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Blautopf t1_j95jwzq wrote

China has a largely free market with strategic state intervention as well as many state owned companies competing in this market. They have a massive supply of cheap but often well-educated labour, low regulatory costs including environmental costs as well as labour costs.

The state subsidises many industries, especially those producing raw materials such as steel and many others. Cheap state backed loans as well as land to build production on are often available.

So cheap labour, low environmental costs, and cheap raw materials added to economies of scale have allowed low-cost mass production to flourish.

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FeistyCanuck t1_j96ot58 wrote

Economy of scale is a huge factor. It is a lot cheaper per unit to make 1 million refrigerators than it is to make 100.

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ostentatioushuman t1_j95zdex wrote

Labour is not that cheap anymore. Environmental regulations have also been increasing in the last few decades. That's why a lot of industries have shifted to Vietnam and other south east Asian countries, and China is doing a lot more technology based manufacturing.

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Blautopf t1_j96itsp wrote

Yes, all true and good points. I was explaining how they did it though.

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Icycube99 t1_j993rxe wrote

Education and traditional family values is a huge factor to china's success. Having "good enough" is not enough and they make great strides towards improving how efficient their production is. Combine that with a strong sense of family ownership and you get powerful generational wealth.

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garlicroastedpotato t1_j9684if wrote

Let's say you make lemonade. You go to the grocery store and buy lemons, juice them, add a bit of water and sugar and set it in a jug outside your house with a table with "Fresh Lemonade Sale $2." You might earn $0.10 profit off of this. Which isn't enough to be worth your time. So instead you start charging for $2.50 to get that sweet sweet $0.60 per sale.

Now what if instead of having to buy lemons... the government just gave them to you? And the water too.... it would be much cheaper for you to produce so you could sell for even less. That's what happens with China. It has a lot of state owned companies in key sectors providing resources to private companies at incredibly subsidized rates. All of China's state owned enterprises are its biggest corporations. This allows companies to get supplies for assembly and manufacturing at incredibly low input prices compared to what the US would get..

But let's say you want to expand and have a second lemonade stand. You need to hire someone. But that pesky minimum wage law says you have to hire them at $10/hour. That means said person has to sell 40 lemonades an hour in order for you to turn a profit. Impossible, you'd never do that. China doesn't have labor laws that protect their workers in the same way. This makes it a lot easier for businesses to pop up when demand is hot and shut down when it's cold. Whereas with western companies it's very difficult to fire people and the process can take a lot longer.

Finally there's currency manipulation. The currency of China is called the Renminbi (translates to People's Money) and it's a suspicious currency that always seem artificially devalued. When your currency is worth less it makes your goods artificially cheaper for those buying them and it allows you to export more. Most countries WANT to have a currency worth less than the USD while also being able to roughly maintain their standard of living. How currency manipulation works is when you want to buy something you make your currency worth more and when you want to sell you make it worth less.

For example during the Christmas buying months the Chinese Renminbi crashed in price. Why would it crash in price during peak buying season for cheap Chinese goods? And then it's now up 12% since Christmas. For the sake of comparison the Canadian dollar is up by 0.5% and the Euro is the exact same price it was near Christmas.

China has been accused of manipulating their price for a long time and with the way they manage their currency your lemonade business wouldn't.... stand.... a chance

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Agile-Bench-9386 OP t1_j96ms94 wrote

Best explanation everrrr!!! Thank you so much. You're wonderful at explaining things 🙌😄😄.

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MattMBerkshire t1_j95ivbm wrote

Because they take the environmental impact of producing things. This is one of the major factors, plus china has the most abundant supply of rare earth metals, most are mined in China so it makes no sense to export them to produce elsewhere.

You've also got labour costs, aside from wages (no idea what Chinese wages are like in a factory) but in the UK for instance an employer has to pay for pensions, taxes on the site, national insurance contribution on the employee itself.

What you could do at work, is look at your salary, and then ask your HR team what the actual cost is per worker. A fair amount of employers will have a typical cost per desk or workstation which will be substantially higher than you expect.

My old company was an insurance broker based in London, the average cost per seat as it were was around £65k but the mean wage was in the 30s.

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Kcirnek_ t1_j96wr2d wrote

China purposely devalues their currency making their goods attractive and also prevents people from buying foreign goods which makes it expensive to import. They purposely create this imbalance.

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Y34rZer0 t1_j98bd7n wrote

Because they cut every possible corner they can and their workers are essentially slaves.

That being said I’ve been told that they can make things to whatever quality level you want if you want to pay but everybody just goes for the cheapest option on the line so they cater to that

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BackRowRumour t1_j95i3kn wrote

Because Chinese people are owned by the Chinese state. They get told what to make and what to earn. The state wants to sell mass quantities at a profit, so guess how much they drive down wages?

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[deleted] t1_j95ice9 wrote

[removed]

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Calldean t1_j95j5xs wrote

> boarding on racist

What? How?! This is about politics not race.

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Blautopf t1_j95kjyy wrote

It is not based on politics but on ignorant assumptions, which is why it is boarding on racism.

Yes, they do not have as free a political state as many Western countries, but they are not owned by anyone.

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luvchicago t1_j96m7tj wrote

You may want to ask the Uyghurs about that.

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Blautopf t1_j96scd0 wrote

I did not say they had a good human rights record.

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luvchicago t1_j97264i wrote

You don’t think there is any slave labor occurring?

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Blautopf t1_j97p5f6 wrote

Debatable point: What occurs in Prison Labour camps in many doctatorships, certainly forced Labour, but slavery implies more the degradation of a human into a commodity.

After all, it is allowed even in the US for prisoners to be forced or at least coerced into work. So there is a very fine line between prisoners as labour, forced labour, and Slavery but a line exists between each step.

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luvchicago t1_j97wnju wrote

I am not sure that I see forced labor as a better situation than slavery, but if it makes you feel good….

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kuronek_o t1_j95m4st wrote

chinese people are overwhelmingly positive about their govt, without this balance, their govt wouldnt exist. they already went through a revolution and are now experiencing the fruits of that revolution and handling of the country by the govt. to imply the people are owned by the state diminishes these facts that the govt wouldnt exist without the people. its pushing stereotypes that the chinese people are mindless and have no choice. these circumstances that have given them access to a booming middle class and better living standards than a lot of other countries. none of this happened by mistake, it took a century of hard work by the people. assuming things like this prove people have no idea how the country works which is built on centuries of anti-asian rhetoric, you don't have to go that far back to find chinese exclusion acts etc pushed by govt's banning chinese people from their countries (america)

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ostentatioushuman t1_j95zqcv wrote

>chinese people are overwhelmingly positive about their govt

There is growing discontent in the last few years. Economy and standard of living is not keeping up with expectation and the draconian measures to control covid has brought up comparisons to the cultural revolution times.

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kuronek_o t1_j961sxm wrote

this just isn't entirely true, you're only being fed negatives of china, hyper inflated under the microscope of scrutiny. while the people do protest in china, the govt also listens. there's a reason they've kept it together for so long, no matter how much people wish it to fail. there is no comparison to the cultural revolution times, that's a ridiculous statement to make and completely ahistorical. the contradictions under those times were of a population boom and an industrial boom counteracted with widespread famines and other issues. the stability of china now isn't even comparable to the stability of it then.

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