Manufacturers based in China have considerable cost advantages over companies producing goods in Europe or North America. Foreign investors in China continue to chase cheaper wages and lower operating costs, which translate into improved margins and greater profits. (However, as we explain in Chapter 13, most companies don’t lower their per-unit labor costs by moving manufacturing to China. Instead, the improved margins usually come from lower utility costs, one-stop shopping for suppliers, and using more flexible manufacturing models that don’t usually work in the West.)
Strong global demand from consumers for low-priced Chinese-made products is driving much of the foreign investment. You’ve no doubt heard about the large multinational companies that have poured billions of dollars in investment in China to produce goods for export to the West. For foreign companies operating there, Made in China can mean making customers in Europe and North America happy by keeping prices as low as possible.
