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Chinese employees' salaries are expected to increase at a faster speed in the next five years at average 20% per year, which increases the cost burden of manufacturers. Together with the high cost of materials from last year, the profit margin is squeezed and the factories are looking for other places to meet with their labor-intensive demand with lower costs. In this way, some South Asian countries are expected to be good alternatives.
On the other hand, China used to be a large labor-intensive industry base and has accumulated large scales, which can also keep cost down based on the scale effect. And many worldwide companies have locations in or around China, removing them will also bring about cost, both physically and culturally. There are still convenient policies such as 24-hour customs clearance. Besides, Chinese government advocates manufacturing companies to go west with promotion policies, which may also be appealing to foreign companies. China has good infrastructures, more efficient flow of work and large consumer markets. By contrast, the newly made products in India often have quality problems, which may bar the foreigners to enter the South Asian market right now.
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