Multinational Corporations in China and Local Human Capital Development

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China’s modern economic growth has been progressing on a scale that is unparalleled in the history of any nation, sustaining a growth rate of about 10% per year for the past 25 years. This is even more remarkable considering that the world is at a stage of transformation and globalization. In such times, countries with higher levels of technological development and human capital are naturally positioned to take advantage of the new growth opportunities. Although at the start of China’s reform era the nation was underdeveloped relative to the powerful nations of the world, it has been able to close the gap significantly over the recent years. One reason cited behind this progress has been that China was open to integration
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The relationships with MNC’s represent perhaps the most important form of foreign-direct investment in China. Central and provincial/municipal governments clearly recognize the benefit of getting MNC’s to work with local companies, seeing opportunities to rapidly develop and improve the condition of Chinese companies just through exposing them to world-class management practices and technology. By piggybacking on the experience of cutting-edge western firms, China can quickly move through the fast track of technological development. This expertise will be necessary as the government seeks to manage the sheer breakneck pace by which the economy is growing, and the pressure is further underpinned by the political restlessness and social fragility of the nation’s large population.
The MNC’s have their own reasons and incentives for reciprocating the attention given to them. China has invested a lot of resources into its universities and education systems, and the direct result of this has been that Chinese cities now field a large and attractive labor pool of university educated workers. Additionally, China has already been home to a deep reserve of unskilled labor. The costs of this labor is relatively low compared to western countries and serves as a major drawing factor in attracting the attention of MNC’s that seek to reduce their operating costs and
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