China the world's factory
What do a pair of Nike sneakers, an iPhone and the last Transformers toy you bought to your kid have in common? Answer : China. Chinese products are everywhere, take an item from the shelves of your favourite store and, more likely than not, it will have a "Made in China" label.
China produces 90% of all the personal computers in the world, 80% of all the air conditioners, 70% of all the mobile phones, 63% of all the shoes and 90% of the toys. To make it short China produce one-fifth of the world’s manufacturing.
Few decades after the founding of the People's Republic of China (PRC) the country undergone a shift from a largely agrarian society to an industrial powerhouse fuelled by a huge manufacturing boom.
China became a commercial gold-rush country for every big companies in the world. China's vast pool of cheap labour was the major reason of its success : The wages of the workers there were a fraction of those in Western countries. Nowadays more than half of China's exports are generated by foreign-invested companies.
You may think China's product are still cheap because Chinese labour is cheap. But you will be wrong, now wages are rising in China and a growing middle class demands high quality goods and services.
It's true that despite its growth, China's living standard is still uneven. Some may know a life similar to the Western countries, while others still remain relatively poor. But there is much more to it.
China's middle class demands high quality goods and services
You can't compete against a country with that much experience. Over these 35 years China has gathered technologies, skills and knowledges making products for the Western markets and today they can produce about everything ranging from top quality to bottom-of-the-line products. Even if some companies start to move to other emerging manufacturing countries like India or Vietnam for their lower wages, it will take them a long time to catch up on the production ability that Chinese factories have.
For 35 years China gathered technologies, skills and knowledges
The concept of "business ecosystems" first appeared in the early 1990s, it is defined as : An economic community supported by a foundation of interacting organizations and individuals, the organisms of the business world.
A business ecosystems does not take place in isolation, but rather relies on networks of suppliers and producers who are all involved in the process of production through competition and cooperation. It is essential for an efficient and low cost production. And China is a model of business ecosystems.
Shenzhen, a city bordering Hong Kong to the south, has evolved as the world's hub of electronics manufacturing and technology innovation. It has cultivated an ecosystem where everything is available in one single location : the component manufacturers, the assembly suppliers, the packaging suppliers and the distribution.
For example : Foxconn, the main company which manufactures Apple products, works with suppliers located in Shenzhen. All the components of the Iphone are located nearby the assembly factory. Actually, except few exceptions, all the smartphones and tablets come from Shenzhen.
Shenzhen, the world's hub of electronic manufacturing
The logistic play a major role in the importing process and over the last 35 years China has build an enormous infrastructure to efficiently handle the huge quantity of goods produced.
The port of Shanghai has been the busiest in the world since 2010. Yearly cargo capacity is now surpassing 700 million tons. And now Shanghai is starting the fourth phase of Yangshan Deep water Port which is designed to make the port fully automated, the largest and most advanced of any comparable port in the world.
Ports of China can handle quantity of goods produced that would be almost impossible for any other country.
Shanghai Port : yearly cargo capacity surpass 700 Million tons
1.35 billion people exactly, China large population means there is an army of workers to fill the factories, including an "unlimited" supply of unskilled labour, but also a large and skilled on thanks to the effort of the Chinese government about the education. Places like Vietnam or Malaysia have a small population in comparison, only about 6% of China's. The only country with comparable population is India, but there are so many logistical problems with producing there that it's not realistic to assume India could take a major share of production anytime soon.
China's greatest asset : its people
Despite what the media says, China is still the leading manufacturing centre of the world. Made in China products are everywhere because they are cheap and good. And only China can deliver them.
August 17, 2017 by Nicole