The China Road

Abstract

This article highlights China’s unusual combination of low wages, modern technology, and an enormous potential of internal market. It is easy to see that labor and materials costs are cheaper in China, but it is harder to pin down the costs of stolen intellectual property, complex supply chains, inflexible manufacturing schedules, and project management overhead. Low-cost labor and high-tech manufacturing have made China the leading destination for companies looking to cut costs by outsourcing production. China’s combination of low labor costs and modern technology-aided by lax intellectual property enforcement makes it a manufacturing powerhouse. It’s increasingly prosperous internal market enables efficiencies of scale. It takes time and commitment to make Chinese manufacturing relationships work. In some cases, they may not work at all. As companies learn the hidden costs of outsourcing, they may find it does not yield the promised savings. This is especially true for products that require customization, proprietary technology, or quicker reaction to market trends.