Chinese economic statecraft is feared by some in the Arctic and around the...
2021-04-26 2 ENGLISH REPORTS
In the case of China, the advantages that derive from a protected home market are further augmented by the size of that market. This creates opportunities for significant internal and external economies of scale. Because China is the largest market globally for many goods and services, protected domestic firms can build greater production capacity than their counterparts elsewhere. In certain sectors, larger production volumes facilitate repeated production cycles that encourage production standardisation and automation, avoid waste, and help raise productivity. Larger Chinese firms might also be able to procure inputs at lower prices or finance themselves more cheaply. These ‘internal’ economies of scale allow them to push per unit production costs down significantly – for some firms, well below those of their European rivals.
To be clear, it is not the size of China’s domestic market by itself that creates distortions, but its combination with market barriers.  Chinese firms active in this vast and protected home market will also disproportionately benefit from ‘external’ economies of scale available in China – namely, advantages secured by having access to a large, vibrant, and interlinked home market, industrial network, and workforce. China’s dense industry clusters provide local firms with direct access to networks of specialised suppliers, labour, and demand, as well as extensive knowledge spillovers across firms, and between firms and local academic or research institutions. Chinese firms also benefit from high-quality infrastructure and proximity to population centres, which can facilitate hiring, procurement, or logistics activities. Where the Chinese market is open to European firms, these advantages are shared; where the market is closed to foreign competition, they only accrue to Chinese players.
标签： ENGLISH REPORTS