The past decade has seen China emerge as a manufacturing powerhouse with its goods circulating at every corner of the world. It’s worth stating that Chinese products have gained popularity on the global market because they’re seen to be cheaper and affordable. When you walk in every market center across the world, you’ll never fail to find a product with ‘made in China’ label. The question of why Chinese products are cheap has been ringing in the minds of everybody. It must be remembered that the government of China should get all the credit for taking the country on a path of economic recovery. Most importantly, Beijing was steadfast in making policy that will bring economic reforms in a country with the largest population worldwide.
A point always overlooked when analyzing China’s economic thrives is the devaluation of Yuan. Analysts believe that reducing the value of its currency has had a direct effect on its exports. This has worked well for exporters that are reaping profit for manipulation. Look here, if a dollar is going at 6 Yuan, it means that for every export that Chinese traders will be making they will be receiving 6 Yuan per dollar. Now, assuming that the Chinese government will devalue its currency in a ratio of 1:8, the amount of profit that each trader will earn will increase to 8 Yuan for every dollar.
Another important point to note is that China, unlike other countries, has always had a plan to take its product to the global market. For this reason, they embarked on mass production of goods which has a direct effect on the prices. While analyzing key aspects of the Chinese market, it was discovered that dumping of goods is a factor that has affected the prices of Chinese goods. Basically, excess supply of goods on the market comes with a corresponding decline in general cost of goods.
Not to mention that Beijing has pumped billions of dollars in its infrastructure sector that has improved critical areas, including highways, roads, rail network, ports together with others. This has helped industries in moving both their raw materials and finished products easily. In addition, improvement in transport has helped in reducing cost of production that might have stretched the prices of finished commodities. Likewise, the presence of stable power generation seemed to have worked well for the Chinese industries. With low cost of production in China, its manufacturing sector has flourished producing more goods that have flooded various markets worldwide.
Being the most populated nation worldwide, it has all expertise that’s needed in increasing production. Although the nation has witnessed a constant increase in the cost of wages in the past, its payment rates are still too low when compared to other developed nations. Even though it has helped in lowering the cost of production, it contravenes the labor laws that advocates for fair payment. On the positive side, Beijing is ranked first in skill development and labor productivity.
Generally speaking, the country has managed to reduce prices of their products due to low labor cost. It must be noted that a hardworking Chinese labor gets less than one dollar per hour which can translate to 80 USD per week since they supposed to work for 10 hours per day. To make matters worse, they are expected to work seven days per week. The rates are slightly higher around Beijing that pays 4 USD per hour.
Identically, the Chinese government has not put measures that will see protection of intellectual property. This has promoted an art of duplication of products that have flooded several markets. Credible evidence shows that this nation has mastered a tendency of replicating popular products on the continent. It’s important to state that technology is the sector that’s facing these challenges.
More than two years ago, the United States entered into agreement with the Chinese government that saw the reduction of tariffs that targeted more than 800 Chinese goods. This has also helped to make the Chinese goods cheaper. Comparatively, the country values capacity building and this has helped in improving workers’ expertise in different fields. Correspondingly, Beijing has the lowest tax to business enterprises worldwide. While the United States supports a corporate tax of nearly 35 percent, China puts its corporate tax at 25 percent reducing the cost of starting.