Sustainable growth in China through 

resource integration to serve the high end market

高旭东

清华大学技术创新研究中心 研究员

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Agenda

• What is Sustainable growth • Sustainable growth: the literature • A new model

• Case illustration

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What is Sustainable growth

• Resource and environment Sustainability – Green technology

• Alleviating poverty – Bop/Inclusive growth

• Survival of local firms after WTO– Indigenous Innovation

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Inclusive growth: The literature

• BoP : sell more to the poor or supporting marginal entrepreneurs; pays little attention to turn the poor into producers or high salary employees (Prahalad, 2004; Karnani, 2007)

• Role of MNCs vs. “embedded innovation” based on transformational stakeholder engagement (Prahalad, 2004; Prahalad and Hammond, 2002; Simanis and Hart, 2009)

• China: development with TVE and private firms but resource consumption and low end market (Kaplinsky, 2005; Simanis and Hart, 2009)

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Our study

• The team

• Data collection

• Theory development

• International collaboration

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A new model

• Resource divide between the city and the country– Farmers: important resources/LAND; high quality education– Advanced tech + management in city

• Competitive advantage through Resource integration – Low cost plus differentiation (advanced tech + management) to

serve high end market

• The role of entrepreneurs in inclusive growth – Not recognizing the opportunity of resource integration – The majority of TVEs and private firms are based on local rural

resources

• The role of the government in inclusive growth

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· Resource divide

· Resource integration

Targeting the high end market

Cost leadership + differentiation

Roles of entrepreneurs and governments

High performance+ inclusive growth

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Case illustration

• ZPMC (Shanghai Zhenhua Port Machinery Co., Ltd

• Shunhua (Hunan Linwu Shunhua Duck Development Co., Ltd

• Jiukang (Nanjing Jiukang Science and Technology Development Co., Ltd

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ZPMC

• Established in 1992 with $1 million, making large-size port container cranes.

• The largest large-size port container crane maker in the world, having a market share of 70%+.

• One of the three firms in the world that are able to make spiral bevel gears, making it well positioned in the ocean engineering equipment industry.

• Has more than 35,000 workers, more than 90% of them as “blue collar” workers-people in the manufacturing and supporting functions (rather than management, technology, and marketing functions), and the majority of them are originally farmers.

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Shunhua

• Established in 1999, raising and processing Linwu Ducks

• The largest shelduck raising and processing firm in China, with 169 duck-raising farms, supporting 3,260 duck-raising families, and 23,000 families to supply materials such as peppers, which are use in the processing of Linwu Ducks.

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Jiukang

• Established at the end of 2003 with Mr. Zhou, Weibing as the CEO and focusing on growing seedlings of grafted azedarach trees, planting grafted azedarach trees, and making toosendainin (extracted from grafted azedarach trees) based bio-pesticides, biodiesel and organic fertilizer.

• Still at its early stage of development but has developed a capacity of growing 5 million seedlings of grafted azedarach trees, and have worked with farmers near the firm and other parts of the country to plant grafted azedarach trees.

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Important characteristics:Serving the high end market

• Numerous numbers of crane makers in China, but most of them are making simple cranes, either selling in the domestic market or exporting

• Price of Shunhua’s Linwu Ducks is much higher than that of other firms: for ordinary cold spiced ducks, the price is about RMB36~56/kg, and for Shunhua’s Linwu Ducks, it is about RMB 94~118/kg.

• More than 200 firms making bio-pesticides, but most of them are very small private companies that do not have much technological capabilities and could only offer low end products.

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Important characteristics

• Integrating stakeholders to integrate resources– ZPMC: Shanghai government; farmers – Shunhua: local government; farmers– Jiukang: local government; farmers

• The role of entrepreneurs, who usually come from the city, is of critical importance – Jiukang: the development of core technologies and core

products is the precondition to involve rural resources

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Conclusion

• Importance of Sustainable growth

• Possibility of a new model in China – Sustainable growth in China through resource integration to serve the high end market

• Implications of Chinese practice

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•谢谢各位 !