What attracts foreign multinational corporations to China?

Why China is "The World's Factory"?


Made in China

  • China is a major hub for world trade. Given its huge land mass, population, a large growing economy, and strategic ports, it lends itself freely to huge international trade. The top Chinese imports from the world are electronic equipment, oil, machinery, mined raw material, and medical and scientific equipment.

  • China’s rate of return on capital---a basic measure if investment efficiency---far outstrips that of most developed nations. Foreign businesses are anxious to move in on China's immense market and take advantage of 1.3-billion-person population and its sizable and growing middle class, which for the first time in the country's history, has a large disposable income.

  • Many businessmen find totalitarianism to be an advantage. There are no labor unions to worry about and elections that might produce an unfriendly government. Incentives offered the government include tax breaks, low import duties, low-cost land and low construction costs for new factories.

  • The mix of cheap efficient labor and stable prices and stable politics is what foreign companies find appealing. There might be places in other parts of the world where you can labor cheaper...If we must look have at a country that’s not politically stable, you might not get your order on time If you deal with a country where the currency fluctuates, every day here is a lot of risk. China happens to have the right mix



Why China Is "The World's Factory"

  • China’s Whole Supply Chain and Business Ecosystem of networked suppliers, component manufacturers, and distributors has evolved to make it a more efficient and cost-effective place to manufacture products.

  • Lower Compliance regards to child labor, involuntary labor, health and safety norms, wage laws, and protection of the environment, long shift hours, compensation insurance, paid workers once a year (a strategy to keep them from quitting before the year is out). Environmental protection laws are routinely ignored, enabling Chinese factories to cut down on waste management costs.

  • Enjoyed a VAT exemption or rebate policy. Lower tax rates helped to keep the cost of production low, enabling the country to attract investors and companies looking to produce low-cost goods.

  • Pundits have wondered if China will lose its spot as "the world's factory” as other emerging economies offering cheap labor dull China's competitive edge. However, the availability of cheap labor is just one of many factors that have kept the "Made in China" label on so many products purchased by consumers around the world. It will take more than low labor costs for emerging economies to set up a business ecosystem that can compete with China's. For some time to come, China will be "the world factory” with its low production costs, huge labor pool, vast talent base, and business ecosystem.

  • China stronger financial

  • China has made rapid advances in areas such as education, infrastructure, high-tech manufacturing, artificial intelligence

  • China is now increasingly targeting indigenous innovation and aims to reform remaining weaknesses.

  • World's biggest consumer market

  • China as a unique industrial ecosystem provides complete solutions for multinational companies and is the strongest magnet and adhesive that attracts multinational companies



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