Why is it Cheaper to Manufacture in China

 

Amazon sellers are used to the idea that the cost of manufacturing in China is much lower than in the US. This belief is especially popular among Private Label sellers, but is it really so?

Let’s learn more about American and Chinese manufacturing and see whether Chinese manufacturing companies are the best option for cooperation.

 

In fact, 20 years ago, manufacturing was really cheap. More than 23% of global manufacturing was situated in China by 2013.

However, many things have changed since that time, as wages grow, and this affects the prices for producing goods. In 14 years, wages in China have grown 187%, a Chinese factory worker gets around 27$ per day. Still, the good news is that Chinese people have very high productivity which is attractive to foreign companies.

 

Is China Not the Cheapest Manufacturer Anymore?

According to Bloomberg, the lowest prices for manufacturing can be found in Indonesia, next are India, Mexico, Thailand. China has the fifth place in their list before Taiwan which takes the 6th place. On the seventh place comes the US. Surprisingly, Brazil was named one of the most expensive countries due to wages, exchange rates, and energy expenses.

 

As for the cost of manufacturing in the US VS China, the difference is just 5%. Nevertheless, products made in China cost by 10-20% cheaper than goods produced in Europe. They say that Chinese companies start their production in the US, as it is cheaper for them.

 

People usually question themselves why is it cheaper to manufacture in China, but let’s take a look at this question from another side: high productivity and automation, low energy costs, rich domestic markets, short supply chains, and so on.

However, this idea is fair only for large manufacturers who own several plants and produce tons of goods every month.

 

What about Private Label sellers?

Does it make sense to not order goods in China but produce them in the US where many sellers live and where Amazon’s warehouses are located?

No, it doesn’t. Private Label sellers better order goods in China, as Chinese people can brand and customize products for a much lower price than Americans will do.

 

What’s more, ‘made in the USA’ or ‘made in China’ has less meaning for products that are sold on Amazon by Private Label sellers since the quality may be high in both situations.

 

We have an article telling sellers how to avoid bad-quality products from China and how to control the whole process. Check it out if you haven’t made any orders from Chinese manufacturers. This information will help you be confident in what you do.

 

So, Why Is It Cheaper to Manufacture in China?

  1. First, labor cost in China is not so high as it is in the US. People in China go from villages to big cities in search of work and they don’t ask for much money.
  2. Large scale manufacturing. Chinese produce tons of goods every day and due to this, their price is cheaper, even if you order a custom design. Still, everything depends on the minimum order quantity, some manufacturers have MOQ of 10K items or even more. The cost may vary depending on this factor.
  3. Routing or raw material. Unlike other countries, China has an incredibly developed infrastructure, so raw material can come from point A to point B in the shortest time and for the minimal price. Chinese plastic manufacturing companies, products factories are still on the top when it comes to transporting material or ready-made products.

 

 

Conclusions

Though ratings say that China is not the cheapest anymore, and there are several serious competitors like Vietnam, Thailand, other Asian countries and even the United States, it is still the best choice for Private Label sellers. Cheap manufacturing, fast production, high quality, customization opportunities are necessary things for Amazon sellers.

 

So, the cost of manufacturing in China VS the US can differ greatly and can be the same depending on the factory and manufacturer’s condition. Nevertheless, we recommend you to start working with Chinese suppliers, as this helps Amazon Private Label sellers make more margins.