Indian Markets have huge potential in terms of producing anything and everything, but we still rely on the Chinese Market for our basic needs, from a toy to a mobile phone. The Chinese producers have infiltrated the indigenous market and are able to sell the goods cheaper than the local producers. There ought to be a reason why Chinese products are cheaper?
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Despite the huge costs involved in transportation through the sea route and high packaging costs and customs duty; Chinese manufacturers are able to squeeze in their products at prices that do not seem viable for their local counterparts. They even compete in items which are simple in nature and are easy to produce, like pencil boxes.
Why Chinese Products Are Cheaper Than Indian Products?
Going by the popular discussions, which emphasize on the fact that production cost in China is cheaper than others as the workers are available at low wages. We doubt the authenticity of the claim as many other countries like Vietnam, Bangladesh, Thailand; also pay their workers in a similar fashion. Yet their products are not that economical as one would perceive.
The fact that the Chinese goods have such an impact on the world and our local markets is really commendable on the part of the Chinese Government. With an exemplary implementation of well thought out strategies; they allowed their economy to be liberalized and supported foreign businesses and investors; which further strengthened the business environment in their county.
The administration has taken necessary steps in investing in the infrastructure of the country including roads, electricity availability, ports to enhance the overall productivity and create efficiency in their operations.
They have also taken initiatives towards setting up of Special Economic Zones (SEZs) and thereby attracting Foreign Direct Investment in their country.
Supporting and promoting global exports for the produce of China, the government consistently indulges in leveraging the currency exchange rates in the International market.
Some points answering the question as to why Chinese products are cheaper?
Economy of Scale
The Chinese Government has always focussed on producing goods on a large scale; which ultimately decreases the overall costs, thereby making the goods cheaper.
China believes in exporting their goods in the international markets. Their focus is to serve beyond their own country and thereby their target market is large as compared to our local Indian manufacturers; wherein the scope is restricted to the Indian markets. Since the quantum of production in our local markets is less, the overall cost is high; thereby increasing the price of the goods.
Huge investments in Infrastructure
China has always invested largely in the developments of the roads, transportations systems, supply chain networks; which makes the movement of raw material and the finished products simple and efficient and thereby reduces the cost and time involved. In a contrasting situation; India has still a long way to go and policies need to be implemented to boost the foster the industrial sector.
The same is the case in electricity generation. While electricity is available at cheaper rates with an uninterrupted supply in China; the scenario for the Indian market is, unfortunately, the opposite.
Productive Labour Force
Even though the wage rate in China has substantially improved over the years, the development of the labor force deserves a notable mention. They focus on providing their manpower with skill development programs from time to time, thus increasing productivity. Therefore, the workers are instilled with higher efficiency; thereby contributing to the high demand for Chinese products.
Reverse Engineering Processes
China saves big on Research and Development by not limiting itself. They believe in allowing the manufacturers to produce similar products without any intellectual property rights involved. They believe in copying the design and producing goods in huge quantities. There are claims that China usually imports, deconstructs, and carries out detailed studies of products from all over the world and make their own version.
Leveraging their currency
It is believed that China is involved in manipulating their currency value for their own benefit. Having not signed any WTO agreements, they are not liable to transparency in their transactions and intentionally keep their currency weak against the US Dollar thereby keeping competitive prices for exports.
It is also to be noted that they sometimes even export goods at a price lower than what they actually incur to take advantage of the benefits available.
Popularly known as dumping; this practice is causing harm to all the importing country’s local producers who try to make ends meet and are ultimately forced to close down shop in lieu of such unhealthy competition. China has been indulging in such immoral activities for a long time now, despite many countries opposing it.
Summing up, we would like to say that, apart from these reasons, and many more; China is able to sell its product cheaper, and we are doing nothing about it. It is high time that the Indian government finds solutions to this unending competition in order to boost the economy and support the local manufacturers and vendors. India should carve a way towards self-sufficiency.
Do you agree with us? Let us know.
The cheapest labour in the world is in Romania.
It’s because China has a great proportion of developed lands whereas in India 70% of people living in rural areas. Also, electricity availability is a major problem in India. Electricity is for a limited time, thus factories lay idle and do not produce goods during the time.
China is at No. 1 when it comes to the production of steel.