G.F. 326
CONFIDENTIAL #2
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47.
(ii) Operational problems
inadequate infrastructual facilities
Energy and transport are the two weakest links in the Chinese economy. Although joint ventures are
usually given preferential treatment as regards
electricity supply, in some places they still have to
tolerate regular power failures. The absence of an
efficient transport network is another problem. Delays in
the arrival of imported raw materials and in the delivery
of finished products are common. The telecommunications network is also poor. IDD service is available in only
some cities, such as Tianjin, Guangzhou, Zhuhai, Shenzhen,
Fuzhou, Xiamen and Changzhou (it is not universally available in Beijing and Shanghai at present). In some localities, even the supply of good quality water is
inadequate.
48.
production cost is not that low
Many investors complain that production costs in
China are not as low as they at first appear to be. For example, although wage rates are set at a relatively low level, joint ventures are required to pay to the local government various forms of subsidies and benefits ranging from transportation and food allowances to housing
allowance and medical insurance. Besides, in certain
industries, considerable costs are involved in training
the workers. When these extra costs are included, and the
low labour productivity is taken into account, labour
costs are not low relative to the value of output.
49.
Production costs may be raised further because
of the need to employ expatriates in certain jobs.
In
China, there is a serious shortage of accountants,
lawyers, and managerial staff. Often, additional
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