Relocation of industry to low wage countries stimulated world trade and capital flows due to following reasons:
(i) In the last two decades the world economic geography has been transformed as countries like China, India and Brazil have undergone rapid economic transformations.
(ii) Wages were relatively low in these countries. Thus, these became attractive destination for investment by foreign MNCs competing to capture world markets. The low cost structure of economy of China and low wages specially attracted them.
(iii) With failure of Soviet style communism and collapse of Soviet Union, many Eastern European countries were also integrated in the world economy.