“Made in China”: A Glimpse of Chinese Economy
Econ Blog Post 1
“Made in China”: A Glimpse of Chinese Economy
Yongxin Shi, Period 1
After viewing the documentary, “The New Rules of the Game,” in class, I pondered on free-trade policies and free-market capitalism which started to develop throughout the world at the beginning of the 1990s. As a Chinese national, however, I grew up in a world where the government intervened and controlled the market and explicitly planned and managed the economy. In contrast to American capitalist market economy, the Chinese socialist market economy—although China no longer remained as pure socialist—collected the private property freedom under the control of the state. To me, this seemed like there was not much of economic freedom in the country I lived for thirteen years and its idea was the exact opposite to the concept of a free market, which I learned here in the United States. Would this prevent the economic growth of China since there may be less competition that was being encouraged—associated with less self-interest and incentives in the market? However, the rapid change of China’s GDP (gross domestic product—the total value of goods produced, and services provided in a country for one year) starting the 21st century proved that the strict control of the government did not prevent the economic development. In 2004, the government began to open up to the international trade which helped the country to go on the rapid economic growth. During the time I grew up in China, China became—still continued as—the world’s largest manufacturing country which led the world in industrial output.
Economic Resources, Scarcity, and Opportunity Cost
One thing that must be mentioned that assisted China to achieve this rapid economic growth is cheap labor. As a country with nearly 1.4 billion in its population, China is not afraid of losing the workforce, particularly in the often-low-tech manufacturing sector that does not require any educational background. In this way, anyone is qualified to compete for the work. This demonstrates that overpopulation is the leading economic resource in China so that the labor force is much cheaper compared with that in developed countries. From the government's point of view, importing the manufacturing sector from developed countries’ companies is a good idea of utilizing its cheap labor force because the opportunity cost of China in labor is less than the opportunity cost of a developed country which needs to pay higher wages for its workers in its own country. Thus, China’s comparative advantage in labor has shown through its competitive workforce.
In comparison to China, companies in other countries would outsource its manufacturing production and only need to specialize in product research, design, and development. One famous example is Apple outsourced its products’ assembly to China whereas it designed each model back in California because it would cost about $65 more when the iPhone is manufactured in the United States instead of in China where it costs about $8. In contrast to the large workforce in China, job opportunities are considered scarce to people because there are many over-qualified people, even with college graduate degree, in the job market that compete for limited opportunities and are ready for taking over other’ occupations. Overall, the enormous, hard-working and skilled workforce enabled China to achieve this economic miracle.
Sources
https://www.investopedia.com/articles/investing/081514/socialist-economies-how-china-cuba-and-north-korea-work.asp
http://www.china-embassy.org/eng/zt/bps/t943740.htm
https://www.worldatlas.com/articles/10-countries-with-the-highest-industrial-outputs-in-the-world.html
https://www.businessinsider.com/you-simply-must-read-this-article-that-explains-why-apple-makes-iphones-in-china-and-why-the-us-is-screwed-2012-1
https://www.economist.com/special-report/2015/09/10/still-made-in-china
Images
Images
https://thediplomat.com/2017/12/is-chinas-era-of-cheap-labor-really-over/
https://www.weforum.org/agenda/2016/12/the-world-s-top-economy-the-us-vs-china-in-five-charts/
Another interesting aspect of this system that might be worthwhile to investigate would be the opportunity cost that workers have when they take a low-paying job, say, in a factory. Since so many people are choosing to work in such positions and in those conditions, it would imply that the opportunity cost is minimized and that doing so is their best option for being able to make a living. You touched on the idea that these jobs don't require much of an education which allows anybody to compete for the jobs. The opportunity cost of somebody getting an education would be greater than that of taking a low-paying job for them, which is why they are unable to break through that barrier.
ReplyDeleteThe workers work in poor conditions and for poor pay which is contrast to the common idea of a socialist nation proving that it isn't truly. Some live lavishly and in wealth while others do not. The disparity appears to us greater than in America even, which employs capitalism (more cut throat than socialism). It seems that China runs under a state owned capitalist society in which the state gets richer while the majority of people suffer. This would explain the efficiency of China's GDP while also explaining the poor living conditions. The question is: will China develop fast enough to counteract the dissatisfaction of its people or will revolution halt the rapid progression?
ReplyDeleteI think that by comparing China and the US in terms of manufacturing and production, it is interesting to see the drastic differences among countries. Some American people in the "New Rules of the Game" documentary expressed frustration that large companies like apple take their factory jobs to other countries. However, when you see the price difference that you mention of $8 vs. $65, it is understandable that the companies chose to manufacture in China. If China were to increase it's working conditions and protect their workers a bit better, I wonder how much smaller the cost gap would have to be in order for the manufacturing to be moved back to the US.
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