As a school student, I would prefer Chinese Products like fountain pens. There were two reasons for my choice: the prestige of using a foreign-made pen and the superb quality of these writing instruments. Moreover, the cost difference between an Indian-made pen and one from China wasn’t very significant in those days.
Nor is it now, too, despite so many years since I left school. I’m sure that somewhere in your life, you’ve also used or continue using China-made products. And indeed, you use them for the same two reasons- they’re cheap and are of superior quality. Perhaps these are the two reasons why Chinese products are also easy to sell.
Therefore, let’s examine some of the reasons why Chinese products are so cheap and easy to sell. In this article, I hope to shed some light on the success of Chinese products in the Indian market. Though Indian companies manufacture similar, superior goods, they’ve yet to meet the astounding success of their Chinese counterparts.
Reasons Why Chinese Products Are So Cheap
The second question, why Chinese products are easy to sell, can be found in the following paragraphs. Therefore, I will discuss why Chinese products are so cheap.
1. Mass Production of Chinese Products
China is spending heavily on the mechanization of all its industries. To add to this, mechanization requires a highly skilled and trained labor force. This makes it possible for Chinese companies to rapidly mass-produce any product. They’re not bogged down by a lack of technology or a workforce shortage in running their industries.
Furthermore, China mass-produces most of its goods for export rather than for domestic consumption. That’s because the export market is much larger than the domestic market. Therefore, China can offer superior quality products at much lower prices than those made in other countries.
2. Abundant Supply of Raw Materials
China ranks as the fourth-largest country in terms of area in the world. Therefore, it has abundant natural resources to support its vast industry. Additionally, China imports raw materials for its industries from countries as distant as Africa and South America.
This abundant supply of raw materials means Chinese industries can continue manufacturing products nonstop. And that’s precisely what they do. Most Chinese manufacturing units function around the clock. Their workers work in shifts to ensure sufficient production to meet domestic demand and maintain a surplus for exports.
And this surplus is precisely what China exports to other countries at highly competitive rates. Their industries need to clear their stocks of goods and continue producing more and more. Therefore, they sell these products at low profit margins but at high volume.
3. Technology Adoption
Decades ago, the Chinese industry was plagued by a lack of technology. They didn’t have modern machinery for mass production. All that has changed now, and China now makes its own manufacturing machinery and doesn’t need to rely on imports. As a result, setting up a manufacturing unit in China is very affordable for entrepreneurs.
This modern machinery enables China’s industries to mass-produce a wide range of products, from toys to computers and mobile phones, and helps them provide high-quality products at very economical prices. Technology is indeed one of the main drivers of China’s vast industrialization. China uses digital platforms, such as online shopping websites, to sell its products in large quantities to reduce costs.
4. Inexpensive Labor
China is the largest and most populous country on Earth. Therefore, it has a large workforce that’s necessary to drive its massive industrial infrastructure. Furthermore, labor rates in China are cheaper than in most countries.
That’s one of the main reasons why top Japanese and American companies, among others, set up manufacturing bases in China: they have abundant, cheap labor, superior production machinery, and other resources. Since labor costs are lower, Chinese industries can keep product prices low.
5. Incentives to Industries
China isn’t a signatory to the World Trade Organization’s treaties on stopping incentives and subsidies to its industries. As a result, the government provides attractive incentives for Chinese entrepreneurs to establish industries that produce goods for domestic and international markets.
These incentives are encouraging more and more entrepreneurs to set up manufacturing units in the country. Therefore, such companies produce high-quality products and sell them cheaply because many of their costs are offset by incentives from the Chinese government.
Cheap Rates
The Chinese currency- the Renminbi– is fully regulated by the Chinese government. The Chinese government keeps the Renminbi exchange rate low enough to make Chinese exports more attractive. Meaning, for a few US Dollars, you can buy much more Chinese stuff than in any other country.
And China also continues to monitor international currency rates to ensure that its Renminbi doesn’t gain so much value that Chinese exports become expensive. This is one of the reasons why importers in other countries find it economical to buy and sell Chinese products.
More Reasons Why Chinese Products Are Cheap
Then we have a few other reasons why Chinese goods are cheap. One of them is the excellent infrastructure of roads and logistics that China has developed over the years. This makes transportation of goods from manufacturing units to ports for exports very easy and fast.
China also does reverse engineering of foreign products. This means they study foreign goods and try to replicate the technology at a cheaper rate. This happens because WTO regulations do not bind China.
In Conclusion
Despite the negative fallout against China over allegations about the Covid-19 virus and pandemic, it’s worth noting that Chinese goods now play a significant role in our lives, whether it’s a humble fork and spoon in our house, or that pen we use at our offices, the smartphone that keeps us connected or even that modern laptop for work. The above factors make it very easy for China to sell its goods easily abroad.