock, severe price competition and gradually brought in a series of breakdown of state owned bicycle companies. After privatization of the state owned manufactures and inflow of foreign investment and branded bicycle companies, export of Chinese bicycles had its beginning. At the mean time, following with rising incomes of Chinese people, the owner of motorcycles and cars were getting bigger and bigger.
There was a period of time the bicycles was viewed as barriers to block economic growth and caused traffic congestion in cities. This is one of factors which give great impact on sales of bicycles and lead to an overstock problem.
2. The establishment of the third parties integrating the firms, government, and academic sectors can accelerate the steps of technological innovation
With decentralization of SOEs and the push for economic growth, Chinese cities have received the infusion of foreign direct investment (FDI) and the globalization of economic activities, and are increasingly competing with each other over policies, resources, and opportunities. Nations cannot succeed in isolated industries, but in clusters of industries connected through vertical and horizontal relationships. An industry cluster represents the entire value chain of a broadly defined industry from suppliers to end products, including supporting services and specialized infrastructure. A neutral organization which integrates the business, governmental and academic sectors, is needed. The organization in the industry cluster can hold
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specific influences on a critical mass and improves knowledge, share resources, and stimulate creativity, innovation and entrepreneurship.
Policies must encourage the learning and the use of technology. The industry must formally connect with scientific institutions and educational organizations and development of domestic technology and foreign technology are interdependent. To cultivate the technology in home country rather is more important than to obtain technology from advanced countries only.
Knowledge accumulation, learning and interaction in the industry cluster are the active mechanisms for industry development. The facilitation of competitiveness in the industry can only be reinforced by interaction, learning and innovation, among the members in the industrial system. Chinese governmental should reinforce the development of technology-based SMEs’
community, and lower the risks and costs of innovation activities undertaken by technology-based SEs.
3. Bicycle firms in China should produce items for the niche market
Before privatization of state owned companies, Chinese bicycle companies were heavily dependent on economies of scale as a source for competitive advantage. It is clear that firms which have been exposed to competitive conditions are driven by the pressure to change and have more chance to been more successful. Confrontation with competitors highlights the importance of developing firm-specific competencies and forces firms to be positioned in the market, which is the brand of a firm. By doing so, they are stimulated to develop specific knowledge with which they can serve distinctive market segments.
For most manufacturing firms, the majority of orders are derived from customers of large enterprises. The contract manufacturer’s business operations are confined to business-to-business, and there is no opportunity to develop business-to-consumer marketing and sales operations. For this reason, SMEs tend to ignore the consumers’ real needs, which can result in a situation where high productivity is combined with low consumer satisfaction. If Chinese SMEs expect to transform themselves from cheap and mass-producing ones to high-value-added ones, they need to focus innovation on branding and on building their operations into meeting with consumers’
needs.
If China wants to make the leap from being a manufacturer of goods, often for other countries, to being a country of world-class inventors and innovators, the Chinese government should set out its science and technology objectives, which included the development and
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eventual increase in indigenous innovation capacity to reduce China’s reliance on foreign techniques. Future policy should expand the range of government services to SMEs. Government should develop an industrial cluster plan for small enterprises, as well as a financing and technological innovation system for SMEs. Chinese governments could learn some lessons from the history and devote attention to supporting policies for the development of small enterprises.
4. Governmental policy for long-term development of bicycle industry is needed
To Taiwanese bicycle firms, setting factories in Southern China is just an initiative of globalization for facing shrinking profit caused by high labor costs in Taiwan and sever competition between bicycle manufactures. Moving the low end of bicycle product line to Southern China, Giant is targeting on China’s home market, set the first company in central region in Kunshan. For the Taiwanese bicycle manufactures, which still stick in Taiwan, the
To Taiwanese bicycle firms, setting factories in Southern China is just an initiative of globalization for facing shrinking profit caused by high labor costs in Taiwan and sever competition between bicycle manufactures. Moving the low end of bicycle product line to Southern China, Giant is targeting on China’s home market, set the first company in central region in Kunshan. For the Taiwanese bicycle manufactures, which still stick in Taiwan, the