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MANUFACTURING EMPLOYMENT AND COMPENSATION IN CHINA - page 56 / 106

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And Mr. Xie [Andy Xie, Chief Economist for Asia-Pacific at Morgan Stanley Dean Witter] estimates that in China today, about 50 million people can be generally considered middle class or on the way there very soon. 171

China’s emerging middle class, people with net income of at least $3,000 a year, numbers nearly 100 million and is growing about 20 percent yearly. 172

…China’s swelling middle class (the 120 million who now have disposable income of up to $8,000 per year, a group that could, according to Morgan Stanley, grow to nearly half a billion by 2010)… 173

Consumers of luxury products now account for 13% of the total population in China and are continuing to increase. 174

China now has high penetration rates for a wide range of consumer goods—that is, today many more Chinese consumers buy many more goods. There are color television sets in almost every urban home, refrigerators and washing machines in more than four out of five, videodisc players and air conditioners in half of them, microwave ovens in almost a third, and computers in one out of five…Close to 90 percent of urban Chinese now own a home. 175

Because of its huge consumer base, China is already the world’s biggest market for television sets, refrigerators, and mobile phones, and China ranks third after the U.S. and Japan in sales of personal computers.176 No matter how China’s luxury class or middle class consumer base is defined or calculated, it is clear that the growing domestic market is a factor drawing manufacturers to China. Indeed, multinational corporations from the most developed countries and economic blocs—-the U.S., Western Europe, and Japan—- aim their foreign direct investment (FDI) into China primarily at capital-intensive, technology-intensive, and skill-intensive products and services aimed at China’s domestic market, in contrast to the FDI from Hong Kong, Taiwan, Singapore, and South Korea into China, which is concentrated on labor-intensive, relatively low-technology manufactured goods to be exported to the international developed country market.177

Convenient logistics in coastal regions of China

In certain coastal regions of China, especially the Pearl River Delta region of Guangdong Province near Hong Kong and Macao, the Yangtze River Delta region including Shanghai and Zhejiang and southern Jiangsu Provinces, the Fujian Province coastal areas across from Taiwan, the Beijing-Tianjin region, and other coastal cities including Qingdao and Dalian, the local infrastructure supports comparatively low-cost and efficient manufacturing production. Huge networks of component suppliers have c o n c e n t r a t e d i n t h e s e p l a c e s , p r o v i d i n g m a n u f a c t u r e r s w i t h m a n y c h o i c e s f o r b a s i c p a r t s and with the ability to pit vendors against one another.178 “The critical mass of factories,

subcontractors, and specialized vendors has created a manufacturing environment with which few can compete.”179 Transportation and telecommunications networks are adequate in these areas. Improving infrastructure has been an important factor bringing

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