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Domestic Market

The attractiveness of its domestic market provides China with tremendous bargaining power, a trump card that was occupied to Japan and South Korea before it. The lure of its domestic market enables China to require technology transfer as a condition for foreign investor entry, wringing unprecedented concessions. In the automotive industry, foreign firms such as General Motors agreed to found research and development centers at a scope never before contemplated in a developing market. Not only did these manufacturers agree to transfer technology that is perhaps close to their core capabilities, but they consented to do so in an environment with virtually no protection of intellectual property rights (IPR).

Enormous Human Resource Pool

China’s size also means a vast pool of human resources. The reservoir includes not only an infinite supply of menial laborers, but also a large and growing number of engineers, scientists, and skilled technicians, many of whom are employed in government-funded research and development centers or in the progressively more prominent technological centers established by foreign multinationals.

China is emerging as the most competitive manufacturing platform ever. Chief among its formidable assets is its cheap labor, from $120-a-month production workers to $2,000-a-month chip designers. Even in sophisticated electronics industries, where direct labor is less than 10% of costs, China’s low wages are reflected in the entire supply chain — components, office workers, cargo handling — you name it. (Engardio, 2004)


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