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The reasons China is so appealing to global companies

| Apr 2, 2021 | Business Issues

China’s business appeal cannot be denied. When large companies and entrepreneurs consider building a factory or locating a business in a large developing country, China usually gets the most serious consideration.

Why is China such an appealing market compared with other emerging markets such as India, Mexico and Brazil? Global companies want to be in China for many reasons, ranging from tax-related benefits, labor and logistics to lower crime rates.

Lower tax rate, solid logistics

Here is a more detailed breakdown showing the advantages China has in certain categories:

  • Corporate tax rate: It is cheaper in China than in the other three mentioned countries. And some of those other developing countries also have hidden taxes.
  • Labor: Three big factors work in China’s favor. Wages are cheaper, the country has weaker labor laws in protecting workers, and it relies on an abundant and diverse pool of talented workers who can produce nearly any product.
  • Logistics: China’s world-class seaports are the envy of many countries because they are so efficiently operated and well-located.
  • Pollution: Granted, China is known for its pollution and bad air, however, the country seems to be addressing this issue more than other countries. For example, China has made vast investments in high-speed rail, is the world’s largest producer of electric vehicles and placed more taxes on coal producers in an effort to reduce fossil fuels.
  • Crime and corruption: Corruption present in all these countries, providing more complications for companies suddenly facing bribes to conduct business. However, China has a much lower crime rate than the other three, making it a safer place to build a factory.

China has many advantages compared with other large emerging markets of India, Mexico and Brazil. The country stands out compared with the others for its knowledge of manufacturing, reliability and stable currency, domestic market growth and safety.

Before India, Mexico and Brazil can better compete with China, they must address a number of issues including restructuring their burdensome tax rates, improving and developing infrastructures in helping exporters, and significantly reducing crime rates.

In the meantime, U.S. and other global companies will continue to seek out China as the better market option for expansion.