Goodbye, SHanghai---Newsweek

“Goodbye, Shanghai” Newsweek
http://www.newsweek.com/id/130657/output/print

Article Review:
The cheap labors, cheap raw materials and unconsciousness of human rights in China are the most attractive points for foreign investors. These three factors together have greatly reduced the cost for production and have successfully attracted foreign companies to open up factories in China. The foreign investment has served as an incentive for local firms to compete with them and driven China’s economy to grow at an exponential rate. However, China’s economic success was somehow based on exploitation of labors and devastation of environment. These hasty methods to economic success, especially the issue regarding labor’s human rights, have caused a lot of international controversy. In order to alleviate international pressure, China has implemented several laws addressing these issues (e.g. new labor rules, environmental regulations). These new restrictions definitely have much negative impact on foreign investment as they have greatly increased the cost of production. Since profit=revenue-cost, as cost rises while revenue keeps unchanged, the profit earned by a firm decreases. In that sense, China is no more a lucrative market for foreign investors. In comparison, Vietnam, India, Thailand and Indonesia are becoming more favorable choices for investments due to the low cost for production in those countries. Hence, it is not a wonder that more and more foreign firms are leaving China for better develepment.


Tianning