Report: Chinese Companies Copy, Then Undercut Foreign Competitors

The New York Times on Tuesday profiled Spanish wind turbine parts maker Gamesa and its experience as a manufacturer in China. The paper reports that  the company was made to train local suppliers, who then "undermine Gamesa by selling parts to its Chinese competitors."

The Chinese start-ups now have more than 85 percent of the wind-turbine market in China and half of the $45 billion global market, says the paper.

The story is typical of many businesses that enter China, the Times writes.

"The story of Gamesa in China follows an industrial arc traced in other businesses, like desktop computers and solar panels," according to the paper. "Chinese companies acquire the latest Western technology by various means and then take advantage of government policies to become the world’s dominant, low-cost suppliers."

But companies such as Gamesa stay in China because the market opportunity is still big for them, despite their diminishing share of it, reports the paper.

The phenomenon is occurring because the Chinese government in the past few years has started to require foreign firms to make more and more of their key strategic components locally rather than import them, in contravention of World Trade Organization rules, according to the Times.

But companies such as Gamesa have not launched complaints with their countries' trade representatives because "everybody was too scared," according to an anonymous source quoted in the paper.

The story was published as China and the U.S. holds meetings in Washington, D.C. this week to address many of the trade issues between the two countries. One of the big items on the agenda is this issue of indigenous innovation.