Higher wages are driving up production costs in China, leading to speculation that companies there are beginning to lose one of their biggest competitive edges. But a McKinsey survey1 of executives around the world shows that, overwhelmingly, they still see low-cost production as the primary competitive advantage of Chinese companies and expect little change on that front in the next three years.
Four out of five of the executives also say that they expect to see rising competition from Chinese companies in the next three years. Executives at companies based in China2 come to a similar conclusion: in a parallel survey, they report that they expect strong growth in revenues from outside the country and aspire to be global competitors in their industries. The primary impediment by far is a lack of managerial talent, respondents say—a finding that supports McKinsey’s experience in the field.
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