Why American companies choose China over everyone else:
Five percent won’t be the deciding factor in deciding whether to set up a factory in China. But these issues sure will ...China is a communist country, so one would expect their workers would have collective bargaining and other rights. While labor rights are stricter now in China than they were even five years ago and wages are rising, China wages are still cheaper than Brazil’s and Mexico’s.
Moreover, even though India has a similar workforce situation in terms of rights and size, the government long ago decided to focus on being a software developer and IT service exporter. India also changes governments every few years and only recently unified its cross-state tax code. China has none of these problems. Continuity makes life easier for businesses. It’s one less headache.There are hidden costs involved in doing business in any country. Taxes can be written off. But countries like Brazil have hidden taxes hard to avoid. A simple corporate cellphone account is taxed nearly as much as the corporate tax rate.
Mexico’s ports are governed by cartels, as Mexico’s president Andres Manuel Lopez Obrador recently said about corruption at two of the country’s ports and customs stations. . India, Mexico and Brazil are way more dangerous. If quality of life for expat workers comes into play, then building a factory in those countries is less safe than building one in China.
Brazil is a good example of this. Companies from Goldman Sachs to Shell Oil were big investors in Brazilian sugar cane ethanol when the government mandated a 10% mix in gasoline. It was an opportunity unique to Brazil, so companies wanted to be a part of that.
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