How can other Asian countries counter the growing strength of China as a low-cost manufacturer.

According to the United Nation's recently released annual Trade and Development Report, labor- intensive manufacturing, including assembly operations in electronics in ASEAN countries and Mexico would face the biggest competition from China. Taking advantage of China's friendly policies, companies from all over the world have come in droves to set up their offices, R&D and manufacturing units in China. The century old textile and ceramics companies in Gifu in central Japan have shifted their bases to China. Intel recently announced a $100 mn investment in Shanghai to assemble Pentium 4 microprocessors. Dell moved its PC manufacturing facility from Kuala Lumpur to Xiamen. Astec Advanced Power Systems shifted one of its electronics plants to China from Penang, Malaysia. Acer, Taiwan's well-known PC manufacturer already has offices and manufacturing facilities in China. Evidently China is becoming a manufacturing superpower.

The neighboring countries of China such as countries in ASEAN region, Taiwan, South Korea and Japan, are alarmed by the rise of China's economic power. Kenichi Ohmae, a well-known Japanese consultant has predicted that China's rise would cause a `second Asian crisis', more severe than that of 1997-1998. Apart from the South-East Asian countries, the growing dependence on China could also be disastrous for the world economy. Supplies could be disrupted by internal strife, terrorism, social unrest or a natural disaster. US-based Harper's Magazine emphasized the vulnerability of the US economy to global supply lines that originate in China and which are designed for just-in-time delivery on which many US companies depend. Michael Marks, CEO of Flextronics, the world's largest contract manufacturer observes, "Too much concentration in China could lead to serious supply disruptions. It would be better if their manufacturing facilities were more geographically dispersed."

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