China Trade 101: Why US Companies Go To China

Filed in archive Outsourcing on December 18, 2007

We all know someone whose job used to be in Michigan, Missouri, or Maryland and now their job is in China - and when their job moved, they didn't. So now they're unemployed or under-employed...

Okay, we probably don't really know a person like that. While that does happen, the truth is that American jobs have largely gone other places.

Is China "the world's factor" (as one writer recently put it)? Well, they manufacture a lot of goods. But many Western companies that move into China aren't there to manufacture products for export. They're there because they want to sell their own products or services in the world's largest market (or cluster of markets) - China.




Google is a prime example. Google's China operation is about getting 200 million Chinese Internet users to use Google instead of someone else.

Another obvious example is Disney. Their Hong Kong theme park has been a success. They're in the early stages of developing a park in Shanghai. They look forward to the day when their movies can be seen in any Chinese home. But Disney hasn't moved its US operations overseas; it's just targeted the Chinese market.

Is there some outsourcing? Sure. Chinese labor is cheap at the moment. But the recent revision of the Catalog for the Guidance of Foreign Invested Enterprises has made it more difficult for foreign firms to come into China and have their only goal be to use cheap Chinese labor to produce things for export. China wants foreign companies to make things for the Chinese.

So whether it's Starbucks, McDonalds, Wal-mart, KFC, or General Electric, the bulk of US companies in China are trying to move products and services, not jobs, to China. And they're bring profits back to America...