Of course the population of China is a factor. This is a given. American blue chips took the philosophy of “be international or fail.”
But it is much deeper than population. American Companies are in China for three primary reasons:
1) Because that’s where they have a significant customer presence or where they expect to have one. Examples would be GE for medical equipment -MRI, CT equip, auto companies etc. They are there because of their China customer base. They are there and need to be serviced there.
2) Companies that have labor intensive products and take advantage of the low cost labor base in China- not only direct labor but engineering talent etc due to the highly educated work force In Shanghai and other mega cities. Note: Those companies in category 1 above tend to take heat for using low costs labor which typically isn’t the reason they are there - it’s where their customer base is located.
3) Companies that need to be located in China as that’s where their supply chain is located. This happened in large part as a result of American companies putting raw material suppliers in business in China - to support their operations.
So just saying companies are located in China isn’t good enough. The motivations for being there are vastly different.
Many American companies are in a tough position should they want to extract themselves from China. They could easily open a factory in America, they could staff a factory but the raw material in large part still needs to come from China because America created the China infrastructure for their products - and not ones in America.
The election of Donald Trump could change this dynamic. But it won’t happen quickly, it will be expensive but it could make us America stronger and less dependent upon foreign countries.
Investors Hangout: https://investorshangout.com/post/view?id=672...z8r1YyxnyE
But it is much deeper than population. American Companies are in China for three primary reasons:
1) Because that’s where they have a significant customer presence or where they expect to have one. Examples would be GE for medical equipment -MRI, CT equip, auto companies etc. They are there because of their China customer base. They are there and need to be serviced there.
2) Companies that have labor intensive products and take advantage of the low cost labor base in China- not only direct labor but engineering talent etc due to the highly educated work force In Shanghai and other mega cities. Note: Those companies in category 1 above tend to take heat for using low costs labor which typically isn’t the reason they are there - it’s where their customer base is located.
3) Companies that need to be located in China as that’s where their supply chain is located. This happened in large part as a result of American companies putting raw material suppliers in business in China - to support their operations.
So just saying companies are located in China isn’t good enough. The motivations for being there are vastly different.
Many American companies are in a tough position should they want to extract themselves from China. They could easily open a factory in America, they could staff a factory but the raw material in large part still needs to come from China because America created the China infrastructure for their products - and not ones in America.
The election of Donald Trump could change this dynamic. But it won’t happen quickly, it will be expensive but it could make us America stronger and less dependent upon foreign countries.
Quote:The list is long and the question is why the Chinese market is an attraction for American Companies to expand their business.
Investors Hangout: https://investorshangout.com/post/view?id=672...z8r1YyxnyE
