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.

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92 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. China has desert turned to farms and cities but the people gives 100% work towards there country and can’t risk to be corrupt or a traitor to your country because it will be the end

  3. That's a place I need to visit over there and buy $600,000 worth of merchandise and put our brand on it and put it in retail stores for a good low price.

  4. Companies get slave labor prices for manufacturing but there product is still overpriced. So the fat owners can get richer from the slaves

  5. China will also steal your Intellectual products info n kick your company out n make your product still.look how they have a Chinese brand that's almost the same has a USA one

  6. Chinese don't care about worker's rights and abuse is rampant.
    They have little environmental regulations and are responsible for most of the pollution in the world.
    There are massive landfills and ghost cities.
    Conditions are so bad in factories that there are SUICIDE NETS because so many workers are trying to kill themselves by jumping out of windows.

  7. Yes , Africans while being a robust people, have no work ethic. This is why slavery was so successful. Forced labor provided products at a rapid rate. On average prove me wrong.

  8. China makes junk and have become synonimous with poor quality, no one wants made in china goods ,they flooded the world with junk and counterfieght products

  9. Perhaps it time we start supporting local products rather than Chinese and give local companies a chance to grow our own economies and create jobs rather than consumers?

  10. If taxes and income taxes were lower in the US, workers could work for less per hour and compete when factoring in logistics. But the folks want their free nanny state stuff hence the huge taxes and need for high uncompetitive income.

  11. USA gave them the tools they needed to destroy us. World economy dumbass. All you college fags we're down. Bill Clinton! Remember? Retard

  12. Useful information delivered with well thought out distribution in so few minutes: that's everything I want from an educational video. Phenomenal work, folks!!

  13. Why?
    -Protectionism through tariffs.
    -Very little environmental regulations.
    -Low wages.
    -Gov. subsidies galore
    -Higher average I.Q. population.
    That last one is especially important for productivity.
    Not unusual for east Asian companies to have 5x to 17x the productivity per worker compared to the U.S.
    Especially so because most of our factory workers are from the bottom I.Q. portion of our population where theirs is mixed.

  14. Listen sir you can say Chinese manufacturing is good but I don't think so because all the chips that they make all of the stuff that they make brakes I got brand new truck that it's not acting right and these parts were made in China even though they have German names on them or they might have an American name on them there still were made in China it is not even that my cell phone which is a note 9 doesn't even work right because of that reason so I don't know what the hell you talkin about they win the manufacturing War not they don't not by fire we need to get rid of this s*** and take it back to the way it used to be like Trump says the way America used to be and not in the way of saying that they're going to get out here and make people go back to race Wars and on the other stuff but it's about us going back to the country we used to be the manufacturing country when we used to sell stuff to people people to say it was American-made so they know it was going to last when I had a frigerator before it lasted 30 years without quitting now frigerator doesn't last was 6 years same thing with washing machines Bass the last 30 years now you be lucky if it'll go 6 years without calling somebody to be fixed

  15. China has polish the economic rules.. I appreciate the Ingenuity and hard work of the Chinese people, right or wrong, They have done it. The Chinese communist party had done something right here. But time will tell.

  16. Why? Because the U.S. basically, for all intents and purposes, shut down our factories and moved them to China at U.S. expense.

  17. 假的假的,千万不能信啊,我们茶叶蛋都吃不上,这辈子第一次吃茶叶蛋还是在美国留学的时候来自弯弯的同学请我吃的,我的天呐,那时候就感觉这辈子没吃过这么好吃的东西,所以我才觉得一定要在美国发奋图强,以后让全家人每周都能吃到茶叶蛋

  18. Because China, don't have angry, annoying, disputable workers always ranting about a pay raise and benefits. If Americans got rid of Unions (New York), there'd be plentiful job market from Asia. Unions…destroy job opportunities in the USA. And they force many employers to vacate America. And the worse is that Unions for teachers, always seem to side with Socialist liberals. Guess they figure "Socialism," will give a better education to the whipper-snappers.

  19. the people r hard work really hard work, it's one one the highest economy in world now..the goverment is really putting effort physically n mentally, I used to see in u tube about shenzan about their working it's really amazing n it's different

  20. chinese people are most industrious people in world. so there is no wonder why they accomplish greater when the markets opened up. and chinese communist party is a fantastic establishment. respect from india. keep up the good work……

  21. US was a "manufacturing giant" back in early 1900s but eventually evolved itself into a "service based market" because US thought manufacturing will be obsolete or archaic in business since it can be easily copied or "reversed engineered" by smaller nations hence it "cheapens" the said market. Give or take 20 more years, China is on its way to take over " service oriented market" away from US with Call Centers all across the globe except North America. 😭

  22. I cant hear the video ! Why ? O Yeah because all my ear sets from china always cut out withen 3 months ! Cheap basterds man so cheap now il get from anywere but them just have to look more cheap basterds

  23. I work for a company that ship in container full of stuff from China, but it’s getting more and more expensive now that China is developing so I wonder where the manufacturing will go to next.

  24. garbage bin food producer nr 1 in the world killing the rest of the world and filling up landfills in the west

  25. Most of the video I found made sense, but the one thing I think you miss the point with is China does not do brands or tacky advertising and all of that guff that has swamped the West, hence it is a fiercely efficient free-market system where the ads are simply detailing the spec of the product and the price, and the price is strictly cost-plus. Think the logic through and you will see China has the edge on this matter. Their consumers are not in the least bit brainwashed, where western consumers are behaving like fruitcakes. This is where the western model will fail.

    Also another point, glibly passed over, is regarding robots. Yes of course the labour model was important, but China has moved up a gear. They are heavily into R & D and their science is first-rate, and so is their maths. They designed a lot of the 5G system. In the UK our education has gone severely backwards. They are moving into custom manufacturing where you will eventually be able to specify what you want the product to be, and the AI and the new robots will build you it just how you like it.

     In my opinion the technology gap will widen. The Chinese run a very intensive education system. They are streets ahead with their maths. They will set up a worldwide distribution network and build large warehouses in each country, and China Post will get it to you so cheaply you would never miss the rest. You see the manufacturing slice of the cake is small. Most of the money you pay is middlemen. China will cut the Western middlemen out. they can even deliver it via drone now. They will move into banking as well. The best thing to do is work with them and not against them. Branding wont work in China.

  26. Honestly, Anker has such a strong brand that I had no idea it was China based. They've certainly earned their good reputation with me.

    looks over at my Anker battery and all my Anker charge cables

  27. 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.

  28. 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.

  29. 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.

  30. 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.

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

  32. 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 !


  34. 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 yrs.now we build nothing.you want jobs? A healty future.go with trump.you 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 rich.at 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 people.im 51.ive seen it.were doomed if we dont start making america great again.

  35. 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.

  36. 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.

  37. 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.

  38. 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.

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