The following package of sweeteners is central to the production of 500,000 iPhones a day in Zhengzhou : (1) Built/financed construction of the huge manufacturing complex at a cost of $600 million; (2) Spent $1 billion to build housing for hundreds of thousands of workers; (3) Provided a discount that reduces the cost of power by 5% annually; (4) Built infrastructure, including power generators and a 24-km pipeline; (5) Eliminated corporate and VAT taxes for 5 years, then halved the rate for the next 5 years; (6) Granted a $250 million loan; (7) Helped recruit/train workers, and paid subsidies for new hires; (8) Lowered the amount of social insurance by $100 million a year; (9) Offered bonuses tied to the growth of exports; and (10) Paid out a subsidy to help defray the cost of shipping goods.
American officials have long decried China’s support of its state-owned companies, calling the subsidies an unfair competitive advantage in a global marketplace. But the Zhengzhou operation shows the extent of China’s effort to entice overseas multinationals to set up production facilities in the country.
Apple, like many multinationals, depends on a vast global supply chain that includes multiple companies and countries, each with its own expertise and advantages — a complexity often lost in the political debate over trade. The iPhone is a collection of intricate parts that are made around the world and assembled in China, spurring employment in many countries, including 2 million jobs in the U.S.
Classroom discussion questions:
- What incentives were recently offered Carrier to stay in Indiana?
- Would the U.S. offer packages similar to China’s to attract manufacturers?