... areas in terms of production factors, preferential policies and accessibility to the market. Compared with the central and western areas, China's coastal region possesses such comparative advantages, which would make the multinationals take returns as much and soon as possible. Certainly, China's abundant resource of cheap labor is one main attraction to foreign investors. There is a popular illusion that this advantage is more prominent in the central and western areas, which is largely due to the fact that laborers in those areas earn much less money than their counterparts in the coastal areas. This supposition, however, has very little factual basis because labor costs do not refer to wage rates alone. Labor costs are determined by both the wage rate and labor productivity. Lower wage rates do not only mean lower labor costs if labor productivity is low as well. Similarly, a higher wage rate does not only ...

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