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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: RealMuLan who wrote (46341)2/12/2006 11:12:18 PM
From: mishedlo  Read Replies (1) of 116555
 
People on the FOOL saw your post here.
This is a reply from Harmy...

In order to secure maximum profit, many foreign companies require in the contract of using their own imported components (at inflated price), and then export at below market price, thus booked as loss on the ledger so they do not even pay any tax to the Chinese gov. By doing this, they transfer almost all the profit out of China without even leaving a trace.

This is transfer pricing and is illegal in most Western countries. It is not the lack of profit that is the important thing because much of the profit is retained by being vested in local wages, it is the tax which the Chinese government is missing out on. Sooner of later they will wake up to this practice and put a stop to it.

Regards
Harmy
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