Peking University Issues Report on ‘Dell Effect’ in China

For Immediate Distribution

Peking University Issues Report on ‘Dell Effect’ in China

Computer Company, IT Become Increasingly Key Contributors China’s Rapid Economic Growth

(Beijing, Jan. 26^th) Peking University today issued its report “Dell in China: Economic and Employment Impact,” concluding large and increasing economic benefits from global computer-systems company’s presence in the country.  The report is the result of a six-month study conduct by Shenzhen Graduate School of Business of Peking University and the China Center for Economic Research, under the direction of Professor Hai Wen.

The study measured Dell’s effect on industrial production, employment, tax revenue and GDP using rigorous quantitative analysis.  It also assesses Dell’s influence in three microeconomic areas:  technology diffusion, supply-chain efficiency, and links created for Chinese companies with overseas markets.

Results of the research were announced at an event this morning featuring representatives of the university, Dell, Ministry of Commerce, National Development and Reform Commission, Ministry of Science & Technology, Ministry of Information Industry, China Association of Enterprises and Foreign Investment (CAEFI), the Development Research Center of State Council, National Economic Research Institute etc.

“The IT industry has been a key contributor to China’s fast economic rise, and the country’s rapid adoption of IT products has been the source of significant productivity gains boosting economic growth.” said Peking University’s Prof. Hai about the study. “We aimed to contribute to an understanding of the effect of IT production and use on economic growth in China by focusing on the impact of a single IT firm, Dell.”

“By 2005 China had surpassed the United States as the world’s leading exporter of IT goods, and IT accounted for 22 percent of China’s exports.  Electronics production, of which computers are the major part, accounted for 5 percent of the nation’s GDP.”

The report indicates that:

• Dell is a significant contributor to China’s economy.  In 2005, the total direct and indirect effects of Dell’s activity in China in 2005 contributed US$36.4 billion to China’s GDP and supported nearly 1.5 million jobs, or 0.4 percent of total non-farm employment.  In general, each US$ 1 million spent by Dell in China produces US$2.3 million total contribution to GDP, 92 new job and US$144, 000 in tax revenue. 
• Dell plays a critical role in driving greater access to IT in China and facilitates valuable knowledge transfer among its partners and suppliers.  For example, Dell’s entry into the local market appears to have been an important factor in the 40-percent reduction in the average cost of network server computers sold in China from 2000-06.  This decline probably had a significant positive effect on IT-related productivity growth in China, since studies in other countries have shown that corporate technology investment accelerates as average equipment costs fall.

·            Much of Dell’s expertise in managing its supply chain – a key source of its competitive advantage – has been shared with and benefited its China-based suppliers, such as in enhancing their quality control and productivity.  And surveys also indicate that Dell’s ongoing reduction of its inventory costs has not in turn raised but actually lowered the inventory costs for suppliers. In fact, Dell’s supply chain management has been  improving the  overall productivity of its suppliers.

·            Dell also has played a significant role in enabling suppliers to gain increased access to global markets. For example, Xiamen Witel Information and Technology Co., through working with Dell, went from being a small enterprise with no international exposure to a medium-sized company with a large proportion of its business outside China, and an increasingly skilled work force.

·            Dell has also contributed to productivity improvements of its customers, Chinese companies and government agencies, notably the Customs Administration.  

“Although unable to be quantified, those qualitative benefits are actually more important than figure growth.” said Professor Hai, “The introduction of advanced technology and managerial skills, for example, are having far-reaching impact on the long-term development of Chinese economy.”

“We are deeply grateful of the thorough and thoughtful work on this report by Prof. Hai and his team,” said Dell Chief Executive Officer Kevin Rollins in Beijing.  “We’re also very proud of Dell’s contribution to China’s economic growth, business practices and environmental standards, and to increasing access to information technology throughout the country.

“We are determined to achieve more, and contribute more, and will do so working arm-in-arm with China to make that happen.”