Question

Write a note to explain the effect of the following: The decision of MNCs to relocate production to Asian countries

Answer 1

The decision of MNCs to relocate production to Asian countries. (123 words)

• MNCs began to shift production operations to low-wage Asian countries, from the late 1970s.
• After the 1949 revolution in China, it was cut-off from the post-war world economy.
• After the collapse of Soviet Union and collapse of Soviet Style communism in Eastern Europe, and new economic policies of China; it brought many countries back into the fold of the world economy.
• Capital flows and world trade were stimulated due to the relocation of industries to low-wage countries.
• Foreign MNCs competing to capture world markets found China to be an attractive destination for investments, as the wages are very relatively low.
• China had a low cost structure economy, along with low wages. Hence many goods like toys, mobile phones, TV’s were manufactured in China.