As you already know, the Chinese economy is one that has seen a massive boom in the past and part of it is due to the sheer magnitude of its population and the many natural resources it has in store as a country. Another main reason for its massive economic boom, was its economic policies which allowed the foreign markets to tap into this massive resource base and thereby, helped the country develop in its infrastructure and in utilizing the resources. The special free trade zones were also introduced as a way in which foreign companies could invest in the resources of China by giving them attractive incentives and drawing them in.
However, what is the ‘China Price’? Due to the various economic policies in place and also due to the massive resource base of cheap labor, the products exported from China, hit an all-time low on the price market, thereby levying a heavy blow on the western nations and resulting in a price monopoly to China. This price pressure on the western and developing nations by China, is known as the ‘China Price’.
Dangers of the ‘China Price’
The extremely cheap labor force and the special tax and trade incentives made it extremely attractive for offshore company formation.
Thus allowing more and more foreign nationals to register offshore companies in China. However, as the Chinese economy grew, so did the demands of the labor force and the currency of China was being appreciated against those of the world, thereby increasing the price on the international market, and thereby losing their price advantage as the ‘new China’ became Bangladesh.
To retain the markets with the low prices, suppliers and manufacturers were bent on any form of cheap production and lower quality material, thus, perilous working conditions such as sweat shops and damaged low quality goods made their way to the market. Causing environmental damage and other forms of corruption too went unnoticed due to the limited levels of transparency maintained. Middlemen were completely removed and logistics and other levels of the supply chain were included into the production altogether. This resulted on the positive aspects the introduction of JIT and better supply chain management and reduced lead times, however also resulted on the negative aspects of unregulated sourcing and unsafe working environments. Other developing nations such as Sri Lanka and India too suffered due to the immense price reductions from China as their labor and resource bases simply could not match those of China in especially the garment export industry, thus, still leaving China to be the world’s largest exporter of western brands, closely followed by Bangladesh.