Saturday, December 24, 2016

MAYBE THINGS AREN'T SO BAD. A lot of people look at labor costs as a reason to move manufacturing out of the United States. Cao Dewang speaks of the advantages U.S.-based manufacturers have over China
The latest to enter the fray is Cao Dewang, one of China’s richest tycoons and a leading philanthropist. Over the past 10 days, his interview with a mainland newspaper in which he suggested the investment climate was more favourable in the US than in China has become the talk of the town.

Cao certainly speaks with authority. The founder of Fuyao Glass, the car glass manufacturer which supplies the world’s leading automakers from BMW to GM, has invested nearly US$1 billion in the United States including a US$600 million car glass manufacturer in Ohio.

In the interview, he said manufacturing costs in the US were much lower than in China because electricity cost half as much, natural gas a quarter, and transport even less (because US highways are free).

Although he said an American blue collar worker’s salary was at least eight times higher than that of a Chinese worker, he also said US corporate income tax was much more favourable than that of China. The official American corporate income tax rate is 35 per cent, rising to about 40 per cent when state taxes and other fees are added.

By comparison, China’s corporate income tax rate is 25 per cent but the overall tax burden is much higher due to the 17 per cent value added tax (VAT) and a litany of other taxes on vehicle use, urban construction, education and stamp duty.

By Cao’s estimates, a Chinese firm needs to pay 35 per cent more in taxes.

As far as manufacturing is concerned, according to Cao, everything is cheaper in America apart from manpower.

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