China has made a whopping achievement of becoming the largest manufacturing country in the world. For the last four decades, Chinese products are increasing in every country’s marketplace.
There are many reasons why businesses and startups decide to manufacture products in China. Some prominent brands were forced to use the overseas manufacturing approach consistently because of the increased domestic rates of labor and raw materials.
China successfully resolved these dilemmas with lower labor costs and manufacturing capabilities. It has transformed into a ‘World Factory’ not just because of cheap labor that cuts the production costs but even due to its solid business ecosystem, competitive currency practices, and low taxes. If you are still wondering why manufacture products in China then here are the good reasons in detail.
Low labor rates
China has a huge population. The worker’s supply is greater than low-wage workers’ demand, so the salary stays low. During the end of the 20th century, there was an internal migration, which put a dent in the rural-urban distribution of the country.
The immigrants to industrial cities willingly work multiple shifts at low wages. China’s huge labor pool helps to manufacture in bulk. It accommodates seasonal industry needs as well as caters to a sudden increase in the demand schedule.
Cheap raw materials
In China, as the demand for manufactured commodities increased the call for raw materials also increased. As the Chinese manufacturers started ordering raw materials in bulk the rates are also as low as possible. Besides, China itself is competent to produce a majority of raw materials.
High production capabilities
The goods produced in China are intended for the global economy. So, they have improved their manufacturing capabilities. Outsourcing to China means you are partnering with time-tested factories with experience in producing niche products in massive supply for years.
The economic level of China is low, so labor cost is cheap but the technological level of producing goods is high. Therefore, overseas companies plan to manufacture products in China.
No downtime due to industrial network clustering
The regional and network industries never develop in an isolated industrial environment but clusters. Industrial network clustering is a practice associated with supplier-buyer links, common channels, common technologies, and common customers.
For example, in the Pearl River Delta region, Huizhou has developed as the largest global producer of DVDs and laser diodes. Shunde and Foshan are key hubs for appliances like refrigerators, microwaves, and washing machines. This kind of localization focus is beneficial because it speeds the production time.
The downtime caused due to broken supply chain links is reduced and overseas orders are completed on time, within budget. Besides, there is intense competition due to network clustering that translates the productivity gains into a price reduction.
China has an extensive infrastructure network including large factories, rail, roads, ports, and airports. It has developed its production field extensively in terms of capabilities, raw materials, trade, logistics, and quality. The international company can locate a comprehensive and reputable industrial chain quickly when they visit China.
Low duties & taxes
China promoted a rebate policy on export tax in 1985 to increase its export competitiveness by abolishing double taxation. Export products are subject to 0% VAT [Value-added tax], which means international businesses, can enjoy the export rebate policy or VAT exemption.
Nevertheless, China’s consumer products got an exemption from import taxes. Lower tax helps to keep production costs low, so China attracts companies and investors looking to manufacture low-cost goods.
Manufacturing goods domestically is too costly. Domestic manufacturers have high overheads including labor, steep training costs, equipment costs, and manufacturing process complications. There have to be enough profit margins to produce the products at home efficiently.
For example, the aerospace sector has high-profit margins and even government support. However, new businesses have little chance of competing with established brands. China removes this high risk of failure connected commonly with domestic manufacturing.
The labor cost in China is low and manufacturing process complications that derail the operation hardly occur, so the production efficiency is high here. Things operate smoothly for your business at a low production cost.
High output – less time
Domestic factories are limited in time and capacity, but in China this is impossible. Cheap labor cost allows hiring more employees to finish products in high volume. Besides, the Chinese industry has invested in state-of-art technologies that allow shortening the production cycle of goods.
The money spent in completing the volume-demanding goods is less than domestic facilities. However, you need to do your research before partnering with a China manufacturing facility because of certain ethical reasons.
Better development and diversification opportunities
Business expansion is essential and diversification allows tapping upcoming markets, but it seems impossible through current wholesalers. So, if you plan to manufacture products in China then this aim can be fulfilled on the fly. Outsourcing to China manufacturers opens doors to expand and diverse product offerings and sell your brand to the global market with ease.
For example, ready-to-use high-tech products leave Chinese ports. Apple iPhones, iPads, and iPods are assembled exclusively in China. Even China stands number one in product duplication capabilities. It is a great way to compete with product duplication but not similar copy.
Products inspired by brands are duplicated but the cost is less because of cheap labor and raw material cost. Chinese factories even allow you to rebrand your already working concept. Copycat culture empowers competition and facilitates improvement in terms of quality and cost.
Communication & negotiation with Chinese manufacturer is easy
Working with overseas suppliers was hard in the past because of communication deficiency and language barriers. Digitalization has made it possible to send your message across and interact with the preferred manufacturer with ease.
Many Chinese companies have representatives that speak English. Negotiating directly is a key advantage to having your goods manufactured in China. You gain total freedom to shop for a suitable manufacturer via Alibaba or other such platforms.
Businesses looking to lower their production costs can choose to outsource to China. There are myriads of quality suppliers in China operating real factories. If your business needs are bulky then improve bottom-line outsourcing products overseas!