From: www://chinacog.com/advantage.htm


“Our government regards export as an important task for our economic development. We will continue to provide favorable policy for export, such as tax rebate policies”.

— Ms. Wu Yi, Vice Premier, People’s Republic of China

Companies from around the globe have entered the Chinese marketplace to take advantage of its low labor rates and the explosion of its economy. The manufacturing industry in China is the fastest growing sector as compared to other countries such as Mexico, Thailand, India and Taiwan. While manufacturing output in those countries grows annually in the low single digits, China has maintained a double-digit growth rate for the past ten years. In fact:

Chinese manufacturing grew 12% a year between 1998 and 2002

Its world market share in manufacturing has grown from 1.4% in 1980 to 6% in 1998

Of the top 500 companies in the world, 400 companies have invested and manufactured in China

What is driving the Chinese dominance in manufacturing? A combination of a large cadre of skilled, disciplined work force; low labor rates; and continued incentives to both foreign and domestic firms to invest in key industries.

Given its vast population (over 1.2B people), China is in a position to leverage an ever-increasing supply of workers to ensure low labor rates. Current wage rates in China are $1/hour and are forecasted to only reach $1.5/hour by 2008(1).


China is also investing in its workforce, ensuring that future skills are in place to maintain its manufacturing prominence(2). This education is focused on quality assurance and standard business practices. Employees are now familiar with ISO900X processes and procedures and are able to produce high quality products for crucial markets. This is allowing Chinese companies to move up the value chain – to produce high value products, not just the low quality, commodity items traditionally associated with it. Chinese companies are now competing globally in telecommunication infrastructure, PCs, TVs, refrigerators and auto parts.


Key to this sustained economic growth is China’s ever-improving economic infrastructure. While countries such as Thailand and Mexico may be able to compete on labor rate, they cannot guarantee on-time shipments. Their infrastructure is old and in much decay. However, throughout China, transportation networks are being upgraded to facilitate the large volumes of exports being produced in its factories:

Rail tracks have been doubled
Expressways are being built
Sealed roads lead to factories throughout the country
Ports are being modernized
All major ports are connected with railways and highways


(1) Source: EIU; China Labor Statistical Yearbook; US Bureau of Labor Statistics; Nordic Business Report; Lit Search
(2) Source: China Labor Statistical Yearbook; China Population Statistics Yearbook; Lit Search