Should businesses have their products made in china?
China is the second largest exporter in the world. Chinese goods are cheap, so cheap they are causing a massive trade deficit for the USA with China. Various scandals have shown that products from China are not always safe as the manufacturers try to cut corners, should we really be importing them?
China provides manufactured goods at very low prices. China is the reason that the west has had very little inflation over the last decade, the prices of many good have been coming down as the cost of manufacturing them in china is so low. The cost of Chinese manufactures is typically 30-50% lower than the cost would be if the product was made in the west. This applies for a whole range of industries and increasingly even for more advanced manufactures such as semiconductors. Due to tough competition in china prices can go so low that they are essentially the cost of materials, squeezing out any profit for the manufacturer. [[Pete Engardio, Dexter Roberts and Brian Bremner, The China Price, Businessweek, 6th December 2004, http://www.businessweek.com/magazine/content/04_49/b3911401.htm%5D%5D
As China is getting richer so the cost of wages even in China rises forcing up costs. This means that it is now possible for other countries such as Vietnam to undercut in price on some manufactures.
Unlike many other developing countries China has very good infrastructure; roads, rail, ports and airports that means that factories can import materials or parts both from other areas of china or all over the world easily. Similarly deliveries from the factory will reliably get to their final destination. In a world where western countries have moved as close to a ‘just in time’ (not stockpiling goods in warehouses but providing for orders from the shops as they are needed) approach as they can they need reliability of supply. As an example of china’s ongoing infrastructure investment by 2050 china aims to more than double its road network from 1.7 million km to more than 4 million km, with the network of highways (motorways) also more than doubling from 35,000km to 75,000km.[[China maps out future road network, Xinhua, 22nd October 2002, http://china.org.cn/english/China/46456.htm%5D%5D
China has an immense appeal to manufacturers, both as an immense market and as an immense labour pool, China has for a long time been a place of opportunity for western companies. China while being exotic does not have many cultural factors that interfere with business such as prayer several times a day, or gestures such as bowing that need to be learnt. The Chinese try to be accommodating to business from the English world by often using English names.[[Muhammad Cohen, Outplaying your partner, Asia Times Online, 18th July 2009, http://www.atimes.com/atimes/China/KG18Ad02.html%5D%5D
China is the number 1 source of counterfeit products seized at US borders accounting for 81% of the total value of seized products. Some multinationals are losing up to 20% of revenue through such counterfeits.[[Gloria Gonzalez, Top risk in china? Intellectual property theft, Financial Week, 13th August 2007, http://www.financialweek.com/apps/pbcs.dll/article?AID=/20070813/FREE/70810013/1003/TOC%5D%5D It often occurs that the Chinese manufacturer takes on a contract at a price that will make them next to no profit because once they are making the product they have the relevant information to make it themselves. They then make the product and sell it at a higher price, so as to make a profit this time, to other countries or companies, particularly in the third world.[[Muhammad Cohen, Outplaying your partner, Asia Times Online, 18th July 2009, http://www.atimes.com/atimes/China/KG18Ad02.html%5D%5D
This could happen anywhere, it is simply a problem with outsourcing manufacturing in general as you have to hand over the designs, obviously if they can make the product the factory could make if for someone else. China has joined the WTO and has promised to crack down on such examples on intellectual theft.
There are numerous examples of Chinese manufacturers cutting corners, using inferior materials or having no quality control leading to products becoming dangerous. For example the toy company Mattel has been bitten more than once, having to have product recalls several times. Mattel had some of its products produced by Plastic Company, which sub-contracted the painting of miniature toy pets and small furniture pieces to Dong Lian Fa and Yip Sing. This was done with lead paint which is potentially poisonous.[[Mattel recalls more toys over lead paint fears, Times Online, 5th September 2007, http://www.timesonline.co.uk/tol/news/uk/article2390193.ece%5D%5D
Once an importer has a relationship with a supplier they are essentially locked in to the deal without any possibility of getting out. The cost and effort involved in finding another manufacturer far outweighs the cost of trying to sort things out with a current manufacturer even if they do produce shoddy products or demand more money. To change the importer would have to forgo getting any supplies for several months, so unless they have a large stockpile of the stock they would lose months of orders and would potentially lose the trust of their clients.[[ Muhammad Cohen, Outplaying your partner, Asia Times Online, 18th July 2009, http://www.atimes.com/atimes/China/KG18Ad02.html%5D%5D
As with above this same problem would occur if the products were manufactured elsewhere.
What do you think?