The Effects of China’s Economic Growth on Domestic and International Supply Chains: Assessing the Risks

Abstract

The purpose of this study is to assess the positive and negative effects of China’s economic growth on international supply chains. Various methods, including cause-and-effect diagrams, Pareto analysis, and total cost modeling are used to assess China’s business environment. The study identifies the financial benefits of making China a strategic partner in any business’s supply chain, and recognizes when there is no competitive advantage. Extending a supply chain into China often provides companies with many cost-saving benefits, which is primarily driven by low labor rates, but companies must assess the major risks and hidden costs as they relate to their decision making. Assessing whether to manufacture Milwaukee Electric’s drills in China or in the United States illustrates the application of the proposed total supply chain cost decision model. China has become such a dominant force in the global economy that businesses may be at risk if they don’t engage with it in some way, but extending into China should not be viewed as a decision that will automatically result in a positive outcome for businesses.