Does a Japanese Miracle Look Possible in China's Future?

When you hear about the Japanese Miracle, then someone has referred to the unprecedented recovery and growth of  Japan's economy after World War II. During the economic boom between 1946-1990, Japan rapidly became the world's second largest economy (after the United States). They began to see momentum during the 1960's and took over as the second largest economy, pushing Germany to number three. 

Today, someone else has become the world's low-cost manufacturer. The title of the second largest economy belongs to China. It's doubtful, however, if  China will experience a miracle similar to Japan.

Chinese Watch Designed Taken
from "Citizen Holdings of Japan"

In 1968, Japan became the second largest economy, pushing Germany out of the way. Economists considered that quite a feat since Germany had its own economic miracle or "Wirtschaftswunder".

China reached the status of number two during the second quarter of 2010, when its Total
Output came in at $1.337 trillion, to Japan's $1.288 trillion.

Even with such an impressive economy, China's miracle doesn't look much like Germany's or Japan's or anyone's for that matter.



Lack of innovation, education and branding

China remains a very poor country in per capita terms. They use four times as many people to generate less than 50 percent of US production. No doubt, China's economic miracle has reduced dire poverty for hundreds of millions of people, but many more live in poverty in rural areas.

China's output causes observers to overstate the development level of the Chinese economy.  It's a country so large and dominant, but lags behind far smaller countries in terms of per capita income and quality of life. Taiwan and Hong Kong serve as examples of the kind of development for which the Mainland can strive and become.

Japan's development has relied heavily on technological prowess. Japan has the world's largest electronics goods industry, third largest automobile output and ranks high in global patent filings. They focus primarily on high-tech and precision goods, such as optical instruments, hybrid vehicles, and robotics.

Per capita income runs $ 36,899 in Japan and $7,600 in China. Japan has a population of 127 million, while China has a population of 1.35 billion. With both country's output around $1.3 trillion, it's quite obvious the Japanese workforce leads in efficiency.

According to market research by The Monogram Group of Chicago, American consumers view Chinese goods as low quality.  Except for PC's consumers do not trust Chinese products or brands. Lenovo's efforts to build brand identity has benefited Chinese PC products.

Mispercention of Chinese Quality

China produces 98% of goods consumed in the "watch or timepiece" industry. That includes complete or cased watches, movements, cases, bands, dials, hands and tools and equipment. In spite of the volume, the industry owns only 50% of the global income in the industry.

Seagull Movements Rival Swiss ETA's 

The Swiss produce 2% of global output of watches while owning 50% of global income. An irony exists within the figures as China provides the Swiss with as much as 90% of the components used to build "Swiss Made" watches. China is Switzerland's watch industry's largest vendor.

China is the world's watchmaker. It's also the world's largest timepiece consumer and Switzerland's largest customer.

Of the many companies producing high quality watch parts, Seagull Tianjin has come to represent quality. With the Swatch Group Ltd.'s ETA movement manufacturer ending sales to non-Swatch companies, watch manufacturers have turned to Seagull as an alternative.

Citizen Holdings Co., Ltd, Tokyo Japan

Citizen, one of the world's largest watchmakers, relocated its movement manufacturing to China in 1994. That year, they produced approximately 1 million movements in Beijing. Six years later, the company produced 317.6 million movements.

Obviously, the company found Chinese labor more than adequate to produce watches. At right is a Citizen Miyota brand movement. This is a 21 Jewel model 8215 and one of the most widely used mechanical movements on the planet.

An Indicator of Quality

The intracies of watchmaking give us a hint of China's agility in manufacturing. At some point, consumers will cease considering Chinese products as low quality and see the advantage of owning Chinese goods.

A Chinese Miracle?

China is a manufacturing economy. Currently, a miracle doesn't appear in the country's future. To gain in per capita productivity, China will need to:

1) Improve its educational system and make it more rigorous
2) Start demonstrating innovation evidenced by patent filings
3) Follow Lenovo's lead in gaining consumer acceptance through brand management
4) Become legitimate competitors of Taiwan and Japanese Companies
5) Increase per capita income of its workers

If the country meets the criteria above, then they will swamp the world's industries.

As many people have said, China is a sleeping economic giant.