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Is China's Sucess Hurting Future Prospects?
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January 26, 2007
Impressive growth in foreign investment has caused wages and land value to skyrocket around previously attractive swaths of Southeastern China, causing companies to reconsider planned investment projects in the area for less costly locations in Southeast Asian competitor countries like Malasia and Thailand. Intel recently comitted to a one billion dollar manufacturing plant in Vietnam, citing more attractive labor costs as one of the main reasons for choosing the location. Thailand and Malaysia are also enjoying increasing foreign investment in plant and equipment, at the likely expense of China. As the areas close to Shanghai, preferred to those inland due to port access and lack of enthusiasm of foreign contractors to live in less developed areas, become prohibitively expensive relative to equivalent locations. Despite these rising costs, China still presents a more attractive environment for many investors. Those who have chosen to build new plants in other countries, for the most part, already have sites in China. This is called a "China-plus-one" strategy, and is cited by many to simply be a diversification strategy, with no indication of a dire outlook for the future of FDI in China.
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