strategySome Chinese companies like Xiaomi produce cheap phone, and values billions just in several years. From entrepreneurship point of view, those are great successions.
Assuming that profit / investment is high, so why don’t American or Western companies jump into that field? Why most companies like that are only Chinese companies? What is wrong here?
Is that Western investors don’t want to make money by producing cheap goods? Oh this question is just for fun because I don’t think anyone hates money that much.
The real question is what prevents Western companies to go that way of Chinese companies? For example, starting a company on Chinese mainland to produce cheap goods
Assuming that profit / investment is high, so why don’t American or Western companies jump into that field?
Your assumption is dubious. Profit / investment is not high. Producing goods is capital intensive - even in China. And productivity counts. So much so, in fact, that it’s about as cheap to make goods in the US than it is to make them in China.
Things that China has going for it include proximity to suppliers (if you need more screws the factory is down the street) and a market which, while nominally a billion consumer strong, is actually smaller when you strip out Chinese who, well, don’t actually consume or then only the cheapest stuff they can find.
Things that China has going against it, by contrast, include a rather corrupt administration, not so accommodating laws for foreign investors, rising labor costs that can break companies with razor thin margins, and a financial bubble that will make Japan’s 1980s bubble look tiny.
Plus, there’s then more to it than merely investing. You need to keep things on a tight leash in much the same way that a grocery store owner would want to keep a close eye on their cash register. That’s cool and all if you like living there. Less so if you don’t.
On a more strategic level, manufacturing in-house or at all is not always desirable. Think Benetton or IT companies.
IP considerations kick in as well. Apple is producing Mac Pro units in the US for good reasons: if your capital investments and automation are such that your labor costs become irrelevant, why risk leaking your know-how to would be Xiamis?
As to trends, you may have missed the ongoing manufacturing renaissance in the West. 3d printing is about to turn everything upside down.
Your other assumption is also dubious. Many Western companies did go to China and other cheap countries. If you look back, it was an expensive mistake for a great many of them. Some died or are still licking their wounds because of it. Some will eventually die because of it - they lost key strategic know-how in the process. The main company I can name that succeeded is Apple, and they did so by outsourcing with tight control on their supply chain instead of by investing directly.
The Chinese government does not want foreign companies to settle in China. They want them to buy from Chinese companies instead. That's why the laws and regulations are stacked against foreigners trying to open businesses in China.
Remember that China is still far away from being a free-market democracy where anyone can create a company and do business as they please. It's still a socialist one-party dictatorship.
As a foreigner you will have to register a WFOE (Wholly Foreign-Owned Enterprise) which is not just a bureaucratic nightmare (it has to be approved by the Chinese government and they can reject it just because they feel your business plan is bad for their economical interests) but also puts lots of restrictions on what you can do and limits your legal protection. These advantages don't apply to "true" Chinese companies.
For more information check the article series How To Start A Business In China on China Law Blog.
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