Why Should Companies Leave China?

Just like other manufacturing, the company I worked had moved to China following the flow of manufacturing business. After researching the trend of future jobs in

Since goods can now be transported a lot easier, many companies prefer to hold their manufacturing units offshore in LEDCs such as China, India, Bangladesh etc. Land and labour in these countries are a lot cheaper, allowing more goods to be manufactured

China is reaching new levels making it a top choice for many global managers. China accounts for more than a third of global growth over the past seven years. (Legarde, 2015) The country has worked hard in creating economic growth and although it has been slow it has been successful. They are gaining on economic and financial stability. As a relocation specialist I would inform the global manager and his family what they can expect when relocating to China.

A factor which has led me to believe that business trade in china is going to get harder is the fact that the cheap labour that has been the backbone for the large increase in Chinese exports is falling short. China is facing an aging working population and by the year 2020 the nation will have more than 200 million people over age 60 which is considerably more than in November 2010 when China had ‘178 million people over 60 years old, of which 119 million are over 65’ [6]. This ageing population means that labour in china will not always remain this cheap as a young workforce will be less available however this will not completely destroy China’s economy growth just hinder it.

The Chinese are an emerging economy that has taken over the world's production in recent years. In fact China is now considered to be the world's factory, as all the major players in the world outsource all or some of their manufacturing activities to the country. All this would not have been possible without the help of technology and with the state of globalization being such, that logistics and distances are becoming shorter and shorter.

Generally, the Asia-Pacific markets include Australia, Hong Kong, India, China, Indonesia, Japan, Malaysia, New Zealand, Taiwan and South Korea. The Asian-Pacific region is full of natural, social and economical diversity. Specifically, China has large amount of human resources due to its largest population while both New Zealand and Australia has powerful farming industry. From economic perspective, China and Japan belong to top-ranking countries with larges economic volume. Meanwhile, Hong Kong and Taiwan have maintain favorable economic performance and played an important roles in global economy. Overall, the

trade deficit with China cost 2.8 million jobs between 2001 and 2010” by Robert E. Scott, the Director of Trade and Manufacturing Policy Research. His research provides a lot of remarkable data that shows how Chinese imports displace American jobs. For instance, he points out that the dramatic growth of US-China trade deficit has been one of the primary factors contributing to the crisis in U.S. manufacturing employment. The trade deficit over the last decade has replaced 2.8 millions million American jobs, in which 1.9 millions million were in the manufacturing industries. Noticeably, the Chinese currency has been manipulating is valued lower than it should be, in order to increase the competitive advantage of Chinese cheap-price goods. Besides, Chinese government has been issuing some illegal policies or regulations to compete unfairly with American goods, such as labor abuse or environment damage. Some other reasons are counted to point out how illustratehow cheap imports from China harm the American economy, in which China has broken its promises to attend the WTO. Scott concludes that the deficit caused by the trade with China has been replacing millions American jobs, increasing the national depth, decreasing the export capacity, and making more macroeconomic problems. Moreover, I think that moving blue-collar jobs abroad can support

Since two decades ago, many MNEs seem to be expanding into China for the strategic, marketing, and economic reasons. It is suggested that China presents the potential for a huge market, as well as a relatively inexpensive place for manufacturing resources, including labour.

China has benefited tremendously through globalization, its GDP growth outlook is phenomenal, promising a double digit market growth in the near future. This has allowed the Chinese market to grow at double the speed of most countries, leading many to believe it is great for foreign investors to take advantage of. Due to the tremendous amount of growth, China is rapidly industrializing itself in to one of the world’s most prestigious Economic powers. China is turning into an economy that is becoming increasingly reliant on global trade. Fortunately, “The Chinese economy is undergoing unprecedented and profound changes. The “innovative, coordinated, green, open and shared” development concepts put forward by President Xi not only offer solutions for China’s current outstanding economic problems, they also point out a clear direction for its long-term development (Jianguo).” So why aren't businesses setting up shop here?

Up till now, it is ranked No.1 busiest port in 6 consecutive years. (World Shipping Council, n.d) Also, the World Shipping Council ranked Top 50 World Container Ports, and within the top 10 ports, 7 of them are ports located in China as we can see from figure 1.2. In only 30 years, China’s economy is vastly growing and it hit the world’s second largest economy. China now is a market that every company wants to enter and it is amazing to see the changes. Much of the country’s wealth comes from trade that it even has a nickname of “the world’s factory”. From t-shirts to oil and coal, China’s vast natural resources and government support in economy turned impossible into possible. Cheap labor cost as one of the factors that draw attention to international companies. In recent years, technology has become one of the biggest impact to China’s society. (Huijiong & Yan, 2012)

Indonesia is relatively a very young country with a plethora of “growing pains” like trying to step out of poverty, human rights issues, trying to deal with corruption, fight the development and expansion of terrorism, enforcing its legal system, resolving armed conflicts with separatist groups around the country and opening up for trade. There are some technology bursts in major urban centers but most of its human resources still go out to the agriculture sector.

The phenomenon of firms transferring their business operations back to its country of origin can be referred as reshoring, insourcing, onshoring, backshoring, homeshoring, and rightshoring (Espana 2013). Even though some explanation have been mentioned, this strategic changes in manufacturing location mainly because of increase in wages, fluctuation in currency values, labour productivity and reduction of energy costs from 2004 to 2014. According to the International Labour Organization, wages in low-cost countries have soared. For instance, real wages in Asia rose by 7.1% to 7.8% a year between 2000 and 2008 while pays in advanced economies just increased 0.5% to 0.9%, even in American manufacturing, the real wages have declined by 2.2% since 20005. Pay for senior management in several emerging markets such as China, Turkey and Brazil, now either matches or exceeds pay in America and Europe (Hay Group report 2014). In addition, pay and benefits in China – the largest offshoring and outsourcing developing country increased by 10% (2000-2005) and 19% (2005-2010) (Boston Consulting Group 2011) (figure 1). Moreover, Chinese Government increased the target minimum wages by 13% until 2015. At this rate, wage differential between the US and China will disappear by 2020 (Sirkin et al.).

Education: If a country has good literacy rate then it has bright future. Same thing apply on Indonesia. 90.4% of its populations are literate in which male are 94% and female are 86.8%. 3.6% of their GDP is spent on education.

GDP: Indonesia has made significant economic advances through last years. Indonesia's debt-to-GDP ratio in recent years has declined because of increasingly robust GDP growth which was 6.1% ($915.9 billion) in 2008 compare to 5.5% ($811.1 billion) in 2006 and compression to the world they are on 54th position in GDP growth. 14.4% of GDP earning from agriculture, 37.5% from service sector and the major part 48.1% comes from industry. (The World Bank, 2009)

Indonesia rests between the Pacific and Indian Oceans, consisting of 13,667 islands, and a population of approximately 200 million. Indonesia’s population matrix is approximately 35% living in urban areas, and 65% living in rural villages. Indonesia has five cities with a population of one million or more, and all five of these cities are located on the island of Java. Jakarta is the capitol city, and the primary economic engine of Indonesia (International business center, n.d.). .