Why do so many companies want to go into China?
Other practical reasons to do business in China include: Market stability: China has been growing at a steady rate for over four decades, so it's a reliable, stable destination for expansion. A skilled workforce: If you need talented, competent workers and specialist manufacturing know-how, China is the place to be.
- Reforms are Improving the Ease of Business. ...
- National Investment in Innovation. ...
- Proven Market Stability. ...
- Comparable Tax Rates. ...
- Ease of Access for Import and Export.
China's dazzling economic growth shows no sign of stopping. And thanks to improvements in China's infrastructure, workforce, and regulatory environment, multinationals (in particular) have unprecedented opportunities to lower their costs and reap new regional and global competitive advantages.
China remains an attractive destination for manufacturing overall and holds many advantages over its competitors: Skilled workforce and labor pool. Developed shipping and logistics infrastructure; and, Government incentives promoting the sector, among others.
| Company | % of revenues from China |
|---|---|
| Tesla | 22.3% 22.3% 22.3% |
| AMD | 22.1% 22.1% 22.1% |
| TE Connectivity | 22.0% 22.0% 22.0% |
| Agilent Technologies | 21.9% 21.9% 21.9% |
Thus, manufacturing in China is comparatively cheap. It attracts many American companies to choose China as their manufacturing operation location. Q. Many American companies import components from China as they are cheap compared to those manufactured locally.
Foreign companies are shifting investment out of China as confidence wanes, business group says. BEIJING (AP) — Foreign companies are shifting investments and their Asian headquarters out of China as confidence plunges following the expansion of an anti-spying law and other challenges, a business group said Wednesday.
While expanding foreign trade can disrupt US employment, trade with China also creates and supports a significant number of American jobs. Exports to China support over 1 million US jobs, and Chinese companies invested in the United States employ over 160,000 workers.
The Bottom Line
Government control over major companies and the yuan's exchange rate have generated large improvements in the Chinese economy. Its regulations on foreign businesses have helped as well. China's present debt-to GDP ratio is one of the highest in the world. Its domestic consumer demand is low.
For U.S. firms seeking overseas expansion opportunities, China is perhaps a natural candidate. Given its vast population of 1.4 billion, rapidly growing middle class and loosening economic restrictions, China is now one of the most lucrative international markets in which to conduct business.
What American companies moved to China?
From General Motors to Apple, many major American corporations have established a strong foothold in the Chinese market and are reaping substantial profits from their operations there. In addition, US-owned subsidiaries based in China number nearly 2,000 while total investments by US firms amount to $14 billion.
Foreign companies are relocating their investments and Asian headquarters out of China due to growing unease regarding security controls, Beijing's protection of Chinese rivals, declining business environment, national self-reliance policy, and a lack of progress on promised reforms.
Within China, rapidly changing demographics, rising incomes, increased consumer spending and an increasingly open business environment have all helped to make the Chinese market increasingly attractive to Western businesses across a variety of industries.
China's economy has grown to one of the largest and most powerful in the world over the past few decades. Driven by industrial production and manufacturing exports, China's GDP is actually now the largest in terms of purchasing power parity (PPP) equivalence.
Chinese Manufacturing: Advantages
More US companies send their manufacturing production overseas, primarily to China. Doing so provides several significant advantages, including: Lower costs. Cheaper labor.
In 2021, U.S. Imports of $68.5 billion of furniture, bedding, lamps, toys, games, sport equipment, paint and other miscellaneous manufactured items constituted 53.2% of the total U.S. import of those commodities.
Many of China's largest companies are state-owned enterprises, due to the significant presence of the Chinese government in the national economy. The headquarters of the electric utility company State Grid in Beijing.
Indeed, during the past four decades, Chinese companies and investors have bought up land in the U.S. as well as purchased major food companies like Smithfield Foods, the United States' largest pork processor.
Its parts, design, marketing and distribution may have come from anywhere — and that “anywhere” is often the United States. China is the United States' largest trading partner. Companies import goods from China in part because their lower cost allows higher retail markups.
1. China – 28.7% Global Manufacturing Output.
How much cheaper is manufacturing in China?
For every dollar spent on manufacturing in the U.S., it costs roughly 96 cents to produce the same thing in China. For companies who are more concerned with increased quality, protection of intellectual property, and simplifying the supply chain, the extra four cents is a bargain.
China has historically been one of the world's most prominent low-cost, high-labor-intensity manufacturing centers, with a manufacturing economy 50 percent larger than that of the United States.
Cheaper labor
This means that their average salary is almost half that in the United States (about $7,900/month). Businesses can further access lower labor costs by outsourcing to developing cities like Wuxi, Jiangsu, Chengdu, and Sichuan instead of larger cities like Beijing.
How many US companies operate in China? It is estimated that there are over 50,000 US companies that have operations in China.
It supports US jobs.
While expanding foreign trade can disrupt US employment, trade with China also creates and supports a significant number of American jobs. Exports to China support over 1 million US jobs, and Chinese companies invested in the United States employ over 160,000 workers.
Japan owns the most at $1.1 trillion, followed by China, with $859 billion, and the United Kingdom at $668 billion.
China has the third largest share in U.S.–World Trade following Mexico and Canada. In 2021, 8.6% of total U.S. exports of $1.8 trillion to the World were exported to China and 17.9% of total U.S. Imports of $2.8 trillion were imported from China.
China's economy “opened up” in December 1978 and the timing couldn't have been better. At the time, U.S., Japanese, and European companies were looking for new locations to manufacture their goods cheaply after wages rose in East Asian countries like Hong Kong, South Korea, and Taiwan.
America's trade deficit with China continues to grow and plague manufacturing in the United States. Workers saw 3.7 million U.S. jobs lost to China since 2001, with more than 700,000 lost in the first two years of Donald Trump's presidency, according to a study released Thursday by the Economic Policy Institute (EPI).
Manpower is possibly the most important resource in any company, and is also one of the largest expenses. By outsourcing to China you can reduce costs by between 30 and 80 percent depending on the labor intensity of the product. These outstanding rates will lower your cost of production exponentially.
What major American companies are in China?
China is an important source of revenue for many multinational apparel companies like Nike (NKE), Gucci, and Abercrombie & Fitch as well. Other notable consumer goods companies with sales in China include Avon, Colgate-Palmolive, Tyson, Nabisco, Kellogg's, Danone, Conagra, and Tupperware.
Companies like Apple (AAPL), Intel (INTC), Ford (F) and Tesla (TSLA) have large manufacturing ties to the country. Others, like Starbucks (SBUX) and Nike (NKE), rely on Chinese consumers.
