China has been frequently referred to as “the world’s factory”, but why?
The Beijing government and the citizens of China are extremely proud of their ever growing economy. One of the reasons for the boom in China's economic growth can be attributed to the rising rates of Chinese exports making their way around the globe. It would seem that every country in the world is now a trading partner with China. Continue reading to see why China is now known as the “World's Factory”.
1. World wide trade surplus
Recent reports released by economic trade associations show that in 2018, China exported $2.26 trillion dollars worth of goods, and imported $1.84 trillion dollars into the country. That means the country has a world wide trade surplus of $42 billion dollars. Based on these figures, it is easy to see why China is considered the “world’s factory”. In fact, most of China’s imports are in the form of raw materials and crude oils. Beijing’s focus on becoming a nation of producers rather than consumers has propelled wholesale Chinese goods to almost every corner of the globe.
2. Chinese manufacturers are selling directly on Amazon and eBay
One of the reasons for the boom in Chinese goods around the world is definitely the fact that Chinese manufacturers are now selling directly on Amazon and eBay. These e-commerce websites provide no restrictions for factories selling directly to the public. Therefore, Chinese manufacturers have taken full advantage of the opportunity to enroll in programs like the Amazon FBA (Fuffilment By Amazon), the eBay sellers program and other platforms such as Wish. Being a large manufacturer gives these factories the ability to undercut the competition and corner the market on price. This is definitely an advantage for Chinese manufacturers and one reason why Chinese goods are now seen everywhere.
3. Constant innovation of new products
As a nation of innovators, Chinese companies are constantly developing the latest and greatest of technological advancements. This means that they always have a new product ready to debut on the marketplace. The constant innovation of Chinese manufacturers has led to the development of products that span from the medical industry to the construction industry and everything in between. With so much manpower, many find it hard to compete with China’s ambition and innovative strategies.
4. Range of products from low quality to luxury
In the beginning, Chinese manufacturers were recognized for creating mass amounts of low quality, cheap products. However, in today’s global economy, Chinese manufacturers also produce luxury items for the rich and wealthy. Items like fine jewelry, high-quality accessories and high thread count cotton goods are only a few of the luxury items Chinese manufacturers produce. A quick search on a website like made-in-china.com will reveal many luxury items available for purchase at wholesale prices in China.
5. Ability to reverse engineer western goods
Chinese engineering has come along way. China is quick to reverse engineer more affordable and even more efficient versions of new inventions that unveil in the west. This ability has allowed China to leverage the power of inventions from around the world and rebrand them under a separate name. In today’s world, there are many physical or digital products that Chinese manufacturers have already and are continuing to reverse engineer.
6. Highly technological nation
The country of China is known for being a highly technological nation that is involved in many research and development projects around the world. Chinese university students currently study in every corner of the globe and learn from the very best engineers, scientists and professors available. This fact has made China one of the most technological nations on the planet. Using their technological acumen to produce goods that the rest of the world needs is one of the main reasons why the Chinese economy is booming.
7. Chinese products are easily accessible for new businesses
Another reason why Chinese products are so prevalent is because they are easily accessible for small businesses. The low cost of production and incredible shipping times has allowed Chinese products to be very affordable for new companies looking to retail or re-branding Chinese goods. Take a look at a simple item like this medical device. It’s low cost of production and low shipping costs means that this device has the potential to travel to clinics around.
8. Emphasis on commercial products
Manufacturing consumer goods is one thing. However, China has also branched out into manufacturing commercial products for organizations. This includes items like industrial refrigerators, air-conditioning units and even factory machinery. You would be surprised what types of commercial equipment you can buy from chinese manufacturers. Take for example prefabricated buildings. You can even purchase an entire prefabricated home directly from a Chinese manufacturer. The ability of the Chinese to manufacture commercial products in addition to consumer goods makes them a double threat in the export business.
9. Large Chinese manufacturers crush the competition
Large Chinese manufacturers have the ability to outperform their competition. Smaller factories around the world with less capability will eventually turn to larger Chinese manufacturers to produce their goods. This means that China not only produces and manufactures consumer goods for China, but other companies also outsource their manufacturing jobs to China. In turn, China has access to the world's intellectual property. Competition from other emerging markets like India and Indonesia don’t stand a chance to compete against the economic powerhouse that China has become.
10. Other countries can’t compete with low Chinese wages
A large country like China has such manufacturing power because of their low factory wages that other countries cannot compete with. Even with the low wages factories pay their workers, employees are still able to provide for themselves and live a fully functional life. This means that the Chinese society has a virtually unlimited supply of happy, dedicated, hard-working, individuals ready to produce products for the world to use. With a system like this, it is no wonder why other countries cannot compete.
11. The Chinese Business Ecosystem Is Immensely Interconnected
The interconnectedness of the Chinese business ecosystem is incredibly efficient. A typical business ecosystem contains various industries all work together, producing independent products that combine to create other more elaborate goods. For example the Chinese auto industry is comprised of thousands of individually-operated factories that produce everything from auto parts, tires, glass and many other materials that the car manufacturer will then purchase. This type of business ecosystem is absolutely essential for any nation trying to become a powerhouse exporter around the world.
12. Lower levels of manufacturing compliance
Chinese manufacturers have been able to develop products with a lower level of government compliance. When compared to western nations, this means they don’t have to upgrade their factories to the latest safety standards of today. Nor do they have to contend with some of the red tape that other western factories must overcome. These two reasons combined ensure that Chinese manufacturers enjoy a virtually untouched operation. Not having to worry about legal compliance means that Chinese manufacturers have a lower cost per product and can produce items at a faster rate compared to other factories around the world. Even with the lower level of legal compliance regulations, Chinese manufacturers are still allowed to sell their products in most countries. Some governments have taken steps to regulate items like children’s toys and food products. However, for the most part, Chinese consumer electronics and other goods enjoy free access around the globe.
13. Chinese exports are exempt from import taxes
Through intense negotiation and trade deals, the Beijing government has been able to virtually eliminate import taxes on most of their products. Chinese goods like auto parts, household supplies and other daily use consumer items are allowed entry into countries like the United States and Europe without any port duties or taxes. Over the past decade, this has created an advantage for Chinese manufacturers. However in return, the Chinese government gives other benefits to US companies and European companies for the right to export duty-free.
14. Subsidized currency gives Chinese exports and advantage over other products
Reports have suggested that the Chinese currency is undervalued and in fact gives their exports an advantage over other products. Undervaluing their currency has the effect of lowering the cost of overall shipments to trade partners and underestimates the actual value of Chinese wholesale merchandise exported around the world. This serves to give Chinese manufacturers the ability of exporting more by circumventing trade limits. It is a very smart tactic that has allowed Chinese exports to virtually touch every piece of land on the planet.
15. Chinese tourists bring their products with them
As the Chinese economy booms, so does the number of Chinese citizens with discretionary income for travel. When Chinese tourists make their way around the world, they bring their products with them. Introducing new Chinese items into different economies happens in two ways. The first way happens when other cultures are introduced to the Chinese culture through Chinese tourism, and have a chance to become acclimated to Chinese goods. The second way happens when a local economy of Chinese merchandise is advertised directly towards Chinese tourists. Take for example a country like Malaysia. Certain coastal towns in Malaysia are experiencing a boom of Chinese tourists unlike anything that has been seen in the past. Therefore, many Chinese vendors have moved to Malaysia just to service the influx of Chinese tourists. As a result, we see that as Chinese tourists expand around the world, so will merchants and shopkeepers to support their specific Chinese taste for food and merchandise.
16. Emphasis on non branded goods
One of the most powerful reasons why China is considered the “factory of the world” is due to the fact that manufacturers focus on producing non-branded goods. This gives other retailers the ability to brand items as their own. Many sellers on Amazon and eBay purchase non-branded items from Chinese manufacturers and apply their own labels, design and packaging. This branding or white labeling of products has become a specialty of retailers all around the world. However, the Chinese also have the power to create their own brands to compete with online retailers. At any moment, a Chinese factory can brand its items, and sell for a cheaper price on the open market. This is actually what some Chinese manufacturers do to compete with other sellers on Amazon and eBay.
17. China’s recreation of the Silk Road
In the past, European merchants were credited with traveling the Silk Road from Europe to China. However, today China is turning the tables by developing a new expanded road from Beijing all the way into the heart of Europe. This expansion of the Silk Road is creating Chinese jobs from Beijing to remote Iraqi villages, and even into developed countries like Turkey. All along the way, Chinese companies are bringing Chinese products to build the highway and even imported Chinese labor to do the work. This incredible expansion is serving to further advance the Chinese global economy that has tentacles in every country on the planet. For Beijing, this can be considered a great accomplishment that the world will never forget. Once the new expanded Silk Road is complete, the cost of exporting Chinese goods will further drop even cheaper. We can then expect more Chinese manufacturers to ship their merchandise to some of the most remote places in The Middle East.
18. “Made In China 2025” initiative
The Chinese government has pledged to become a world leader in high-tech electronics by the year 2025. This initiative is causing a statewide technological boom sponsored by the federal Chinese government. Beijing is subsidizing tech companies as they attempt to acquire intellectual property patents that surpass the tech developments of western countries. This state-led initiative will help add yet another notch of exports under the belt of the “World’s Factory”.
All of the above reasons combined contribute to the global dominance of wholesale Chinese merchandise. Don’t forget that when you are in need of a special prototype, or bulk supplies, there is only one logical place to look, CHINA!
