Why China-made products are cheap?

Some people think that the low price of China-made goods is largely due to poor quality. I quite disagree with this point of view. If that were true, these goods would have been blocked under anti-dumping rules and rejected by global markets. Admittedly, this has happened in a few cases in the past decades, but not universal.

In my opinion, the main reason for why China-made products are cheap is low labor costs . The average pay for a Chinese blue collar worker is around 20 thousand Yuan. By comparison, that for an American worker is around 40 thousand USD.

Low labor costs may due to the lack of a complete legal system which supervise employers in China. Under this uncompleted law system, Chinese employers save a lot money by abusing employees in many ways such as over time working with no extra pays, low cost on employee’s health care and no pay on life insurance. In one word, large amount of employees in China enjoy comparatively low welfares.

Another point is that, China lacks a complete taxation system. Tax dodging is common in China. Thus many firms are able to cut cost for sales and production.

What is more, protection of intellectual property rights (IPR) is also a problem in China. Though government has been making efforts to address and protect intellectual property rights since economic reforms began in 1978 , the problem still exists in many areas. And this could be an obstacle for domestic innovation in future.

Low price is not a sustainable competitive advantage for Chinese companies. Pricing war could also cause unfair competitions. According to Resource-Based Theory, domestic companies should focus on product quality, innovative technology and other non-price factors in order to gain long-tern success. And there is an urgent need for governments to perfect law system with the purpose of protecting labor and innovation. Further, education and training could also bring benefit to business world.