Until the late 70s, globalization was not a thing, and most products were made relatively close to where they were sold.
In 1950, the global export value of trade in goods was 62 billion US dollars. In 1970, it was 318 billion.
But what does that have to do with everything made in China? Well, let's take a look.
In 1976, Mao Zedong died. Shortly after, in 1978, Deng Xiaoping rose to power and started implementing economic reforms.
One of these reforms included opening the door to foreign businesses, and by 1979, China had adopted its first Law on Joint Venture Using Chinese and Foreign Investment.
This law created a series of Special Economic Zones for foreign investment that included tax incentives and were relatively free of regulations and interventions. These included the city of Xiamen in the Fujian province, Shantou, Shenzen, and Zhuhai, in Guangdong, and Kashgar, in Xinjiang.
During the 80s, China further opened 14 coastal cities to overseas investment, which shortly became an open coastal belt.
From 1960 to 1979, China's exports never surpassed 10 billion USD a year.
By 1990, it was 44 billion.
By 2000, it was 253 billion.
In 2010, it was 1.6 trillion USD.
Today, it's a whopping 3.5 trillion USD.
China's growth is crystal clear, but how does that compare to the rest of the world?
Let's take a look at the top 10 exporting countries.
You'll find manufacturing powerhouses like South Korea, Hong Kong, or Japan with around 750 billion USD. Then there are economic giants like Germany or the United States, with over 1.5 trillion each.
And then there's China with 15% of all world merchandise exports. And that's all kinds of exports, let's take a look at electronics;
The top ten countries that export electronics to the US are Vietnam, Thailand, Taiwan, Germany, South Korea, Canada, Japan, Malaysia, Mexico... and China.
That's 42% of all electronic exports to the US.
China stands as the world's factory, however, over the last few years, manufacturing in China hasn't been as smooth or cheap as before.
The hourly wage in China has risen to more than three times that of India and more than twice that of Mexico.
On top of that, there's the increased cost of overseas shipping and all the supply chain issues derived from COVID-19, like factory lockdowns and travel restrictions.
The answer is relatively simple: after so many decades of manufacturing in China, everything is there: the factories, the machinery, the qualified workers, and even the know-how. It's a whole ecosystem.
For example, let's say we move our assembly line to Spain, where we have our headquarters. That would be more expensive but doable. In fact, we do part of the assembly and the final quality control here.
However, many components for our keyboards are custom-made in China, and in most cases, there are no suppliers in Europe or the US.
So we'd still need to make those in China and import them, but at least the assembly would be done here.
Imagine if we received 5000 units of a faulty component. In China, that would be an easy fix. We send them back to the factory down the road and have them fixed in a week tops.
Now imagine the same problem, but you must ship them thousands of miles back and forth. And multiply it by all the different components that make up a product.
The keycaps are made in one place, the top panel in another, the PCBs in another factory, the legs, the base, the palm pads, the cables, the travel case, the neuron... you get the idea.
Well, what if we moved all our supply chain to Europe? We'd need to be a company with enough production to have the whole supply chain working all year round, so let's assume we are;
What happens if one of our component factories has a technical issue or has to shut down? In China, that wouldn't be a problem; you'd find another supplier around the corner. Here, your whole supply chain would be disrupted.
The same would happen if you needed new components for a new product. In China, you would have many suppliers to choose from. In Europe, you'd probably need to set it up from scratch.
But, despite all that, things are starting to move.
India, Taiwan, Vietnam, Thailand, Malaysia, and Bangladesh are stepping up to replace China as the world's factory. And other countries could play a key role too, like Mexico or the East European countries.
Those countries pose their challenges, but the big international firms are starting to diversify their supply chain there, opening the door for small startups like us.
However, setting up a new supply chain is an arduous process. It took almost three years and countless trips to China to set up ours.
Then COVID arrived, and manufacturing in China got much more complicated. And with world travel restrictions and limited resources, it was almost impossible to change anything. Surviving as a company was a first.
Looking back, it was a feat that we were able to deliver three more batches of the Raise, develop and manufacture the tenting kit, and kick off the Defy production. All that from Spain, not being able to travel, and with China's zero-COVID strategy.
That massive endeavour allowed us to grow, and with travel restrictions lifted, we can now start diversifying our supply chain.
With a bit of perseverance and many trips to Asia, maybe not everything will be made in China soon.
There is a common perception in the West that China only makes low-quality goods. In many people’s minds, a “Made in China” label may as well say, “This is a cheap, poorly-made product that will break within a few weeks.”
Look at this meme — a great example of this commonly-held attitude. A small yellow car (representing Chinese goods) crashes into an orange bicycle (symbolizing German goods). The “Chinese” car crumples against the rear tire of the “German” bike. What’s funny, though, is that the car appears to be a Chevy!
We have all heard people talk negatively about Chinese goods at one time or another. However, we should stop for a minute to ask an important question — is this perspective warranted? Are goods from China really only worthy of the trash bin after minimal use? And how do you manage product quality if you plan to manufacture there?
Chinese Manufacturing is Not Good or Bad — It’s Both!Sure, there are poor-quality goods made in China and many other countries. However, memes like the car and bicycle don’t reflect the level of nuance needed to understand the situation.
As a third-party product inspection company, we’ve checked countless goods at factories in China and worldwide. After many inspections, we’ve seen that there are three types of Chinese factories:
While plenty of cheap consumer products come out of the country, there are also many Chinese brands that have made a name for themselves in recent years and are well-regarded. Consumer electronics companies such as Lenovo, DJI, and Xiaomi tend to be well-reviewed and have significant global market share.
Well-known Western brands like Apple, Coach, and Armani make products in China that people regard as high quality and command high prices. They know that if they provide precise specifications, work collaboratively with suppliers, monitor their manufacturing closely, and get involved in quality control, they will be successful in making high-quality goods.
If you design a new smartphone, chest of drawers, or handbag and want to have it made in China, you can make low-quality goods or high-quality goods. The choice is up to you, but success depends on your skills in product design, supplier development, and quality control.
China is no longer the low-cost, low-skilled manufacturing country it once was. Those days are long gone, and it has emerged as a manufacturing powerhouse and moved steadily up the value chain.
China is Not “Cheap” — It Has Other AdvantagesWhen China opened up to the world over 40 years ago, it was one of the world’s poorest countries. Western nations were able to take advantage of its massive population and workforce to help them produce many cheap consumer goods.
Today, China is an upper-middle-income country, and there are other places with cheaper labor costs — India, Vietnam, and Bangladesh, for example. While these countries have been growing their manufacturing sectors, especially for labor-intensive goods, China still has an immense pull that consistently draws in foreign buyers.
Here are three key reasons why brands decide to make their products in China:
As Tim Cook, the CEO of Apple, said:
“There’s a confusion about China. The popular conception is that companies come to China because of low labor cost. I’m not sure what part of China they go to, but the truth is China stopped being the low-labor-cost country many years ago. And that is not the reason to come to China from a supply point of view. The reason is because of the skill, and the quantity of skill in one location and the type of skill it is.”
As Tim Cook indicates in the quote above, China is no longer a low-cost, low-skill country. It has undergone a modernization process and seen an explosion in its manufacturing sector. Let’s talk about that evolution.
Chinese Manufacturing Has Evolved Over Time: This is HowOver the last 40 years, China has gone from an agricultural economy to the world’s leading manufacturer. In 2022, China produced $4.98 trillion worth of goods, accounting for about 30% of all global manufacturing output.
During the last few decades, its manufacturing sector has matured significantly. Factories have improved their processes, quality control, and worker training. Wages and labor costs have risen along with the level of skill and technology in factories.
For example, when labor was cheaper, a plastics factory could quickly push out high volumes of plastic parts with many defects from their injection molding machines. Then they would have workers manually trim and rework them as needed.
With rising labor costs, that factory had to adapt by operating more efficiently and producing better quality from the beginning. The factory owners and managers also might have realized at some point that they could reorganize the layout of their factory to ensure more lean and efficient operations.
They also would have become more aware of the quality standards and typical requirements of companies in the countries they export to. We’ve seen many factories in China follow this trajectory.
The reality is that, as an importer, if you want to produce very high-quality products in China as luxury brands do, nothing is standing in your way. Some companies make low-value products in China intentionally. However, some do so accidentally, as there are pitfalls to avoid.
Why Do Low-Quality Products Still Come Out of China?First, you should understand that, like it or not, there is a demand for low-quality products in Western countries. Many global brands realize they can get more sales of their products by selling them at a lower price. To do this, they very consciously choose to sacrifice quality.
As a buyer going to China, you will find factories that can produce your products to various quality standards. It comes down to the demands the brands place on them and how willing they are to spend money on better materials and quality control.
If you come to the factory and say, “I want you to make the highest-quality products for me, and I want you to produce them at rock-bottom, below-market costs,” you are starting things off on the wrong foot.
It would be better to recognize that while you can make products in China at a lower cost than in the West and still get good quality, trying to push your costs down too far is counterproductive. You get what you pay for. Therefore, having reasonable expectations and not focusing on price as the sole factor guiding all your sourcing decisions is infinitely better.
Another thing to consider is that you must design your products well and manage the relationship effectively when dealing with Chinese factories. Otherwise, you risk painful, unexpected quality issues or quality fade that can lead to high defect rates or product recalls. Let’s talk about how to manufacture your product competently.
How to Manage China Factory Relationships and Avoid Quality IssuesIf you are thinking of manufacturing your product in China, there are many factories that can and will make things exactly the way you want them. It is crucial, though, that you do three key things:
We have a saying in our industry that “quality begins with the buy.” As a third-party inspection company, clients sometimes come to us thinking that product inspections are the key to quality, but you can’t inspect quality into a product.
Quality begins with design, and many quality issues you come across in China are actually design issues. If you’ve developed a product with materials, components, or assembly that won’t meet customer needs, it doesn’t matter if the factory produces them precisely the way you asked — the product will be low quality.
Another problem that many companies run into is quality fade. In essence, the factory begins secretly making material substitutions due to the following:
As such, the three keys we outlined above are essential if you want to ensure product quality.
Remember That it Falls on the Brand to Ensure Product QualityEach brand is responsible for deciding how important product quality is to them. Producing high-quality goods in China requires working with suitable suppliers on the basis of mutual respect.
There is a range of suppliers in China with varying capabilities. To get good quality, you should design your products well, provide clear specifications, and plan and implement your own quality control measures. That way, you can get the exact output you are looking for.
Brands that don’t do these things should not be surprised when consumers don’t view their products as high quality. If you’d like to learn more about the distinction between price and quality and how to manage your product’s quality, we recommend downloading the guide below.
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