China's world beaters?

The Economist is pessimistic about China's prospects for producing world-class companies, despite their privileged access to domestic markets and capital.

"China has so far failed to build world-class companies. Even the natural monopolies and resources companies are mostly just big rather than particularly efficient. In manufacturing, technology and consumer areas, a few companies are groping towards international competitiveness, but none are there yet. Nor will China necessarily produce a Sony or a Samsung. “People assume it is just a matter of time before China develops world-class brands,” says Mr Gilboy. “But Chinese firms may not develop like Japanese or Korean ones did. China may be building a distinct model of capitalism with distinct firms.” While American firms broadly excel at breakthrough innovations, and Japanese ones at process and incremental innovations, “China capitalism may simply be best at making things a lot cheaper.” If so, China might do well to focus on building no-name component suppliers as Taiwan has, rather than home-grown brands as in Japan and South Korea."