Chinese products have long been seen as cost-effective to manufacture, and this belief was widespread until 20 years ago. Manufacturing in China promised low prices and competitive pricing – however, labor and land costs have skyrocketed recently despite all of the benefits that come from manufacturing here. Factory worker hourly wages have seen a drastic increase recently – now at an average of CNY 27 per hour.
The reality is that, if you’re importing from China, you’re going to have to pay a lot more than you probably think.
A few years ago, it was still possible to find good deals on manufacturing in China. Now, however, the market has changed dramatically. Here are some of the reasons why:
1) Currency fluctuations
The Chinese Yuan (RMB) has been steadily losing value against the US Dollar for years now. If you haven’t been paying attention, this means that your products will cost more and more money as time goes on. Since 2015, the Chinese yuan (also known as the Renminbi or RMB) has lost 7% of its value against the US dollar. This devaluation of the currency comes amid a period of global economic uncertainty and volatility. The decline in value is seen by many analysts to be a deliberate move by China’s central bank to enhance exports, making it more competitive in international markets.
2) Tariffs and duties
Importing goods into the US comes with a number of trade restrictions and taxes that increase their price significantly. These include:
Tariffs: Taxes imposed by the US government on imported goods to protect domestic industries from unfair competition or subsidies by foreign governments. They usually range from 10% up to 25% depending on what industry they apply to (for example, apparel items are subject to an average tariff rate of 12%).
Duties: A tax levied on any imported good above a specific quantity threshold (usually 1 unit). This tax is calculated based upon the value of the goods, and is typically set at a percentage. For example, the US Customs Service may levy an import duty of 10% on any item that costs less than $1000 USD.
If the product price is in the $1-$5 price range, then most of the time it will still be made in China.
When it comes to product prices, the most common manufacturing location is still China. This is true even when the price of a product falls into the $1-$5 range.
This is mainly because China has been investing in its future for many years now, and this investment has allowed for the accumulation of more capital than the US.
China has a highly skilled workforce and a large number of factories that can produce goods at very low costs. It also has access to resources such as land, electricity and raw materials. All these factors contribute to China’s ability to manufacture products at lower prices than in other countries.
This is why Chinese manufacturers can offer lower prices and better quality products than other countries. Furthermore, due to the devaluation of the yuan, retailers are able to buy more with their dollars, which is a great benefit to supplier nations as well.
The faster delivery times
The faster delivery times of goods made in China are allowing companies to respond more quickly to changing market conditions. This improved speed of delivery is a boon for businesses that need to get their products to customers quickly and efficiently.
By shortening lead times, companies can stay competitive and meet customer demand more effectively. The fast pace of technology has also played a role in this trend, with new innovations such as e-commerce and digital logistics providing businesses with even more options to get their products to market faster than ever before.
For those companies looking to expand into the Chinese market, faster delivery times can be a major advantage. By being able to move goods quickly and reliably, companies can increase their chances of success in a highly competitive environment.
A pool of rich experienced engineers
China is renowned for its extensive pool of highly experienced engineers and well-developed manufacturing industry. With a population of over 1.4 billion people, it offers a vast labor pool with an ever-growing number of skilled workers and technical experts from different industries.
This makes it easy for Chinese manufacturers to meet the demands of their customers. With a large number of skilled workers, companies can easily find qualified engineers and technicians who are able to provide them with high-quality products.
The country’s education system is also geared toward producing graduates who are skilled in science, technology, engineering and mathematics (STEM), which means that China has a steady supply of highly qualified talent available at all levels of industry
This provides the perfect platform for China to become a global leader in the manufacturing industry.
Takeaway:
So what do these changes mean to you, the consumer? It means that China is no longer the powerhouse of manufacturing that it once was. It’s not a bad thing, though. If anything, it’s a reminder to us all that manufacturing costs are constantly changing and evolving, and that it takes hard work for other countries to catch up with the manufacturing might of the Chinese. Just because something is manufactured in China does not make it automatically “low cost”. Instead, you must look at each project and determine what makes sense for your business, your customers, and your wallet.