The Secrets of Chinese Economy Success

American manufacturers complain that China keeps its currency undervalued to help make its exports seem cheaper. But is that really why customers buy Chinese?

Etron is a small company in the city of Suzhou, in eastern China, that exports 95% of its products.

It is not doing badly in the downturn. Far from it in fact. Sales of the electronic components it manufactures for firms around the world were up 70% year-on-year in the first half of 2009. The managing director, James Qian, is a new type of Chinese businessman. He speaks English well.

He has ambitions for his daughter to go to an English university. Clearly he sees the value of good public relations, he's generous with his time and patient as we film with him.

'Produce better products'

Mr Qian says the company is doing well because small and medium-sized firms from Europe and North America are now confident they can get the products they want from him at a good price, but matching the quality of those produced in their markets. As we tour the factory floor, it is clear he is proud of his workers. They are part of a new generation who are more skilled than their parents.

Wang Feng Lian is 24. She's from a neighbouring province, about three hours drive from the factory.

'Global manufacturing glut'

Here they reject the charge made by some in the US that China cheats when it comes to trade by undervaluing its currency. So why then do US firms find it so hard to compete with them? The managing director, Mr Qian, blames a global glut in manufacturing caused by shrinking demand.

Last year he took his administrative staff on a holiday to Phuket. "It cost 6,000 yuan," he says, "but if I gave them that money they would just put it in the bank. "They all, had fun, they all came back and told their friends all about it. That's the best way to keep your employees - keep them happy," he says, smiling.

No safe jobs

America's losing large numbers of manufacturing jobs now. China fears it too may soon face the same problem. One of the firm's competitors in Suzhou lost half its business recently, when a big multinational television manufacturer decided to stop using the Chinese supplier and switched the business to Malaysia, where it was cheaper.

No job is secure in today's global supply chain.

Over lunch, the managing director introduces me to one of his customers, an engineer from a big German company. We discuss why the German firm use a Chinese manufacturer rather than a European or a North American one.

"Customer service," he says. "These days firms like this one really understand what we need from them. If there is a problem with a product or a process they come up with a solution fast."

By Chris Hogg