Why is China worlds Biggest Manufacturer -5 strong reasons!

Why is China worlds Biggest Manufacturer -5 strong reasons!

China we know is the world’s most populated nation. It relies solely on its labour force and as well utilizes its resources very well which makes it depend less on other countries as it produces its own products. Nigeria in particular is one of the highest consumers of Chinese products, that is why we see most of the products in Nigeria tagged “made in China”.

The economy of China flourishes as a manufacturing power house which makes some to think that omnipresence of the Chinese products is as a result of low production due to high man power but that is far from it.

China is now recognized as the “world’s biggest manufacturer” because of its low taxes, the solid business community, no regulatory compliance, and competitive currency practices. In this article, we are going to consider those factors that make China to be considered the world’s biggest manufacturer.

Lower Conformity

Western manufacturers are usually required to abide by certain rules and guidelines that govern compensation insurance, child labour, health and safety standards, involuntary labour; but China is immune to such laws and guidelines as Chinese industries have utilized child labour in manufacturing processes.

They have not made provisions to give insurance compensations to workers and they have long shift hours of work. Some of these industries or factories have even come up with a strategic plan to prevent their workers from quitting their jobs before the end of the year, by making it a matter of policy to pay their workers once a year.

Chinese factories have been able to reduce the cost on waste management by ignoring environmental laws governing waste management.

Competitive currency practices

China puts in great efforts to maintain the value of Yuan by constantly carrying out a routine check on the appreciation of their Yuan by purchasing USD and selling Yuan. It was because of this strategy adopted by China that it was accused of depressing the value of Yuan in order to give its exports a lead over similar goods produced by the United States.

In late 2005, yuan was estimated to be less in valued by 30% against dollars but in 2017 it appreciated by 8% against dollars. It later depreciated in 2018 after United States tariffs were imposed on Chinese goods reducing it to an exchange rate of 7.0205 per dollar by the Chinese central bank which is china’s lowest exchange rate since 2008.

Lower Wages

China has a population of 1.39billion which makes it the most populated nation in the world. Following the law of Supply and Demand, we can see that there is a high supply of labour while there is a low demand for low-wage workers which makes the wages to remain low.

Additionally, many of the Chinese residents were from rural and lower settlements until internal immigrants changed the situation of things by accepting to work many shifts for lower wages which made the wages of workers to stay low.

Fortunately, the situation is changing as statistics has shown that some factories in some cities in China have increased their wages per hour or month. In January 2020, the wages per hour or month is 20.3yuan($2.91) and 2,200yuan($315.5) respectively. In Shanghai, the wage per hour is 22yuan($3.16) while the wage per month is 2,480yuan ($355.70), this is based on the exchange rate of 1yuan to $0.14.56.

Business Ecosystem

Industrial production of goods solely relies on distributors, suppliers, consumers, component manufacturers, and government agencies who are involved directly or indirectly through cooperation during the process of production. China business ecosystem has experienced positive developments for the past three decades.

Let’s consider Shenzhen which shares the same boundary with Hong Kong, has developed to be the centre for the electronics industry.

A Taiwan-based producer of electronics by name Foxconn Technology Group also has manufacturers of parts as well as multiple suppliers at nearby locations ; even Apple Inc. takes advantage of the efficiencies in China’s supply chain to keep high margins and low costs.

Taxes and Duties

The export tax discount policy set up in 1985 by China as an avenue for boosting the competitiveness of its exports by getting rid of double taxation on exported goods. Exported goods were subject to zero percent value-added tax (VAT), meaning they enjoyed a VAT exemption policy.

Additionally, consumer products from China were free from any import taxes. These lower tax rates helped to keep low production costs, which enabled the country to attract investors and companies looking to produce low-cost goods.

The U.S. announced China-specific tariffs, targeting 818 imported Chinese products valued at $34 billion, in 2018. This was the first of many rounds of tariffs imposed by both countries, which resulted in $550 billion of U.S. tariffs applied to Chinese goods and $185 billion of Chinese tariffs applied to U.S. goods, in February 2020.

Over time its anticipated Americans will feel the impact of these tariffs in the form of an increased cost of goods, while the Chinese economy is expected to experience a slowdown.

Summary -China worlds Biggest Manufacturer

Many have wondered if China will ever lose its spot as the world’s biggest manufacturer, as other economies are emerging. One thing that keeps China in that spot, and also keep “Made in China” label on most of the products in other countries is its low labour costs but it will take more than cheap labor coast for other emerging economies to measure up with China’s. Hence, in the interim, China remains the “world’s biggest manufacturer” with its huge business ecosystem, low laver cost, as well as low production costs.

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