Whenever we go to the market and if we observe more than 50% of products have label and tags on which it is written: “MADE IN CHINA”. Due to which many buyer and seller might wonder ‘though china is a communist country’ still it is the world’s biggest manufacturer. Many of the product of china is similar to the US and other countries still most of the people buy Chinese product because of its lower price.
During the time famine which was faced by the Chinese in 1958-1961, they lost their economy and crisis took place at that time but as the time passes they rebuild themselves and today they are Biggest Manufacturer of the world
China is known to be “the world’s factory” because of the following reasons:
- Low wages
During late 20 century, people were divided into 2 category urban and rural but as time changes they started internal migration many rural people came to the urban city for the work as we all know China is the most populated country in the world that’s why the supply of worker is more for working on low wages then the demand of worker this help china in production of goods as if the wages will be low then price of the product will be low.
Also, they don’t believe in the law of child labour but this law seems to be changing and also they have increased their minimum wages.
According to 2020 report, minimum hours cost in shanghai is 22 Yuan which is $3.16 her and if we consider of the month then it is 2480 Yuan which is around $355 and on the other hand in Shenzhen, the monthly wages is 2200 Yuan which is $315 and hourly it is considered as 20.3 Yuan ($2.91). Since the wages are low therefore the price of product decrease
And if we talk about the western country their main focus is on minimum wage value and child labour. This makes a difference in the price of the same kind of product.
- LOWER COMPLIANCE
In certain countries mainly western are very strict and concern about their rules and guidelines regarding child labour, minimum wage rates, labour laws etc. but at the same time if we talk about china they don’t have any such strict rule regarding child labour or worker’s laws most of the industries don’t follow any such rules.
Child labour in industries of china has long shifted and also they are not provided with any compensation insurance not only this many companies follow the policy to pay wages once a year to the workers. This is the way to keep the workers form quitting before the year ends.
Nowadays workers are standing for their rights and government are now quite concerned about workers rights however, slowly and gradually these laws are taking place in industries regarding child labour, environmental protection and minimum wages.
- BUSINESS ENVIRONMENT
China is involved in trading from many years during AD 1371-1433 china exchange goods; culture and religion with other countries like South Asia and the Middle East through the silk route
After that, as time passes on of the most famous person from Ming Dynasty called captain Zheng took 7 trips to establish trading contact with countries like- Africa, India, Arabia and South East Asia through the Sea route. So, it is quite clear from this that China has a large history of trading with other countries and for this, they need network supplier, customer, component manufacturer, distributor, government agencies. This is good for the business and china has all such link which helps them to grow their work worldwide.
- TAX AND DUTIES
In 1985 china came up the policy to rebate the export tax and also they abolish the system of double tax on export goods which means zero% of VAT (value-added tax) which means they enjoyed the rebate policy and VAT exemption also this help to lower down the price of their goods this policy also attract the investor and companies produce low-cost goods.
Most of the time China is a summons for artificially depreciating the value of Yuan which provide them to export similar kinds of goods produced by their competitor country U.S.
China always takes care of rising in Yuan they buy the dollar and sell Yuan.
In late 2005 according to one report, the value of Yuan was 30% against the dollar after that in 2017 the value raises to 8% against the dollar
Although in 2018 trend got to change and Yuan got depreciate against Dollar, in the beginning, the US adds the tariffs to china goods but then on 8th August 2019 central bank of china lower the Yuan to 7.0205 per Dollar this allow china to export their good with a lower price of the product but also this results in Trade war between China and US.
With the help of cheap labour and less compliance and business environment help china to become “largest manufacturer of the world” but also at the same time artificially depreciating the value of Yuan result in a trade war between both US and China because of the lower price we able to see most of the product in the market with the label ‘Made In China.’