Why are most of my items made in China?

If you are like me and not much of a shopper, I recently found a much more interesting way to pass the time whilst being dragged from store to store. It’s really simple to play, but much more difficult than it sounds. It’s not really a game, more like a challenge. The challenge is: to find as many things as you can that were not made in China. 

Any visit to a department store and you will soon find that almost everything from clothes to household items is made in China, the manufacturing capital of the world. Whilst this may be of no surprise to you (in fact I hope it’s not for you aspiring young economists), do you really know why they all are? What is it about China that makes firms from all over the world choose to produce there?

The main answer to this question is actually very simple. It’s cheap! Super cheap. As a result, firms are able to cut their production costs dramatically and this in turn allows them to increase supply. With an increase in supply firms reduce their prices, meaning that consumers all over the world all benefit from the cheap production that China has to offer. 

There are many reasons why China is able to offer firms such low production costs. One is the cost of labour. Labour means the people who work, and in China wages are much lower compared to most western countries. The labour force, meaning ALL the people who are able to work, is also huge, mostly thanks to China’s massive population of over 1.4 million people.  

Other reasons include the cost of renting land, costs of third-party services such as delivery and transport, and the favourable tax rates. All of these combined, have made China a haven for cheap production and it’s no surprise it has become the factory of the world!

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