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Why chinese products are so cheaper


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Published in: Business, Technology

Why chinese products are so cheaper

  1. 1. 中国 中国 為什麼中國的產品更便 宜嗎?中国 中国 Why Chinese Products are so Cheap? 阿米特·喬希 (Amit Joshi)中国 (c) 中国
  2. 2. THE LABOUR COST IS CHEAP IN CHINACheap labour force is the main reason foreconomic products in China, you know,many people are competing ,so the factorycan employ a worker in a really low price.The vast and easy availability of unskilledworkforce is making uneducated Chineseworkers very cheap . (c)
  3. 3. The labor in China is so cheap. Some peoplework all day to get only 5 dollars. In contrast,U.S. workers get minimum wages which maybe 7-8 dollars per hour, and this is telling thatthe cost of producing the product is sodifferent. (c)
  4. 4. The average pay for a Chinese blue collarworker is around 20 thousand Yuan.The average for an American worker is around40 thousand USD.So, the Chinese worker only gets 2 thousandUSD. (c)
  5. 5. Economists often use the Cobb-Douglasfunction to estimate the influence of capitaland workforce on each other:income = Technology * (Capital)^0.5 * (workforce) ^0.5As the internet made technology availableeverywhere at any time, you can set it as 1. (c)
  6. 6. SELF RELIANTChina produce products itself and all the rawmaterial are not imported. (c)
  7. 7. MASS PRODUCTIVITYThe components going into production really are mass produced at an aggregate cost (c)
  8. 8. YUAN IS MANIPULATEDIt happens because the Yuan is manipulatedand pegged undervalued to the US dollar. Theprice quoted in US dollar will be cheaper thannormal. The manipulation has affected ondomestic price and wage level. It has been keptlower that it should have been. (c)
  9. 9. LOW QUALITY They manufacture goods which are cheap asopposed to expensive Western goods that make a killing in profit (c)
  10. 10. CHINESE COMMERCEChina, like the United States, is becoming anindispensable partner, wants to buy raw materials with novalue added and to export consumer goods. Chineseexports are one of the major factors of the outstandingeconomical growth. The reason for this success is therelatively easiness in which their products enter themarkets. Many Chinese emigrants when settling in a newcountry open stores or restaurants and start sellingChinese products and their way of living. This is in manycases the tip of the spear of their entrance in a specificmarket. (c)
  11. 11. It is not only this privileged access to the markets thatmakes it work, the products are much more cheaper thanthose produced locally even though the quality might insome cases be inferior. Nevertheless a great deal of theseprice advantages are blamed to the social dumping as thesocial conditions of the workers producing the goods inChina are inferior to those in the other countries,therefore making labor costs inferior. Their currency,which according to analysts is at an artificial low value,also helps making their goods more appealing. (c)
  12. 12. CHINESE EXPORTSAs seen before there was a great change in the products that Chinacurrently exports from agricultural and raw products to machines,transport equipment, and miscellaneous manufacturing goods, andtoday the most rapidly growing Chinese exports are middle-tech - andincreasingly high-tech - manufactured goods. But basic manufacturesand chemicals still account for the vast majority of exports. Chinaruns a huge and growing bilateral trade surplus with the UnitedStates, and the position of Japan has changed radically from being anet exporter to China in the 1980s and most of 1990s to being a netimporter today. China’s smaller East Asian industrial competitorssuch as Taiwan, Korea, and Singapore face fairly difficultreadjustment problems as they try to follow the path laid down byChina. Recently China replaced Japan and Mexico as the largestsingle source of U.S. imports of consumer electronic products andinformation technology hardware such as computers. (c)
  13. 13. IMPORTSAlso in the imports scenario there werechanges but they were in the opposite directionas Chinese imports of primary products andindustrial raw materials faced a suddenincrease. Basic manufactured products haveseen a significant downturn in demand asChinese industry started to replace that sort ofimports. Today China reports large importsurpluses with the ASEAN group and otherrich natural resources countries. (c)
  14. 14. T R A N S P O RTAT I O N S I T U AT I O N Currently, about a quarter of the world’s exports are Chinese, andChina wants this stuff carried in Chinese built and controlled ships. Thesame with oil. China imports over 50 percent of what it uses, most of it iscarried in Chinese tankers. As Chinese growth caught everyoneunexpected so were the transportation companies caught. It’s growth,demands more raw products to be imported and finished or semi-finishedproducts to be exported. The amount and speed in which this happenedresulted in a under capacity by mainly the shipping industry to cope withdemand. This because the location of both the raw materials and theexporting markets is such that shipping is normally the most appropriatemethod to dispatch the products. Therefore such a demand pressureresulted in a rise in the costs of transportation, not only through fuel costsincrease but mainly through an increase in power of shipping industries.As ships are of lengthier building and demand continues to grow it willtake a few years before the prices return to their previous range. (c)
  15. 15.  For a few years now China has encouraged its own shipping industryto build the needed boats. Not only the most common and simple cargocontainers but also those who demand more skillful techniques. They aredeveloping complex ship building know-how. In ten years, China hasgone from a minor ship builder, to the third largest on the planet. In 2004,Japanese shipyards got 35 % of new orders (by weight) for merchantships, South Korea 34 % and China 17 %. That’s 86 % of the world’sshipbuilding concentrated in East Asia. Chinese growth has beenspectacular, averaging 26 % a year over the last five years. China did thisnot just with cheap labor, but also by developing technical expertise.China can now build ships up to 300,000 tons. This effort is driven byChina’s growing export trade. China uses the profits, and technicalcapabilities, gained from all this activity, to build warships. In China,commercial and military ships are often built at the same facilities, oradjoining ones. With a growing merchant marine, China wants to build anavy powerful enough to protect it. (c)