Question

You are building a manufacturing plant in China. Why is China the best location for the manufacturing plant?

This can be done with an introductory paragraph, key bullet points, and a conclusion paragraph.

Answer 1

China is the most populous country in the world leading the world population with the highest population in the world. Due to the over-population in the country, poverty is one of the major issues that the country faces. In order to overcome poverty and to generate better employment opportunities for the people, China has formulated foreign trade policies which are favorable for the manufacturers. Over the span of the last 30 years, China attracted most of the leading companies in the world to manufacture their goods in the country. It developed its supply chain management to provide better facilities to the producers. And the country only demanded from the manufacturers that a statement "Manufactured in China" should include in the label of the products to attract more businesses in the country with popularity. The country has favorable tax policies for the manufacturers which attract more manufacturers from different parts of the world especially the western countries. In most western countries, the tax is higher and the compliance policies are quite strict but China is very liberal regarding such policies which are an attraction for such producers.

The reason as to why China is the best location for the manufacturing plants can be as follows:

• High availability of laborers - As it has already been mentioned that China has the highest population in the world, therefore, it also has high availability of laborers who would need employment for survival. In order to generate more employment for its countrymen, China has opened its doors to the world to do business in the country.
• Low wage-rate - Due to the high availability of laborers and lower demand for the same, the wage rate in China is comparatively lower than most of the western countries. So the manufacturers find it beneficial to get cheap labor in order to cut down the product prices. Wage payment is one of the most important factors in the cost of production. So when the wage rate is lower the cost of production is also reduced which will ultimately lower the price of the products and thus will generate more sales and more revenue for the manufacturers.
• Low taxes - The Chinese Government has formulated a cheaper tax policy for the manufacturers. They even provide tax rebates to foreign manufacturers doing business in China. Most countries charge higher taxes to the businesses to generate more Government revenue especially western countries have higher tax rates. Such a lower and favorable tax policy is one of the reasons that manufacturers find it attractive to build their plants in China.
• Low compliance requirements - Most of the countries have policies regarding minimum wage rates, employment of child labor and business compliance requirements. But China has no such law regarding employment of child laborers or paying a certain minimum wage to the laborers. Therefore, the manufacturing units can pay as much as they want to the laborers and employ whoever they want. This is another reason for the low wage rate. In a country with such a high population and poverty, everyone seeks employment. Such factors help the manufacturing companies to cut down their cost of production by cutting down the wage payments.
• Favorable export-import policies - China has a very favorable policy regarding export with an exemption on Value Added Tax on export. Thus, if a manufacturer manufactures in China and then export the goods to the rest of the world, he does not require to pay VAT if the plant is located in China, which will again cut down the cost for the producers. For imports of consumer products, there is no requirement to pay taxes for such import in China which is also a favorable condition for the businesses.
• Currency value - The value of yuan has been kept low by the Chinese Government to attract more businesses in the country. By depressing a country's currency, it can enjoy the privilege of better income generation during exports. As the value of Chinese yuan is quite low compared to US dollars, while the manufacturers are manufacturing the goods in China they have to invest less amount and while exporting the final goods after manufacture, they can charge more to the outside world. Due to the lower exchange rate, it is very attractive for western investors to invest in China and make a better profit on the export of the manufactured goods to other countries.
• Supply chain management - China has formulated its supply chain management in such a way so that the producers do not have to worry about selling their products after the manufacture. First of all, the demand for goods and services is quite high in China due to the high population, and with better supply chain management, i.e., easy availability of wholesalers and retailers and other intermediaries, make it easier for the manufactures to dispose of their goods.
• Infrastructural facilities - During the last decades, China has developed its infrastructure to support business needs. The roads, bridges, and dams are quite developed in China which provides better transportation facilities for the transportation of manufactured goods and the price for transportation is also cheaper. With more businesses in China, the infrastructure is getting developed at a higher pace.

To conclude, China has all the facilities that a manufacturer wants. The main reason for the manufacturers to set-up their plants in China is the easy availability of cheap labor and the low currency value. Apart from that the infrastructural and transportation facilities with better supply chain management are also attracting the businesses. With a low compliance requirement, it is easier and faster to set-up a factory in China than in any other place. On top of that, the tax rebates that the country offer attracts a lot of investors who belong from high complaint jurisdiction. Although the other developing countries like India and Bangladesh are trying to attract investors from the other parts of the world by offering cheap labor and low currency value, they do not facilitate the required infrastructural facilities like China. The requirement of low compliance and favorable tax policies are helping the businesses to make a better profit at convenience. Thus, for all the reasons China is considered to be the best place for manufacturing plants and preferred by manufacturers from all parts of the world.