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Why Chinese Manufacturing Wins

Why Chinese Manufacturing Wins

At the end of the first millennium, around
1000 AD, China was definitively the most powerful country in the world. More than a third of the world lived within
its borders, it’s technology was the most advanced in existence, and its economy accounted
for an astronomical 50% of the worlds GDP. The west paled in comparison to China, but
eventually, Europe arose from its dark ages, the importance of China diminished, and the
west came to rule the world. Today that is still largely the case, but
China is rising again. In 1978 China had a GDP of only $200 billion,
only about 4% of the world’s GDP, but nowadays that GDP has risen to $11 trillion and accounts
for 15% of all economic activity in the world. This economic renaissance of the last 40 years
is largely thanks to one industry—manufacturing. We’ve come to accept that China is the world’s
factory, but it wasn’t always this way. In the early 20th century goods were often
just produced right near where they were sold. America made American goods, Europe made European
goods. It wasn’t until cheap, worldwide shipping
became available that the production side of a company could be relocated to the other
side of the world, but why did China win? How did this country become the manufacturing
giant it is today? In 1978, Deng Xiaoping took power in the People’s
Republic of China. He quickly visited Bangkok, Singapore, and
other flourishing Asian cities and was convinced that, in order to succeed, China needed to
open itself up to the outside world, at least to an extent. He gave people control of their farms, privatized
businesses, and, most importantly, allowed foreign investment in the country for the
first time in decades. He opened up four special economic zones with
tax incentives and exemption from the oversight that the rest of the country saw on its investments
and trade activity. These four zones were essentially the free
market portions of China, but none was more successful than this one—Shenzhen in the
Guangdong Province so I went there to see what it was like. Before its designation as a special economic
zone in 1980, Shenzhen was a tiny town with about 30,000 inhabitants but today that’s
grown to nearly 18 million people. That means its size rivals that of New York
and London. It’s believed that Shenzhen might have been
the single fastest growing city in human history. Every other Special Economic Zone was an established
area before its designation, but Shenzhen made sense as a spot where China could embrace
the west as it lay just north of the border of Hong Kong—what was at the time a British
territory. Today Shenzhen is the electronics manufacturing
capital of the world. “Shenzhen as a city is really known for
two things. One is manufacturing capabilities especially
for consumer electronics products and second, its gravitation for talents or human resources
especially on the product development or research and development disciplines.” Apple, Samsung, Microsoft, Sony, Canon—they
all manufacture products here in Shenzhen. In fact, 90% of the world’s electronics
are made at least in part in this city. Everything just costs less in China so labor
costs less too. Where a factory in the United States might
pay upwards of $10-15 an hour, a Chinese laborer would happily accept $3 or $4 an hour in Shenzhen. When I was there I withdrew the equivalent
of $80 from the ATM upon arrival and left four days later with cash leftover. A 30 minute taxi ride cost about $7 US dollars. A full meal at a local place was about $3. But China isn’t cheap entirely naturally. China has artificially depressed the value
of their currency. Up until 2005, the Chinese government just
said that the exchange rate was 8.27 yuan per dollar and that was that. They then went a few years allowing it to
increase in value within a margin, but in 2008 they pegged its value again to make Chinese
exports more attractive during the financial crisis. Nowadays, the government just picks a exchange
rate daily and lets the currency fluctuate from it by up to 2%. This just makes it so western companies can
buy more for less. China also doesn’t charge taxes on exports
while the US doesn’t charge taxes on imports. The US doesn’t even charge customs fees
for some products like tablet PC’s so some products can make it all the way from their
factory in China to stores in the US completely tax free. When I was in Shenzhen I visited a company
called Anker. They make all sorts of consumer electronics
but chances are if you have something from them, it’s one of their portable batteries. I asked their CEO why so many electronics
companies are now based in Shenzhen. “So the advantage is that, you know, we’re
close to the supply chain so everything is faster. Right, so, instead of like, you know, you
do a mock up and you see it two weeks later here you send design to mockup and you receive
it, like, three days later.” In Shenzhen there are markets where you can
buy every part imaginable, there are factories ready to build prototypes in a matter of days,
there are engineers ready to work at the drop of a hat. Development just happens faster in Shenzhen. A US company might use the same factories
as one based in Shenzhen but the geographical distance makes production slower. In addition, word travels fast in Shenzhen. A few years ago Anker was first-to-market
with a technology called PowerIQ that allows for faster device charging. The engineers from Anker told me that a big
reason they were able to go to market before the western companies was because they heard
about it first thanks to their proximity to other engineers and companies. Shenzhen just produces things better and faster,
but a product isn’t just a physical item. “Honestly being in Shenzhen for this company
is an advantage for the supply chain that we can develop good products with a competitive
price but for the brand its also a kind of a challenge.” What Shenzhen can’t build as well is brands. Certain companies like Anker have been able
to to an extent thanks to smart PR and marketing, but some other companies just don’t bother. Lucrative western consumers want familiar
and approachable feeling brands but cultural differences and geographic distance often
make China based companies just seem different. All across Shenzhen I saw these boxes filled
with rentable portable chargers and as it turns out, it was an Anker product but the
Chinese designed product didn’t really succeed in the western market. “Talking about AnkerBox, the product is
initially designed for the western market, however, actually, our trial in Seattle wasn’t
that successful so we realized that, first of all, that US people actually, when they
go to a bar they actually really go there drinking instead of looking at their phones. Well if you walk into a bar in China you’ll
find that actually, like 20 tables of people standing around looking at their phones.” When the designers are thousands of miles
away from the consumer they might not be as knowledgeable of their wants. Some companies have sprung up in Shenzhen
whose whole business is to develop and produce products without a brand. They’re called “white label companies.” They might produce earphones, for example,
then sell them to a western audio company who will attach their brand and sell the product
at a mark-up. Despite it’s enormous role in increasing
the GDP of China 30-fold in the last 30 years, manufacturing is not an entirely sustainable
industry for the country long-term. The problem is that, rather ironically, the
economic growth that manufacturing spurred in China has increased labor prices to a point
where their manufacturing is less competitive. Before manufacturing came in China was a country
of poor, rural farmers but today China has a real middle class and cities that are expensive
to live in. It used to be that workers like the ones at
Anker’s factory moved to the city for a few years when they were young to make money
for their family back home but nowadays people are moving to cities permanently and want
to be able to set up solid, middle class, urban lives. The average cost for real-estate in central
Shenzhen is almost $1,200 per square foot. That’s even higher than San Francisco and
New York. Even when workers live outside the city center,
higher wages are necessary even just to pay for housing. At the same time manufacturing is becoming
less labor intensive every day as robots and automation are becoming increasingly advanced
and inexpensive. In 2015 China launched a initiative spending
hundreds of billions of dollars each year to upgrade and automate factories in order
to keep prices low, but this will likely do little to keep companies from packing up shop
and moving elsewhere. Manufacturing lines that can be automated
are likely to move back to the United States and the rest of the western market. Robots cost the same whether they’re in
the United States or China so manufacturing products in the US helps save on shipping
costs and certainly is good for PR. At the same time, the labor intensive jobs
that China prospered on in past decades are moving to less developed and less expensive
countries like Vietnam, Bangladesh, and India. Chinese manufacturing firms are responding
to this by opening up their own factories all across the world—everywhere from Africa
to the United States itself. The model that might work for China in the
future is that of Anker—Chinese based firms that can take advantage of their proximity
to the production lines to cut down on development cost and time. Shenzhen based start-ups like Anker, DJI,
and OnePlus have already succeeded in taking advantages of this proximity, but more are
being established each day. If you see a hardware-based Kickstarter campaign,
there’s a good chance it comes from Shenzhen. 10 years ago a company would be hard-pressed
to succeed in Shenzhen as its own brand because historically the retailer has acted as a barrier
in between the manufacturer and consumer, but with the rise of Amazon and other e-commerce
sites its now possible for eastern companies to sell directly to the western consumer in
a system that rewards for quality over price. The time really is ripe for Chinese entrepreneurship. While Silicon Valley might be the dominant
area for software start-ups, its hard to rival Shenzhen as an ecosystem for hardware development
and manufacturing. I have to give a huge thanks to Anker for
bringing me out to Shenzhen to research and film this video. It truly would not have been possible without
them and they gave me complete creative control over the video. I’ve actually owned and used an Anker battery
for over five years thats never broken down even when it’s been accidentally submerged
twice and dropped countless times but luckily they upgraded me to one of their newest ones
which I love. The main thing I want to plug for them is
their “Power it Up” contest going on right now. 10 winners will each get $2,000 in cash and
a bunch of free Anker products. To enter you make a video up to 1 minute long
about an unpleasant or awkward situation caused by running out of power, upload it to youtube,
then share it on their page and the 10 highest voted ones at the end of the contest win. The link to enter is in the description so
good luck! Aside from that, please be sure to check out
my podcast Showmakers and subscribe to this channel to get all my future videos right
when they come out. Thanks again for watching and I’ll see you
next week for another Wendover Productions video.

100 thoughts on “Why Chinese Manufacturing Wins”

  1. I hope you enjoy this video!

    There's a bit of a unique situation in this video where the sponsor is partially the subject of the video as well. This is because they were able to give me a level of access that normally would not have been possible (Chinese factories are not easy to film in.) I want to stress that I did have creative control over the video but take my presentation with a grain of salt nonetheless. I visited a well-regarded, ethical factory which isn't necessarily a reflection of all factories in China, as you may know. I also didn't cover some of the issues with manufacturing in China and other less-developed countries since I was taking a more holistic, economic view rather than a person view.

  2. Anker stuff is the definition of quality. I've only had my Anker battery for a couple months, but I can tell just from the build construction. It will not fail. The last time I said that was my Nexus 6p, from Huawai. Rock solid construction. 5 years it lasted. Finally the battery went out. But that will never happen again once Dr. Goodenoughs new battery technology goes live. It gets better as more charge cycles add up. But Anker stuff is the best.

  3. China started to manufacture goods AFTER 1978 or so. WHY? Why not BEFORE? The CHANGES made in China were in EFFECT to turn to Capitalism from so-called communism- in essence- DESPITE what THEY say. Again WHY?
    On the other hand WHY didn't they DECLARE that OPENLY?

    Because THEY know communism does NOT work for ANYONE'S benefit, except it's own.
    When russia or ex ussr realised this AFTER 70 years of TOTAL communism they did not declare THAT, instead they SAID that they were "liberalising" their so called SOCIALIST, communist policies. The deception is massive, colossal, deceptive, cunning, cruel, diabolical but in line with the nature of communism. All the world was told this LIE deliberately, repeatedly "ad nauseum". MOST of the people were LED by this massive propaganda that the so-called ussr was AT LAST relaxing it's harsh, dictatorial policies to MORE democratic. In fact, it was a total REVERSAL of the entire "system". Capitalism has PROVEN to be the ONLY system suitable for HUMANS. Communism has FINALLY been PROVED to be what it is. A total of lies, cheating, half truths, total lies, spying on everyone ALL the time, controlling EVERY individual ALL the time, total DICTATORSHIP. It in effect killed, or butchered the VERY human nature. So the so-called communism is harmful to HUMANS. Period.
    The so-called communists HAVE nothing to SAY, argue about this PHENOMENON. Nothing. Despite their own tendency or nature TO dispute, argue endlessly EVERY THING in nature, THEY have nothing to say about, argue, defend communism FINALLY.

  4. China is failing sorry they wanted to cheat their way to top. Cheating environment concerns and using their people is their doom to fail only matter of time. China is the whore of the world.

  5. Why are the 4 "capitalist" zones limited to 4 cities on the east coast? Because, the communist leaders understand that communism cannot exist on its own. They had to accept "some" capitalism in order to generate income. Then the ChiComm gov subsidizes them. They keep them in these 4 controlled areas so that it doesn't spread throughout the country because they know that if capitalism were to take root more broadly, the people would eventually get with clue and revolt against tyrannical communism and the communist leaders would be dead and no longer in control.

    China didn't surrender to capitalism. They set up 4 capitalist zones to use capitalism to survive; which is the normal human condition. Communism is ANTI-human.

  6. Trump about to stop this with tarrifs…he is no lawyer but a hard nose builder…yet US don't see China and Russia would like to see the back of him not just progressive s

  7. Bottom line: USA has lost its ability to manufacture competitively. Technology stolen ? Well, it was the US MNCs that spearheaded the idea to outsource production (and eventually design & tech) overseas to leverage (take advantage) of lower costs. Now, the ball game has changed. Surely, USA annot accuse China stole 5G technology, when USA does not have 5G at all and patents for 5G are mostly held by Chinese firms. If it is so easy to steal tech, then USA can close its doors and develop tech within a few years right ? But obviously it is not that easy. China is the biggest builder of HSR in the last ten years, but USA HSR is not even completed halfway despite starting at same time and now over-budget ! Tarriffs ? Look at the global situation lah ! USA wants China goods and USA distributors wants profits, so all tarriffs will be passed onto the US consumer. Who is magnimous in USA ? Amazon paid so little tax on billions it earned and teachers in USA have to pay for students' staionery ? C'mon lah.. this video is not just about China manufacturing but also a forecast of the predicament that USA faces !


  9. Listen kids.this sucks.we build everthing here.and invented the tv.computers.mass manufacturing techniques.and now very rich fourtune 500? Are selling you out.we make nothing here? Go to wallmart.find anything made here? You ask so what? You the young? Will not have any skills except how to press buttons.war comes? Or china gets pissed? What the hell will you do? We built everthing here.for hundreds of we build want jobs? A healty future.go with say hes for the rich? Bullshit.the people hes fucking up are way richer.and own cnn nbc cbs BBC.and all want him gone.why? Cause hes fucking bringing work back home.what the fuck will you do.without a job? We gotta go back to being america dependent on nobody? We will be prisoners of china if we dont change back.manfacturing was the backbone of the usa.the people blue collar workers.went to dinner with there families.bought cars.houses.clothes.and those tens of millions of jobs left with obama.the rich stay least when there in america? We have paychecks.trump is old sees this.the golbalist liberials care less about you.or if trumps a racist.his economy is screaming cause the jobs are comming home.dont be blind young 51.ive seen it.were doomed if we dont start making america great again.

  10. You also have to note that labor is just one ingredient in manufacturing. You also need cheap reliable power, political stability, access to related trades, good infrastructure, etc etc. China's dominance will not evaportae just because of a lobor cost increase.

  11. 0:42 This video was made in 2017. It's 2019 now, China's GDP (nominal) is no longer $11 trillion, it's now $14.4 trillion. And their GDP (PPP) is $27.4 trillion, that's the highest in the world.

  12. 4:16 China doesn't charge taxes on export? No wonder why I can buy less than $1 product on Aliexpress and they'll ship it to Nigeria without charging me shipping fee.

  13. The Huawei operating company is 100% owned by a holding company, which is in turn approximately 1% owned by Huawei founder Ren Zhengfei and 99% owned by an entity called a “trade union committee” for the holding company. Meaning 99% government run by the dictator.

  14. America has awaken a sleeping giant in China. America simply doesn't have the resolve or the intelligence to battle China in a true trade war. China considers America to be an enemy and for those who know world history China has good reason not to trust the west. A Sleeping giant that has awaken and who will refuse to go back to sleep. Wake up America. The clock is tick tick ticking

  15. Chinese companies are producing stuff in Germany and elsewhere with German knowhow and then they paint "Made in China" on the products…

  16. There is NO RESPECT for Communist China! The people work hard because they are in labor camps or locked inside factories, all for the benefit of Communist thugs in Beijing. The only risks Communist China takes is to STEAL from Western companies and governments. There is NO HONOR in a country that subjects its people to SLAVE LABOR like China!

  17. I’m a Shenzhenese and wish that I ve come across this video earlier-it provides some provocative insights of my home. Idk if u can make a video on Huawei? Goodluck on the ads this time tho lol

  18. Chinese people are the greatest thieves of the 21st century. Even if they manage to steal quality as they are in the process of doing, I will NEVER buy their brands.

    American all the way!

  19. OMG there are now Thousands of People everywhere staring at their phones in America! AnkerBox would have been good now, but the Chinese have Transponders on Ceiling that charges your phone remotely. And America is Becoming Chinese.I keep returning to Wendover to Marvel how China has Culturally become the Phoenix that Rises in Glory.Also Elon Musk has started a new factory in China and The Chinese Contractors are Way Way Ahead of Schedule and Elon is Known to set a Unavailable Schedule then Judges the Contractors by theiy percentage of FAIL.
    Yes, ELON is Under Pressure to be Ready for the Plant going on-line!
    He has expressed Delight that Chinese People have a Work Ethic that transcends American by a factor of ~9

  20. So weird seeing chinese bearing english names and language… England plundered China in the past and on their way back they left them this Hong Kong cancer to deal with… Their own people brainwashed into englishmen. Maan that is low blow by genocidal UK…

  21. Would you mount Chinese tires or brake parts on your auto good luck. I read a Brit bought a set of cheap Chinese tires two of which failed on the first day. I drive a German SUV all Japanese electronics..

  22. My AT& T Charges me $50 per month for only 8GB, My Chinese Mobile card charge me ¥50+ for a open flow then faster than AT&T.
    Then about internet, my non-optical fibers Spectrum internet charge me $119.5 this month, and in my Chinese home, a 200M optical fiber +TV+ cellphone cost is the ¥50+ above.
    So in China, the internet and phone cost is ignorant for most people. So as my father and wife, they even forget what the price is of the telecommunication service. When in arrears, I pay in Wechat or Alipay the bill .

  23. But China costguard invade west phillippines? China made is low quality of their products,so they are easy and pay.beacouse of price?but some other manufacture like thiland Malaysia,have been high quality of their product!just compare it to another nufacturer,that would being reliable for working.china is immitated country!

  24. The simple answer why Communist China win in their manufacturing is that they steal the Technology of other country around the world especially in the USA.

  25. Sounds great, but China got too big too fast, now they are aggressive toward other nations and even have outsourced much of their manufacturing to poorer countries around them. All while the government artificially buoys the economy with dangerous credit based on money that doesn't exist. US companies stock will skyrocket when they cut out the China middlemen and do business directly with those other countries.

  26. Everything, I mean everything should made in USA. Who's idea make China make our products? He must be a stupid pig, imbecile, retarded Mfcker.

  27. Some people are ridiculous. I hope to buy a price of $100 for a price of $1. Is it possible? You think that Chinese products are not good enough, you can resist, but can you resist? See how many Chinese made around you can find alternatives?

  28. Consider the fact that the engineering students that graduated last year in China, was greater than ALL the student graduates in all fields in the US. Plus the US graduates read at the 7th grade level. How is it possible that US companies can have these graduates capable of doing technical. Also, people flipping burgers in US want $15.00 USD per hour. China is the world's factory and will continue far into the future.Go China Go!

  29. Love to China from India.Though we'll never reach you, I hope we'll be atleast 70percent of what u'r economy is ryt now after 10 years.

  30. @Wendover
    This looked like a Chinese Communist Party propaganda video. You left out a lot of important relevant facts and distorted your whole topic.

  31. Wendover: …are moving to less developed and less expensive country, like Vietnam, Bangladesh, or India…
    Me: *from Vietnam
    Also me: ouch

  32. Robots don’t cost the same wherever they are in the world, they incur electricity, rental costs, sales tax rates, and other marginal costs

  33. China makes all kinds of products those US needs. US makes high tech products, but doesn't want (fear) to sell those to China. How to win? Force China buy US corn and soya bean. Hahahahahaha.

  34. ummm…slave labor….no environmental cares or concerns…no safety measures for workers….no health care, vacation time… yeah, they win….for a while

  35. I recently heard that China wants to sue us for the tariffs….. What about suing China and the CCP over human rights violation, media manipulation, lack of free speech, police violence, polluting the world (China is #1 polluter) and selling DIRTY COAL plants to Africa (Exposed by Andrew Yang recently), building FAKE islands to steal resources from nearby countries, mind control school, stealing people's organs, stealing intellectual property and counterfeiting our brands ?

  36. The answer lies on the greedy Wall Street investors coupled with disastrous trade deal fact of Clinton, Bushes and Obama. While these guys was busy making a disastrous war in Iraq and Afghanistan China took away our manufacturing base, stole our intellectual technological property through force technology transfer and cheat on being a economic fair traders

  37. If you would put heavy tax/tariffs on the multinationals and big corporates that make their products in China, and force their shareholders to gain less, you'll see how the future of China will be. So, the greed of the elites must be taxed heavily!

  38. Lol, everything costs less in china and labor costs less too. Nice blanket statement. Slave wages. In areas that aren't as economically prosperous and in those factories where there is manual labor it shows how communism truly thrives off of those who are unable to rise above their stations in life. I have several friends in China from very impoverished to very wealthy. Your blanket statement while true was also very misleading.

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