Knowledge a priority

The concept of a knowledge-based economy was first put forward in 1996 by the Organization for Economic Cooperation and Development. Theoretically, it mainly contains the following four connotations:

First, knowledge-intensive sectors have been a major component of the modern industrial structure.

Second, professional knowledge, particularly industrial know-how, is the driving force behind economic growth. Capital, labor and other comprehensive factors are essential to sustaining economic growth. These comprehensive factors are inherently associated with education, science and management. Currently, in industrialized countries, these so-called comprehensive factors contribute an average 60 percent of the total economic growth; yet China's growth still depends heavily on investment.

Third, knowledge is a crucial part of productivity. An economics study concludes productivity is heavily dependent on labor, and is determined by the level of knowledge. Given this fact, as knowledge amounts, tools improve and technologies advance, labor forces can explore resources that were not feasible before, especially after the oil prices soared from the late 1990s when the development of alternative resources saw an upswing. Management, long seen as software for productivity, optimizes and reallocates human resources, tools and labor elements in a more integral combination.

Fourth, technological innovation accounts for more costs when developing new products.

Against the backdrop of globalization, an emerging economy normally develops in four stages. First, trade of raw materials. When tracing back to the late 16th century, Holland and Britain took advantage of the Dutch East India Company to reap cheap raw materials and labor from Asian markets. The second level is trade of products after preliminary processing of raw materials. Next is the capital that generates profits through overseas investment. Finally, we look into the use of knowledge to make money. As we know, the marginal costs of intellectual properties are the lowest compared with other forms of exports. Like Microsoft, which is making huge profits from sales of its software, avoids paying substantial intellectual property costs like other businesses.

The wealth gap is fundamentally caused by the difference in the knowledge level. China owns less intellectual property and is not innovative enough. With more than half of its technologies imported from abroad, including patents and other intangible assets like specifications and famous brands, whose value is difficult to estimate compared to actual products, China lags behind. Thus, we are more and more aware of the fact that a competitive edge can only be gained by independent innovation. Without mastering core technologies, we cannot be successful.

Information technology

Information technology helps shorten distances in space and has made our world into a highly efficient "global village." It is expected to play a greater role in corporate management in the new century.

Promoting multinationals

The emergence and extensive presence of multinationals have triggered controversy in developing countries, where they are often involved in problems of monopoly, interference in local political affairs, transfer of heavily polluted industries and tax evasion. Despite all these side effects, most transnational companies are self-disciplined and strong performers with high reputations. China is putting more efforts in developing its own multinational entities.

A powerful multinational should sustain strategic development in a unique commercial pattern and with a profitable business mode. Some Chinese companies are keen to acquire foreign companies after they are listed, but a lack of a long-term market planning and experience in dealing with cultural differences in overseas market is neglected.

Economic globalization is a double-edged sword. If we can take advantage of its benefits and avoid its negative aspects, our enterprises can develop in a healthy environment.