As China opens up to a post-pandemic normal, is it still the factory of the world?

With a GDP value worth $17734.06 billion, representing 7.94% of the world economy in 2021, China has one of the largest manufacturing sectors in the world. In fact, China has the world’s largest assembly service and OEM manufacturing industry. Let’s take a look to see whether the factory in China is the “Factory Of The World”? This article delves into the multifaceted landscape of Chinese factories, supply chains, and the intricate web of factors that define China as the “Factory of the World.”

China has developed a strong manufacturing industry over the past few years. Before 1980, China was a relatively small player in the global manufacturing industry. However, it turned a new page in 1980 by slowly overtaking other industrial powers and even surpassing the United States by 2010. Chinese manufacturing started to embrace modern industries by branching out into consumer goods.

The Chinese economy has continued to thrive as a manufacturing powerhouse by using updated equipment and innovations. It is common to see labels, tags, and stickers on various products saying “Made in China.”. This phenomenon is not just due to low production costs but also lower taxes and robust business ecosystems that open a world of manufacturing capabilities.

China’s extensive OEM capabilities have made it the factory of the world for some of the largest international companies. China is littered with vast networks of factories and suppliers, with certain areas known as global production hubs for specific products. Shenzhen, a southeastern city bordering Hong Kong, is a hub for the electronics industry and has built up an ecosystem to support the manufacturing supply chain.

Many American companies like Apple Inc. benefit from China’s supply chain efficiency by keeping costs low and margins high. Several components suppliers and manufacturers are located near Foxconn Technology Group (a Taiwan-based electronics manufacturer).

After Covid-19 hit, China experienced some of the strictest border controls in the world. For three years, leaving or entering the country was heavily restricted. After the borders opened earlier this year, China must face losing some manufacturing market share to its neighbors. Since 2014, Vietnam has acquired some of China’s manufacturing business with an increase of almost 360% in long-distance trade. Moreover, Bangladesh and Malaysia are taking over apparel production from China, while Taiwan has experienced marginal growth in metal production.

However, China’s success as a global manufacturer is not just because of low production costs. China will still remain competitive as its large business ecosystems are hard to replicate elsewhere, and it would take substantial amounts of time and effort to build up ecosystem networks in other countries. Furthermore, it is not easy for companies to pack up and leave China, as there may be high financial losses and possible difficulties in relocating elsewhere due to different laws.

Although the Covid-19 pandemic has created obstacles for Chinese factories, such an advanced infrastructure of government-controlled provisions means they will regain their place as the global manufacturing leader over the next few years.

Why choose Lone Star?

Lone Star has experienced and professional teams in China and Taiwan, and can judge which location is best for your production needs. Our team has an in-depth knowledge of the local market, conducting supplier evaluation and selection, factory audits, risk analysis, and product development while seeking benefits and cost-saving opportunities for your projects. If you are considering outsourcing your manufacturing to Asia, contact us for more information.

Check out our previous posts to learn more about What Issues do Companies Face When Manufacturing Goods in China or Taiwan? and How Lone Star Can Help You Outsource Production to Taiwan

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