As a complete aside. What is it that China offers that is making so many western companies go and do business in China?
If it is cheap labour then India has it as well. I feel like I'm missing something, but not sure what.
Can someone ELI5 please?
So there are four major draws to China for Western companies:
1. It's a market of >1B people, hundreds of millions of whom are rapidly developing disposable income. That in itself is probably enough;
2. Cheap labour;
3. Supplier proximity; and
4. Political stability
I can't stress how important (3) is.
The net effect of all this is there's a network effect of suppliers in China. Those phones that are made in, say, Shenzhen require parts that are made by a factory down the road. This could be everything from chips to tiny screws.
Anywhere else and you'd need to ship various parts from China and have the supply chains and inventory management that that entails.
If you look past the fact that worker conditions are Dystopian, it's quite a wonder of the modern world, really.
But when I (and I'm sure others) talk about the perils of kowtowing to China, it's because they want the market not the manufacturing capacity.
Think of a movie studio that wants to distribute content in China. To get permission to do so that content has to be acceptable to the CCP.
Many suspect this is why the movie "First Man" had no scene of planting the American flag in lunar soil (an iconic historical moment). Some pseudo-artistic defenses have been unenthusiastically lobbed on this issue. Personally I find these unconvincing at best.
Western companies willingly engaging in self-censorship (or even the credible allegation of such) to pander to a foreign totalitarian government is not something I, personally, approve of.
For manufacturing, a large portion of existing supply chains already exist within China, so even if it's not the cheapest, it's practical to set up your factory closer to where all your input components are manufactured.
> What is it that China offers that is making so many western companies go and do business in China? If it is cheap labour then India has it as well. I feel like I'm missing something, but not sure what. Can someone ELI5 please?
It's not just cheap labor, a robust supply chain, etc. Those are definitely factors, but today, a lot of companies invest (or remain invested) in China because it significantly helps them access the Chinese domestic consumer market.
India, of course, has a huge population too, but China's consumer market is a lot more developed and therefore attractive.
I think that being an authoritarian country, where you don't expect surprises in every election was a strong incentive for american companies to invest in China instead of India.
Of course, the idea that a country that doesn't give a damn about human rights would also not be completely invested in the protection of IP never was a an idea too advanced for the simple minds of the Jack Welchs eager to exploit cheap chinese manpower.
Probably to counter the totalitarian communists by turning them into freedom-loving capitalists or something. But it so happens that freedom can't be bought so we ended up with a totalitarian capitalist (AKA fascist) China.
