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Focus on quality can bring new economic miracle

April 7, 2016

The balance between quantity and quality is the key underlying issue for the Chinese economy. China's economic size has allowed for a huge quantity of its goods to be sold globally, but quality has lagged behind so far.

To tackle this issue, and the structural issues within the economy, it's essential to deal with the contradiction between high-quality effective demand and low-quality ineffective supply.

Some people criticize Chinese consumers for having excessive enthusiasm for foreign merchandise. The argument goes that if a product is sold as a foreign brand, Chinese consumers will be clamoring to buy it, even if it is produced in the Chinese mainland. One example of this is Chinese tourists' desire to buy Japanese lavatory seats that are actually produced in China.

But if this is true, why are smartphones produced by domestic brand Huawei Technologies Co increasingly welcomed by Chinese consumers? Based on market demand and sales volume, it's highly likely that Apple Inc's status in China will be challenged by Huawei in the next two or three years.

In fact, Chinese consumers' spending on overseas products is not a matter of worshiping foreign products; it's because these products offer better quality than domestic brands. Similarly, Chinese consumers' willingness to buy goods produced by domestic bands such as home appliance makers Qingdao Haier Co and Gree Electric Appliances Inc is not just out of being patriotic - its because their products offer a better balance of quality and value for money than equivalent foreign products.

By now, we can see there is an obvious trend: Chinese consumers are becoming more rational when it comes to purchasing goods, as they have passed the immature phase of conspicuous consumption of foreign brands. Now their purchasing preferences are no longer limited to the origin of a brand, but to its quality and cost effectiveness.

Against this backdrop, Chinese products have a golden opportunity for development. So long as we manufacture products with high enough quality and value, Chinese goods will be favored by domestic consumers and could enjoy a bigger market than foreign goods.

This means there is an urgent need for domestic products that are nationally recognized and known to be of decent quality. For instance, cars produced by South Korea's Hyundai Motor Company are well recognized by consumers in its home market. Apple Inc's iPhone is also nationally recognized by US consumers as a top electronic product, and this is not because they feel proud that it was designed in America - it is simply because it offers the requisite quality. Since its initial launch in 2007, the iPhone has evolved from version 1.0 to the upcoming 7.0, with an accumulated sales volume of more than 200 million units.

In this regard, Huawei smartphones, Haier fridges and Gree air conditioners are well on their way to being nationally recognized brands.  

We should not complain about a lack of sufficient market opportunities in China. The Internet is not the only area of economic innovation in China. Creating more nationally recognized products is another area in which genuine innovation is taking place. This is partly because the foundation for the development of Internet industry and e-commerce in China is built upon the quality of products sold online. Therefore, as Chinese consumers have become more and more rational in making purchases, creating nationally recognized products can allow Chinese companies to prosper. The question is whether Chinese entrepreneurs are fully aware of the potential opportunity.  

The reason why nationally recognized products will offer huge opportunities for China's economic development is that these products will generate huge demand. No matter which industry, once a good product is created, it will become a common choice for a large number of consumers, or a "star" among similar types of products. Therefore its symbolic meaning for consumers is more significant than its actual function.

Also, once these products are nationally recognized, consumers will naturally develop a strong loyalty toward them and when the upgraded version comes out, consumers will be willing to buy it. 

Furthermore, with the influence of Chinese products growing around the world, those Chinese companies that are committed to creating good quality products will continue to grab larger market share overseas. Demand from consumers all around the world will enable China's economy to roar ahead. 

Over the last three decades of opening-up and reform, China's economic growth miracle has rocked the world. The era in which China's economy has been based on high-speed growth may have ended, but a new economic miracle may be coming, one that will be marked by the creation of high-quality Chinese products that are widely recognized by consumers the world over. As long as Chinese entrepreneurs are committed to creating high-quality and good value products, they will gain even greater opportunities to prosper than in the past 30 years, when scale was all that mattered.  

(The author is director of the Wuhan University Institute of Quality Development Strategy.)