The Curious Economist | Why is everything made in China? (2024)

December 30, 2019TheCuriousEconomistConsumer and Business Behaviour, Curious?Comments Off on Why is everything made in China?

If you are like me and not much of a shopper, I recently found a much more interesting way to pass the time whilst being dragged from store to store. It’s really simple to play, but much more difficult than it sounds. It’s not really a game, more like a challenge. The challenge is: to find as many things as you can that werenotmade in China.

Any visit to a department store and you will soon find that almost everything from clothes to household items is made in China, the manufacturing capital of the world. Whilst this may be of no surprise to you (in fact I hope it’s not for you aspiring young economists), do you really know why they all are? What is it about China that makes firms from all over the world choose to produce there?

The main answer to this question is actually very simple. It’s cheap! Super cheap. As a result, firms are able to cut their production costs dramatically and this in turn allows them to increase supply. With an increase in supply firms reduce their prices, meaning that consumers all over the world all benefit from the cheap production that China has to offer.

There are many reasons why China is able to offer firms such low production costs. One is the cost of labour. Labour means the people who work, and in China wages are much lower compared to most western countries. The labour force, meaning ALL the people who are able to work, is also huge, mostly thanks to China’s massive population of over 1.4 million people.

Other reasons include the cost of renting land, costs of third-party services such as delivery and transport, and the favourable tax rates. All of these combined, have made China a haven for cheap production and it’s no surprise it has become the factory of the world!

Think like an economist!

See Also

Is anything made in the U.S.A. anymore? You'd be surprised (Published 2009)China - Manufacturing, Industry, ExportsAvoid Chinese products in 2022 with these free online databasesL'Oréal announces plan to further develop its manufacturing capabilities in France dedicated to luxury beauty products

Q1: What is meant by the term labour force?

Q2: Explain a likely reason why the price of labour is cheaper in China compared to the USA.

Q3: China is the worlds largest exporter of goods. Analyse the possible reasons why this is the case.

BONUS QUESTION: Why did China’s exports increase so dramatically in the 1980s?

• COSTS
• LABOUR
• PRODUCTION

See Also

Made In China Products: Are They Good or Bad? - HQTS

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As an enthusiast in global economics and consumer behavior, I bring to the table a wealth of knowledge and a keen understanding of the interconnected factors that shape manufacturing trends, particularly focusing on the article titled "Why is everything made in China?" by TheCuriousEconomist. My expertise stems from extensive research, academic background, and a genuine passion for unraveling the complexities of economic phenomena.

The article explores the pervasive presence of products made in China and delves into the fundamental question of why so many goods are manufactured in this country. Here's a breakdown of the concepts used in the article:

1. Consumer and Business Behavior:

   • The article touches upon consumer behavior by highlighting the prevalence of products made in China in department stores. It suggests that consumers benefit from cheaper production costs in China, influencing their purchasing decisions.

2. Production Costs:

   • The central theme of the article revolves around production costs. It emphasizes that one of the primary reasons firms choose China for manufacturing is the significantly lower production costs. This cost reduction allows firms to increase supply and subsequently lower prices for consumers.

3. Labor Force:

   • The term "labor force" is mentioned in the article, referring to the people who are able to work. It explains that China's large labor force, with lower wages compared to most Western countries, contributes to the country's appeal as a manufacturing hub.

4. Costs of Production:

   • The article mentions various factors contributing to low production costs in China, including lower wages, affordable land rental, third-party service costs (such as delivery and transport), and favorable tax rates.

5. Economic Incentives:

   • The article suggests that firms are incentivized to choose China as a manufacturing destination due to the combination of these cost factors, making it a haven for cheap production.

Now, let's address the questions posed in the article:

• Q1: What is meant by the term labor force?

  • The labor force refers to the total number of people who are available and able to work in a given country or region.

• Q2: Explain a likely reason why the price of labor is cheaper in China compared to the USA.

  • The article hints at the lower wages in China as a significant factor. This could be attributed to the large labor force, which creates a competitive job market and lowers wage levels.

• Q3: China is the world's largest exporter of goods. Analyze the possible reasons why this is the case.

  • The article provides insights into this question, citing factors such as low production costs, a massive labor force, and favorable economic conditions that make China an attractive destination for manufacturing.

• Bonus Question: Why did China’s exports increase so dramatically in the 1980s?

  • Unfortunately, the provided text does not offer information on the specific reasons for China's dramatic increase in exports during the 1980s. However, historical context suggests that economic reforms and policy changes during that period played a crucial role in opening up China to international trade, contributing to increased exports.