Why are Chinese Products so Cheap and Easy to Sell?

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As a school student, I would prefer Chinese fountain pens. There were two reasons for my choice: one was the prestige involved in using a foreign-made pen, and the other was 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’ve 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 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.

Table of Contents

Reasons Why Chinese Products Are So Cheap

The second question, why Chinese products are easy to sell, can be found in the following paras. Therefore, I will proceed to write about 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 is a highly skilled and trained labor force. This makes it possible for Chinese companies to mass produce any product rapidly. They’re not bogged down by the lack of technology or workforce shortage to run their industries. 

Furthermore, China mass produces most of its products for exports instead of internal consumption. That’s because the export market is huge compared to the internal 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 area-wise 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 that Chinese industries can continue to manufacture products non-stop. And that’s precisely what they do. Most Chinese manufacturing units function round the clock. Their workers work in shifts to ensure enough production to meet the domestic demand and surplus for exports. 

And this surplus is precisely what China exports to other countries at highly competitive rates. Their industries need to clear off their stocks of goods and continue producing more and more. Therefore, they sell these products at low-profit margins but in high volumes.

3. Technology Adoption

Some decades ago, the Chinese industry was plagued by a lack of technology. They didn’t have modern machinery for the mass production of goods. All that has changed now, and China makes its manufacturing machinery too 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 makes it possible for China’s industries to mass-produce different products from toys to computers and mobile phones and helps them provide excellent quality stuff at very economical prices. Technology is indeed one of the main drivers of China’s vast industrialization.

4. Inexpensive Labor

China is the single largest, most populated country on Earth. Therefore, it has much 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 many cheap human resources along with superior production machinery and other resources. Since labor costs are more affordable and Chinese industries can afford to keep the prices of their products 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 benefits to Chinese entrepreneurs to set up industries to 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 quality products and sell them cheap because lots of their costs are buffered by incentives from the Chinese government.

Renminbi Rates

The Chinese currency- the Renminbi– is fully regulated by the Chinese government. The Chinese government keeps the exchange rates of the Renminbi low enough to make exports from China more attractive. Meaning, for a few US Dollars, you can buy much Chinese stuff compared to any other country.

And China also continues to monitor international currency rates to ensure that its Renminbi doesn’t gain so much value as to make exports from China 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.

Source@techsaa: Read more at: Technology Week Blog