...How Cheap Labor in China Impact Domestic and Global Economy Cheap labor means that the people who make the product work under unfair work trends, such as low wages and often underage workers. Cheap labor causes China to become an important component of "World factory". For a long time, the inexpensive and rich labor power is an advantage that China participates he international trade. However, along with a progress of technology, the competitive advantage of cheap labor in China is weakening gradually.(The Challenge,2008) In the 1990s, the yearly growth rate of China’s manufacturing industry average per person real wages was 7.1%, and the annual growth rate of labor productivity was 6.75%, showing these two targets almost equal. However, yearly average real growth rate of labor costs including non-staff costs reached 10.4%, and it was 1.5 times of yearly average growth in labor productivity. For all this, in the late 90's, the relative level of China’s labor costs was still lower than the relative level of international labor productivity. In 1999, the labor productivity of China was 9.08% of the U.S rate, 21.98% of South Korea’s rate and 51.50% of Mexico’s rate; during the same time, labor costs of China is 3.94%,11.27% and 35.66% of these countries’ rates respectively. The relative level of China’s labor costs is only equal to 40%-70% of the labor productivity’s relative levels in some developed countries such as the U.S (Advantages Trade,2007). As a result, China can make more...
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...How Cheap Labor in China Impact Domestic and Global Economy Cheap labor means that the people who make the product work under unfair work trends,such as low wages and often underage workers. Cheap labor causes China to become an important component of "World factory".For a long time, the inexpensive and rich labor power is an advantage that China participates he international trade. However, along with a progress of technology, the competitive advantage of cheap labor in China is weakening gradually.(The Challenge,2008) In the 1990s, the yearly growth rate of China’s manufacturing industry average per person real wages was 7.1%, and the annual growth rate of labor productivity was 6.75%, showing these two targets almost equal. However,yearly average real growth rate of labor costs including non-staff costs reached 10.4%, and it was 1.5 times of yearly average growth in labor productivity . For all this, in the late 90's, the relative level of China’s labor costs was still lower than the relative level of international labor productivity. In 1999, the labor productivity of China was 9.08% of the U.S rate, 21.98% of South Korea’s rate and 51.50% of Mexico’s rate; during the same time,labor costs of China is 3.94%,11.27% and 35.66% of these countries’ rates respectively.The relative level of China’s labor costs is only equal to 40%-70% of the labor productivity’s relative levels in some developed countries such as the U.S (Advantages Trade ,2007). As a result, China can make more...
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...Sophy Huang DSOC Essay 5 Revision 9 April 2012 It’s time to change a manufacturing model In the last two decades, China’s economy has grown rapidly, becoming the world’s second largest economy after the U.S. China has gained this achievement by becoming the factory of the world and exporting cheap products to oversea markets. However, recently China has been losing its advantages in the export sector, which its economy is heavily reliant on. New data shows a visible slowdown in manufacturing in China and it’s time for China to reform its manufacturing model to resist this slowdown. Several factors caused this slowdown. First, China’s biggest advantage in the export sector, the cheap, seemingly unlimited supply of labor is gradually diminishing. The number of available workers is decreasing and the wages for these workers are increasing every year. Labor costs have begun to rise in China. The time for unlimited cheap labor is limited. As Michelle Loyalka (2012) points out in her article Chinese Labor, Cheap No More; most big cities are lacking an adequate work forces. The sharp falloff in the amount of labor is mainly due to the One-Child Policy. China started its One-Child Policy in 1978 and has prevented 300 million births from its implementation to 2000. This also means the One-Child Policy has reduced 300 million potential workers. Since the government today is still persistent on this policy, the sheer number of workers will continuously decrease. So, the advantage...
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... The Advantages and Disadvantages of China’s Apparel Manufacturing Industry China leads in the apparel manufacturing industry like the United States leads in cotton production. However, China’s dominance is much different than that of the United States. China is competitive in the apparel manufacturing industry with its quick and cheap labor. However, their low price of production comes at a high price of workers’ quality of life. Thus, China’s dominance has mainly been a disadvantage to workers, yet the hardships within China’s apparel manufacturing industry have surprisingly resulted in advantages. In order to understand the advantages of China’s apparel manufacturing, one must consider the history of China, the workers’ characteristics, and the positive effects of global trade. Historically, China was not expected to dominate the apparel manufacturing industry. Instead, Chinese families worked slowly, yet efficiently to produce and create clothing. However, Britain surpassed the Chinese with the Industrial Revolution. Inventions like the spinning jenny spurred apparel manufacturing. New England slyly acquired Britain’s patented technology and spearheaded apparel manufacturing. Later, the South dominated manufacturing because of slavery and sharecroppers. However, Southern farmers exported to Japan, who had cheaper labor. Soon, China, Taiwan, and Korea surpassed Japan. “Today, China is not only the largest buyer of American cotton, it is also projected to soon produce...
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...Everything is Made in China Made in china means products are manufactured in the mainland of China. People who live in China feel that all goods are made in China is a normal thing because the Chinese people do not really know almost everything in foreign countries also is made in China. Because of the cheap labors and China's large manufacturing industry, “made in China” becomes one of the most recognizable labels in the world today. “Made in China” has a huge range of goods from clothing to electronics (Garten). World economy is becoming so dependent on China as an industrial lifeline. China's importance to global manufacturing will resemble Saudi Arabia's position in world oil markets. As a result, there are more and more goods are made in China. Some people like goods which are made in China because these goods are cheaper. On the other hand, not all people think that goods are made in China is good thing. Just as the editorial cartoon I found, the editorial cartoon describes a broken plane which made by wood, and a soldier say: I told you we should not have bought those airplanes with the “made in China” sticker. Unquestionably, this editorial cartoon ridicules made in China means low quality. Moreover, all goods are made in China also has some negative influences for other economic facets. So the question here is so many goods are made in China is a good thing or a bad thing. Too many goods are made in China have many disadvantages. The main problem about...
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...CHINA: Economic Analysis TOWS of China: China Threats: • Strikes Against Multinational Companies • Allegations of Currency Manipulation • Aging population China Opportunities: • Consumption Boom in China • Instant Translation of Web Pages • Enforcement of intellectual property rights China Weaknesses: • Population • Weakness of economy • Academic and Scientific Misconduct in China • Regulation of gas prices • Corruption in developing country • Country is creating political risk • Air pollution China Strengths: • Stable infrastructure • Chinese influence in Africa • Natural resources • Polluted water supply INTRODUCTION Although there are many points outlined within the TOWS. There are only several, which are most apparent, and significant that will be discussed. A few competitive advantages a Multinational Corporation will benefit from would be some of China’s strengths, which are; infrastructure and telecommunication, and it’s influence on Africa. Some issues a Multinational Corporation may run into would be among the labor force. There are many solutions that China is already headed toward in response to the main issue of human labor. Most of which will benefit a potential Multinational Corporation and China’s economy. COMPETITIVE...
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...Logitech’s products would be astronomical. This would be due to the fact that the production assembly, resources and the sale of the products would have to be done in the United States. The U.S. labor wage is significantly higher than that of Taiwan or China. Additionally, the company would not be able to manufacture in Taiwan, where manufacturing is cheap and efficient, where the company needs the capacity to produce at high volume and low cost and offer a better designed product-not to mention the Taiwanese factory soon out-producing Logitech’s U.S. facility. Moreover, Taiwan offered a well developed supply base for parts, qualified people, and a locally expanding local computer industry. Without trade, Logitech would be able to rely on China for cheap labor and the assembly of the products with 4,000 employees. In sum, all of these increased expenses and costs would require a rise in the retail price for the consumer. There is also less overall competition in a world without trade, thus allowing Logitech to raise retail price to its consumers. 2. Explain how trade lowers the costs of making computer peripherals such as mice and keyboards? Trade lowers the costs of making computer peripherals in many ways. For one, trade allows companies like Logitech to set up production and labor sectors in other countries, which enables the company to manufacture the products at a much cheaper rate. Second, trade allows for increased economies of scale. Whereby enabling Logitech to...
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...manufacturing. While others have done partial outsourcing, where partial assembly is returned to the US industry. When manufacturing is outsourced, whether for goods or services, many companies downsize their work force. This creates a loss of jobs for the American industries while increasing jobs in places such as China, India and Indonesia, just to mention a few. Outsourcing, undoubtedly has its comparative advantages as far as having lower wages but it also has risks such as rising costs and trade barriers. It is some of these challenges that is believed to have created a slow re-routing of manufacturing to return to the US Industry. The global trend in manufacturing and outsourcing is that many countries rely heavily on China and other developing nations for manufacturing. For this reason many countries outsource their manufacturing to China. In the article, “The end of cheap China,” the writer reminds us that, “China is the world’s largest manufacturing power and they account for a fifth of global manufacturing.” The primary reason for this trend is due to the cheap labor. It should be noted that global manufacturing is also advantageous to China and other developing nations, since it facilitates economic freedom and increase productivity and standard of living for their population. The primary comparative advantage of outsourcing is obviously lower production and manufacturing costs. A typical worker can be paid as low as seventeen US dollars ($17) for daily...
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...cotton have floods that hit the world´s major producers North Eastern China and Pakistan. Early in 2010 these floods disasters “have destroyed million acres, affecting an estimated 25per cent of the cotton crop and have pushed the price of cotton to rocket up in recent weeks by more than 700 per cent” (Poulter S., September 14, 2010). What is more, as the different taxes rise and appear the price of cotton rise as well. Other thing which influencing the price of the cotton is increasing price of import. With regular increase of the price of fuel also the price of the transport will increase and it leads to increase of the price of the imported cotton. The diagram below shows that with the decrease in the supply and no change in demand price of the cotton will increase. 3. Other things that can influence price rising are maximum growth in the price of cotton, worldwide´s higher labor costs, transport costs, producing cost and rise in VAT. In the article “Fashion chains far from cheerful about future of cheap chic” from September 2010 on the website the Quardian is stated that the increase in the cotton price has its roots in the financial crisis of two years ago, when farmers stopped planting low-value cotton and switched to higher-value crops such as corn and soya. When retail sales picked up, demand for cotton also rose and prices shot up – just at a time when major cotton-producing regions such as China and Pakistan were suffering devastating floods, and India, the second...
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...Abstract Few years ago, many manufacturers thought that the entry of China into the world of economy would change the rules, with an effective and infinite reserve army of labor, China would be able to grow and grow without ever running out of workers and so having to upgrade and pay higher wages. This thought is gradually changing as China is facing shortage of laborers making the number of Chinese working-age adults scarce. This will have an economic impact since labor shortage would mean rising wages and then rising prices of goods manufactured in China. Company owners must take into high consideration how they can retain their laborers, which is a vital input in their production function. International Application: Is China Running Out of Workers? The most populous nation on earth will soon have a labor shortage. “It is a serious situation if you are a manufacturer because now, you have got to compete on wages” (Anderson, 2004, para. 2). The available number of rural workers seeking factory work is decreasing and younger and more educated Chinese workers are now pursuing white-collar jobs. The number of young people entering the workforce is smaller than the number of retiring employees. The working age population has plateaued in size and will begin getting smaller sometime in the next five years, according to demographers and recently released census data. What will be the implication of the labor shortage? As workers grow scarce, wages are going up; sharply rising...
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...1404837 曾延 The Gap between Chinese Business Model and the International Advanced Business Model ----Chinese cannot be the employee of the world China has been regarded as ‘World Factory’ for a long period until now. This appellation was considered as an honor by a vast majority of Chinese people in the past decades. Nevertheless, it was recognized that China cannot be the world factory because the labor cost and the manufacturing costs are increasing. This change reduced the profits of manufacturing industry, which means that the business environment for our manufacturing has been becoming more deteriorative. From government’s perspective, China need industrial transformation and upgrade industries. On enterprises’ viewpoint, the significant method for this situation is innovate the business model. This essay will demonstrate the gap between Chinese business model and the international advanced business model. The control power to industry chain determined the merchant mode. In modern business, controlling the upstream section of the industry chain means that the enterprises make profits and economize the resource and cost furthest. For instance, China only control the one part of industry chain. That is manufacture which is a low-income and high cost part. However, the upstream section of the industry chain was controlled by American companies. The most famous example may be the Apple Inc. that never produce even one element of electronic...
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...large, varying from business to business. Logistics management, software development to design everything these days is being outsourced to countries like India, China mainly due to cheap labor and cost cutting being the prime reasons behind it. Outsourcing however as it may seem as a loss of opportunities in the countries outsourcing the jobs, it is incredibly beneficial to the countries the jobs are outsourced to. The positive impact of outsourcing outweighs the negative impacts of it. How is it positive and why is it necessary? In...
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...History of Garments Industry in Bangladesh Arif Hasan April 1 2014 Department of Management University of Dhaka Table of Contents History of Garment industry in Bangladesh ........................................................................................................2 Pre-liberation period ....................................................................................................................................................3 Post-liberation period ...................................................................................................................................................4 Early 80’s ...........................................................................................................................................................................4 Present condition: ...........................................................................................................................................................5 At present Bangladesh is: ........................................................................................................................................5 Concluding Remarks .................................................................................................................................................. 10 History of Garment industry in Bangladesh Recently J P Morgan made a list of which “Frontier Five” emerging 5 countries which are worth investing among the five country...
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...Everything is very inexpensive there and they always have the lowest prices. Although that is a good thing, it is bad because it keeps people out of work and the workers get low wages. Global retailers are the most powerful companies in America now. Sam Walton, the creator of Wal-Mart said his formula was, “Buy cheap, sell for less than the other guy and make your profit on high volume and fast turnover.” Wal-Mart can be examined using both structural functional and social conflict theory. Structural functional theory is when society is a complex system of interconnected and interrelated social structures each having a function and working together to promote social stability. One hundred million people shop at Wal-Mart every week. Wal-Mart is very convenient for people to shop at. Most people do not even have to shop at other stores because Wal-Mart has everything. It’s also convenient because it is right around the corner from a lot of customers houses; they don’t have to travel far to find a Wal-Mart store so they save gas. People already know that Wal-Mart has the lowest prices so they don’t have to search for stores with low prices. The items sold are good quality as well as cheap. What more could someone ask for. Wal-Mart is a world leader in logistics and promotes greater efficiency between its suppliers. Bob McAdam who is the Wal-Mart vice president states in the video, “We are raising the standard of living through lowering the cost of goods for people.” He is saying that Wal-Mart...
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...Question: How attractive is China a business opportunity? As a member of China Policy Group, what would you recommend regarding continued sourcing from China? If you recommend continued sourcing from China, would you attach any special requirements/ propose a development road map for the work force? 1. Analysis a. Strengths i. Brand Equity & long lasting products – Customer Perception ii. Levis Global Footprints b. Weaknesses iii. Labour abuse and sweatshop culture iv. Language barrier v. Objectionable work environment vi. Oppressive regime vii. Human Rights issue c. Opportunities viii. Reduce Cost of products to capture youth market ix. Focus on product design and marketing only x. Can better respond to changing fashion trends xi. Availability of cheap raw material in abundance at doorstep xii. Least transportation cost, Cheap skilled/ unskilled labor xiii. Good communication infrastructure xiv. China a big consumer market xv. d. Threats xvi. A forced strategy to lower cost for better competition xvii. Increased lead time for worldwide customers xviii. Criticism over downsizing or job loses is expected. xix. Poor Labor Laws implementation may harm the Brand Name 2. Recommendations Keeping in mind the above mentioned points it’s highly recommended...
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