Why are many products made in China?


Quick Answer

The reason so many products are made in China is due to the competitive advantages that Chinese manufacturers have over American manufacturers. These competitive advantages includes lower manufacturing costs and flexibility when it comes to adjusting to market changes.

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Full Answer

A competitive advantage is an advantage that one firm has over another that makes the first firm more attractive to do business with. Because the Chinese enjoy a lower cost of living, Chinese factories can afford to pay their workforces less than American factories. This cost advantage is carried on to purchasers, resulting in lower per-unit costs for production. This in turn allows retailers to pass on the savings to consumers.

The competitive advantage in flexibility held by Chinese manufacturers gives them lower reaction times to changes in product specifications or production amounts. This gives American companies that use Chinese factories the opportunity to take advantage of market conditions quickly and efficiency.

Along with the competitive advantages of flexibility and lower costs, the Chinese manufacturing market also has a highly efficient supply line in place for its factories. Faster supplies help to provide the flexibility needed by the manufacturers, while multiple sources of supply allow for fewer interruptions in production due to shortages.

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