The global competitiveness of the Chinese wooden f

TheglobalcompetitivenessoftheChinesewoodenfurnitureindustryXiaoHana,1,,YaliWenaandShashiKantb,,aSchoolofEconomicsandManagement,BeijingForestryUniversity,P.O.Box425,Beijing,100083,People'sRepublicofChinabFacultyofForestry,UniversityofToronto,33WillcocksStreet,Toronto,Ontario,CanadaM5S3B3Received31December2008;revised13April2009;accepted27July2009.Availableonline5September2009.AbstractDuringthepasttwodecades,theChinesewoodenfurnitureindustryhaswitnessedhigh-speedgrowth,makingChinaaleadingfurnitureexporter.Giventheintensificationofglobalcompetition,itiscrucialtoassessthepresentstatusandcompetitivenessoftheChinesewoodenfurnitureindustry,aswellasthechangesandchallengesChinawillfaceincompetingwithotherprincipaltradingnations.BasedonBalassa'sRevealedComparativeAdvantage(RCA)Indices,itcanbeconcludedthatChinahasexperiencedatransitionfromcomparativedisadvantageintoahighcomparativeadvantageovertheperiod,andhasmaintainedastrongpositioninthislabor-intensiveindustry.However,itstillfallsbehindtraditionallystrongcompetitorssuchasItalyandGermanyintermsofqualityandunitprice.Itisalsoexperiencingagrowingchallengefromlower-incomecountriessuchasPolandandVietnam.Moreover,Chinanowfacesupmoreunfavorablemacroeconomiccircumstancessuchasrisingcost,shrinkinginternationaldemand,technologygapandescalatingtradebarriers.Thus,thegovernment,industrialassociationandenterprisesneedtoquicklytakeinnovativestepscoordinatelytopromoteChineseenterprisestransitioningfromtheoriginalequipmentmanufacturers(OEM)totheoriginaldesignmanufacturers(ODM),furthertotheoriginalbrandmanufacturers(OBM).Keywords:Balassa'srevealedcomparativeadvantage;China;Competitiveness;Woodenfurnitureindustry;WorldtradeArticleOutline1.Introduction2.OverviewofChina'swoodenfurnitureindustry2.1.Productiontrends2.2.Enterprises—concentration,ownerships,andperformance2.3.Industrialdistribution2.4.Exports3.Methodologyforcompetitiveanalysis3.1.Marketshare(MS)3.2.Revealedcomparativeadvantage(RCA)3.3.Tradecompetitiveness(TC)4.Selectionofcompetitorsanddata5.Results5.1.TrendsinChina'smarketsharecompetingwithothernations5.2.TrendsofRCAwithinChina'swoodenfurnitureindustry5.3.TrendsinChina'sRCAcompetingwithothernations5.4.TrendsinChina'stradecompetitivenesswithothernations6.Emergingchallengesfacingtheindustry6.1.Increasingcost6.2.Technologygapandinnovations6.3.Internationaltradedisputesandbarriers6.4.Deterioratingtermsoftrade6.5.Macroeconomicfactors7.DiscussionandconclusionsAcknowledgementsReferences1.IntroductionGlobaltradeinfurniturehasgrownrapidlyinthepastdecadesbecauseofpackingandshippinginnovationssuchasready-to-assembleandknock-downfurnitureaswellasdecreasingworldtradebarriers.Theincreasedopennessinthefurnituremarketshascausedtheinternationaltradeoffurnituretogrowfasterthanfurnitureproductionandtheinternationaltradeofmanufactures(CSIL,2008).TheworldtradeoffurniturehasincreasedfromUS$42billionin1997toUS$97billionin2007(You,2007).Therehasalsobeenadramaticshiftinthesupplyandflowoffurnitureintheglobalmarket.Chinahasmaderemarkableprogressinfurnitureproductionandexportintheglobalsupplyandflowshift.TheChinesefurnitureindustryhasnowbecomeahugeintegratedindustry,withfivemillionemployeesandUS$55.26billioninoutput,accountingfor18%oftotalworldproduction([Caoetal.,2004]and[Virginiaetal.,2003]).Additionally,thecombinationofplentifulskilledlaborandlowcostsenabledChinatoprovidewoodenfurnituretotheinternationalmarketathighlycompetitiveprices.Chinahasemergedasoneofthemajorsuppliersintheworldfurnituremarket;from1997to2006,China'sshareincreasedfrom4%to19%(CSIL,2008).ThewoodenfurnitureindustryhasretainedanimportantnicheintheChinesefurnitureindustry,andisrankedatthetopintermsofproductionandexportvalueamongallfurniturecategories(SITVRev.38215).Asthemainexportforestproduct,itaccountedfor52.96%andalmost50%oftheChinesefurnitureoutputandexport,respectively,in2005,accountingforthelargestshareoftheglobalmarket.Giventheintensificationofglobalcompetition,itiscrucialtoassessthepresentstatus,competitiveness,andchallengesoftheChinesewoodenfurnitureindustry([Li,2007]and[Zhangetal.,2008]).Inthenextsection,weprovideanoverviewofChina'swoodenfurnitureindustry.InSections3and4,wedescribethemethodologyandselecteddatausedinthecompetitivenessanalysis.InSection5,wepresenttheanalysisresultsofChina'scompetitivenessagainstotherleadingfurnituretradingnationsoverthepast15years.InSection6,wepointoutthemainemergingchallengesfacingtheindustryinChina.Finally,inSection7weconcludeourfindingsanddiscusstheneedtoapplymoreeffectiveeconometricmodelsinglobalindustrycompetitivenessanalysis.2.OverviewofChina'swoodenfurnitureindustry2.1.ProductiontrendsDriven(Virginiaetal.,2003)bytherapiddevelopmentofthedomesticeconomy,highforeigninvestmentandaboomingexportbusiness,Chinesefurnituremanufacturinghasmaderemarkableprogress(ResearchandMarket,2006).Sincethemid-1990s,theChinesefurnitureindustryhasexperiencedfastgrowth,withanannualgrossproductionthatgrewfrom61.2billionyuanin1996to340billionyuanin2005,withtheaverageannualgrowthrateat21.4%(ChinaNationalFurnitureA