The global competitiveness of the Chinese wooden furniture.docx

The global competitiveness of the Chinese wooden furniture.docx

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TheglobalcompetitivenessoftheChinesewoodenfurniture

TheglobalcompetitivenessoftheChinesewoodenfurniture

industry

XiaoHana,1,

YaliWenaandShashiKantb,

aSchoolofEconomicsandManagement,BeijingForestryUniversity,P.O.Box 425,Beijing,100083,People'sRepublicofChina

bFacultyofForestry,UniversityofToronto,33WillcocksStreet,Toronto,Ontario,CanadaM5S3B3

Received31December2008; 

revised13April2009; 

accepted27July2009. 

Availableonline5September2009.

Abstract

Duringthepasttwodecades,theChinesewooden

furniture

industryhaswitnessedhigh-speedgrowth,makingChinaaleading

furniture

exporter.Giventheintensificationofglobalcompetition,itiscrucialtoassessthepresentstatusandcompetitivenessoftheChinesewooden

furniture

industry,aswellasthechangesandchallengesChinawillfaceincompetingwithotherprincipaltradingnations.BasedonBalassa'sRevealedComparativeAdvantage（RCA）Indices,itcanbeconcludedthatChinahasexperiencedatransitionfromcomparativedisadvantageintoahighcomparativeadvantageovertheperiod,andhasmaintainedastrongpositioninthislabor-intensiveindustry.However,itstillfallsbehindtraditionallystrongcompetitorssuchasItalyandGermanyintermsofqualityandunitprice.Itisalsoexperiencingagrowingchallengefromlower-incomecountriessuchasPolandandVietnam.Moreover,Chinanowfacesupmoreunfavorablemacroeconomiccircumstancessuchasrisingcost,shrinkinginternationaldemand,technologygapandescalatingtradebarriers.Thus,thegovernment,industrialassociationandenterprisesneedtoquicklytakeinnovativestepscoordinatelytopromoteChineseenterprisestransitioningfromtheoriginalequipmentmanufacturers（OEM）totheoriginaldesignmanufacturers（ODM）,furthertotheoriginal

brand

manufacturers（OBM）.

Keywords:

Balassa'srevealedcomparativeadvantage;China;Competitiveness;Wooden

furniture

industry;Worldtrade

ArticleOutline

1.

Introduction

2.

OverviewofChina'swoodenfurnitureindustry

2.1.Productiontrends

2.2.Enterprises—concentration,ownerships,andperformance

2.3.Industrialdistribution

2.4.Exports

3.

Methodologyforcompetitiveanalysis

3.1.Marketshare（MS）

3.2.Revealedcomparativeadvantage（RCA）

3.3.Tradecompetitiveness（TC）

4.

Selectionofcompetitorsanddata

5.

Results

5.1.TrendsinChina'smarketsharecompetingwithothernations

5.2.TrendsofRCAwithinChina'swoodenfurnitureindustry

5.3.TrendsinChina'sRCAcompetingwithothernations

5.4.TrendsinChina'stradecompetitivenesswithothernations

6.

Emergingchallengesfacingtheindustry

6.1.Increasingcost

6.2.Technologygapandinnovations

6.3.Internationaltradedisputesandbarriers

6.4.Deterioratingtermsoftrade

6.5.Macroeconomicfactors

7.

Discussionandconclusions

Acknowledgements

References

1.Introduction

Globaltradein

furniture

hasgrownrapidlyinthepastdecadesbecauseofpackingandshippinginnovationssuchasready-to-assembleandknock-down

furniture

aswellasdecreasingworldtradebarriers.Theincreasedopennessinthe

furniture

marketshascausedtheinternationaltradeof

furniture

togrowfasterthan

furniture

productionandtheinternationaltradeofmanufactures（CSIL,2008）.Theworldtradeof

furniture

hasincreasedfromUS$42 billionin1997toUS$97 billionin2007（You,2007）.Therehasalsobeenadramaticshiftinthesupplyandflowof

furniture

intheglobalmarket.

Chinahasmaderemarkableprogressin

furniture

productionandexportintheglobalsupplyandflowshift.TheChinese

furniture

industryhasnowbecomeahugeintegratedindustry,withfivemillionemployeesandUS$55.26 billioninoutput,accountingfor18%oftotalworldproduction（[Caoetal.,2004]and[Virginiaetal.,2003]）.Additionally,thecombinationofplentifulskilledlaborandlowcostsenabledChinatoprovidewooden

furniture

totheinternationalmarketathighlycompetitiveprices.Chinahasemergedasoneofthemajorsuppliersintheworld

furniture

market;from1997to2006,China'sshareincreasedfrom4%to19%（CSIL,2008）.

Thewooden

furniture

industryhasretainedanimportantnicheintheChinese

furniture

industry,andisrankedatthetopintermsofproductionandexportvalueamongall

furniture

categories（SITVRev.38215）.Asthemainexportforestproduct,itaccountedfor52.96%andalmost50%oftheChinese

furniture

outputandexport,respectively,in2005,accountingforthelargestshareoftheglobalmarket.

Giventheintensificationofglobalcompetition,itiscrucialtoassessthepresentstatus,competitiveness,andchallengesoftheChinesewooden

furniture

industry（[Li,2007]and[Zhangetal.,2008]）.Inthenextsection,weprovideanoverviewofChina'swooden

furniture

industry.InSections3and4,wedescribethemethodologyandselecteddatausedinthecompetitivenessanalysis.InSection 5,wepresenttheanalysisresultsofChina'scompetitivenessagainstotherleading

furniture

tradingnationsoverthepast15 years.InSection 6,wepointoutthemainemergingchallengesfacingtheindustryinChina.Finally,inSection 7weconcludeourfindingsanddiscusstheneedtoapplymoreeffectiveeconometricmodelsinglobalindustrycompetitivenessanalysis.

2.OverviewofChina'swooden

furniture

industry

2.1.Productiontrends

Driven（Virginiaetal.,2003）bytherapiddevelopmentofthedomesticeconomy,highforeigninvestmentandaboomingexportbusiness,Chinese

furniture

manufacturinghasmaderemarkableprogress（ResearchandMarket,2006）.Sincethemid-1990s,theChinese

furniture

industryhasexperiencedfastgrowth,withanannualgrossproductionthatgrewfrom61.2 billionyuanin1996to340 billionyuanin2005,withtheaverageannualgrowthrateat21.4%（ChinaNational

Furniture

Association（CNFA,2006）,Fig. 1）.ThedevelopmentoftheChinese

furniture

industryhasfarexceededChina'saverageindustrygrowthrate（10%）,aswellasthecountry'sgrossdomesticproduct（GDP）growthrate（7%to9%）duringthesameperiod（Caoetal.,2004）.

Full-sizeimage（34K）

Fig. 1. 

Chinese

furniture

industrygrossproduct.

ViewWithinArticle

Thewooden

furniture

industryhasretainedanimportantnicheinChinese

furniture

manufacturing,andithasexperiencedrapidexpansioninrecentyears.Althoughitsshareoftotalproductiondeclinedfrom80%to53%,itisstillatthetopintermsofproductionandexportvalueamongall

furniture

categories,andaccountsforoverone-thirdofChina'stotaltimberproductexportseachyear（Sunetal.,2005）.

2.2.Enterprises—concentration,ownerships,andperformance

Wooden

furniture

productionisaresource-based,labor-intensiveindustry,withlowentrybarriersintrade.TheindustryisfragmentedinChina,withfewlargefirmsandnumeroussmallmanufacturingproducers.Uptotheendof2006,therewereonly2149manufacturerswithtotalannualsalesrevenueofmorethan5 millionyuaninChina,accountingfor3%ofthetotalindustry（OCN,2007）.Theconcentrationrateisusedasanindicatoroftherelativesizeoffirmsinrelationtotheindustry.Onecommonlyusedconcentrationratioisthefour-firmconcentrationratio（CR4）,whichconsistsofmarketshareasapercentageofthefourlargestfirmsintheindustry.TheCR4ofChinesewooden

furniture

manufacturingisonly6.62%ofthetotalsectorturnover（Jin,2007）,indicatingtheperfectcompetitionmarketofthisindustry.

Thereareseveraltypesofownership,withatleast90%ofcompaniesnotstate-owned.Accordingtodatainthe2003Chinese

Furniture

InvestmentReport,amongthe6937wooden

furniture

manufacturersselected,83.56%arecollectiveenterprises,7.12%arejointventures,andonly6.79%arestate-owned（StockExchangeExecutiveCouncil,2003）.

TheprofitrateofChinesewooden

furniture

manufacturershasbeenstable,averagingat4%inrecentyears（Jin,2007）.Thoughhigherthanotherproducttypeswithinthe

furniture

industry,itisstilllowerthanthatofotherrapidlydevelopingindustries.

2.3.Industrialdistribution

Over80%ofChinese

furniture

firmsarelocatedinfourregionsstretchingfromthesouthtotheeastcoastlineofChina（seeFig. 2）.Overall,thefourregionsaccountedfor94.5%ofthetotaloutput,withsouthernChinaaloneproducingmorethanhalfofthetotalamount.With34%ofthetotaldomesticproductionin2005（CNFA,2006）,Guangdonghasbeenatthetopofproductionforyears,followedbyZhejiang,Fujian,Shandong,andLiaoning.IncreasinginvestmentsfromHongKong,Taiwan,andsomeAmericanandEuropean

furniture

manufacturershaveexpandedcapacitysincethelate1980s,contributingtothisdistribution（Sunetal.,2005）.Approximately50%ofexportsarefromoneSouthChinaprovince—Guangdong.

Full-sizeimage（48K）

Fig. 2. 

Industrygrossproductbyarea2005.

ViewWithinArticle

2.4.Exports

Inthepasttwodecades,theChinese

furniture

industryhaswitnessedacceleratedgrowth,andChinaisquicklybecomingtheworld's

furniture

manufacturingcenterandbiggestexporter.TheinternationalcompetitivenessofChina'swooden

furniture

industryhasimproveddramatically,andChinaisnowamajorexporterofwooden

furniture.

China'swooden

furniture

exportsrosealmosttentimesinvalue,withadouble-digitannualgrowthratesincethe1990s,higherthantheworldaveragerate（Fig. 3）.

Full-sizeimage（44K）

Fig. 3. 

Chinaandglobalwooden

furniture

exportperformance,1993–2007.

ViewWithinArticle

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