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Deng Xiaping footage courtesy Reagan Library
Singapore historic photo courtesy Hiramatsu Kaxuhito
Chinese bar photo courtesy Roman Boed

Big thanks to Patreon supporters: Kevin Song,
Kevin Song, David Cichowski, Andy Tran, Victor Zimmer, Paul Jihoon Choi, Dylan Benson, M van Kasbergen, Etienne Dechamps, Adil Abdulla, Arunabh Chattopadhyay, Ieng Chi Hin, Ken Rutabana, John Johnston, Connor J Smith, Rob Harvey, Arkadiy Kulev, Hagai Bloch Gadot, Aitan Magence, Eyal Matsliah, Sihien Goh, Joseph Bull, Marcelo Alves Vieira, Hank Green, Plinio Correa, Brady Bellini

at the end of the first millennium around 1080 China was definitively the most powerful country in the world more than a third of the world lived within his borders its technology was the most advanced in existence and its economy accounted for an astronomical 50% of the world's GDP the West paled in comparison to China but eventually Europe arose from its dark ages the importance of China diminished and the West came to rule the world today that is still largely the case but China is rising again in 1978 China had a GDP of only 200 billion dollars only about 4% of the world's GDP but nowadays that GDP has risen to 11 trillion dollars and accounts for 15% of all economic activity in the world this economic Renaissance of the last 40 years is largely thanks to one industry manufacturing we've come to accept that china is the world's factory but it wasn't always this way in the early 20th century goods were often just produced right where they were sold America made American goods Europe made European goods it wasn't until cheap worldwide shipping became available that the production side of a company could be relocated to the other side of the world but why did China win how did this country become the manufacturing giant it is today in 1978 dung Xiao ping took power in the People's Republic of China he quickly visit Bangkok Singapore and other flourishing Asian cities and was convinced that in order to succeed China needed to open itself up to the outside world at least to an extent he gave people control of their farms privatized business and most importantly allowed for an investment in the country for the first time in decades he opened up for special economic zones with tax incentives and exemption from the oversight that the rest of the country saw on its investments and trade activity these four zones were essentially the free market portions of China but none was more successful than this one Shenzhen in the Guang province so I went there to see what it was like before its designation as a special economic zone in 1980 Schengen was a tiny town with about 30,000 inhabitants but today that's grown to nearly 18 million people that means that its size rivals at of New York and London it's believed that Schengen might have been the single fastest-growing city in human history every other special economic zone was an established area before its designation but Schengen made sense as a spot where China could embrace the West as it lay just north of the border of Hong Kong what was at the time a British territory today Shenzhen is the electronics manufacturing capital of the world so Shenzhen missile city is really known for two things one is its manufacturing capabilities especially for consumer electronics products and second is gravitation for talents or human resources especially on the product development and research and development disciplines Apple Samsung Microsoft Sony Canon they all manufacture products here in Shenzhen in fact 90% of the world's electronics are made at least in part in this city everything just costs less in China so labor cost less to where a factory in the United States might pay upwards of 10 to $15 an hour a Chinese labor would happily accept three or four dollars an hour in Shenzhen when I was there I withdrew the equivalent of $80 from an ATM upon arrival and left four days later with cash left over a 30 minute taxi ride cost about seven US dollars a full meal at a local place was about $3 but China isn't cheap entirely naturally China has artificially depressed the value of their currency up until 2005 the Chinese government just said that the exchange rate was eight point two seven one per dollar and that was that they then went a few years allowing it to increase in value within a margin but in 2008 they pegged its value again to make Chinese exports more attractive during the financial crisis nowadays the government just picks an exchange rate daily and lets the currency fluctuate from it by up to two percent this just makes it so Western companies can buy more for China also doesn't charge taxes on exports while the US doesn't charge taxes on imports the US doesn't even charge customs fees for some products like tablet PCs so some products can make it all the way from their Factory in China to stores in the u.s. completely tax-free when I was in Shenzhen I visited a company called anchor they make all sorts of consumer electronics but chances are if you have something from them it's one of their portable batteries I asked their CEO why so many electronic companies are now based in Shenzhen so the advantage is that you know we're close to the supply chain so everything is faster right so instead of like you know you do a backhaul and you know see it like two weeks later here actually you see them you know designed to lock up and you receive it like three days later in changing there are markets where you can buy every part imaginable there are factories where you build prototypes in a matter of days there are engineers ready to work at a drop of a hat development just happens faster in Shenzhen a US company might use the same factories as one based in Shenzhen with the geographical distance makes production slower in addition word travels fast in Shenzhen a few years ago anchor was first to market with a technology called power IQ allows for faster device charging the engineers from Ankur told me that a big reason they were able to go to market before the Western companies was because they heard about it first thanks to the proximity to other engineers and companies Shenzhen just produces things better and faster but a product isn't just a physical item Polish TV in Shenzhen is being instant and public companies and advantage for the supply chain that weekend we can defense value could board us with a competitive price for the brand it's also a kind of a challenge which engine can't build as well as brands certain companies like anchor have been able to to an extent thanks to smart PR and marketing but some other companies just don't bother lucrative Western consumers want familiar and approachable feeling brands but cultural differences and geographic distance often make Chinese based companies just seem different all across Shenzhen I saw these boxes filled with rentable portable chargers and as it turns out it was an anchor product but the Chinese designed product didn't really succeed in the Western market so actually talking about inner box the product is originally designed for the west of Punkins Harbor actually hours following sound wasn't that successful so we realized first of all like you know us yes people actually but I go through a bar they actually really build their training instead of looking at their phones well if you're going walking to a bar in China you'll really you'll find actually like 20 tables of people standing around looking at their phone when the designers are thousands of miles away from the consumer they might not be as knowledgeable of their wants some companies have sprung up in Shenzhen whose whole business is to develop and produce products without a brand they're called white label companies they might produce earphones for example then sell them to a Western audio company who will attach their brand and sell the product at a markup despite its enormous role in increasing the GDP of China 30 fold in the last 30 years manufacturing is not an entirely sustainable industry for the country long term the problem is that rather ironically the economic growth that manufacturing spurred in China has increased labor prices to a point where their manufacturing is less competitive before manufacturing came in China was a country of poor rural farmers but today China has a real middle class and cities that are expensive to live in it used to be that workers like the ones that anchors factory moved to the city for a few years when they were young to make money for their family back home but nowadays people are moving to permanently and want to be able to set up solid middle-class urban lives the average cost for real estate in central Schengen is almost $1200 per square foot that's even higher than San Francisco and New York even when workers live outside the city center higher wages are necessary even just to pay for housing at the same time manufacturing is becoming less labor-intensive every day as robots and automation are becoming increasingly advanced and inexpensive in 2015 China launched an initiative spending hundreds of billions of dollars each year to upgrade and automate factories to keep prices low but this will likely do little to keep companies from packing up shop and moving elsewhere manufacturing lines that can be automated are likely to move back to the United States and the rest of the Western market robots cost the same whether they're in the United States or China so manufacturing products in the US helps save on shipping costs and certainly is good for PR at the same time the labor intensive jobs that China prospered on in the past decades are moving to less developed and less expensive countries like Vietnam Bangladesh and India Chinese manufacturing firms are responding to this by opening up their own factories all across the world everywhere from Africa to the United States itself the model that might work for China in the future is that of anchor Chinese based firms that can take advantage of their proximity to the production lines to cut down on development cost and time Shenzhen based startups like anchor DJI and oneplus have already succeeded in taking advantage of this proximity but more are being established each day if you see a hardware-based kickstarter campaign there's a good chance it comes from Shenzhen ten years ago a company would be hard-pressed to succeed in Shenzhen as its own brand because historically the retailer has acted as a barrier in between the manufacturer and consumer but with the rise of Amazon and other ecommerce sites it's now possible for Eastern companies to sell directly to the Western consumer in a system that rewards for quality / price the time really is ripe for Chinese entrepreneurship while Silicon Valley might be the dominant area for software startups it's hard to rival Shenzhen as an system for hardware development and manufacturing I have to give a huge thanks to Ankur for bringing me out to Shenzhen to research and film this video it truly would not have been possible without them and they gave me complete creative control over the video I've actually owned and used an anchor battery for over five years that's never broken down even when it's been accidentally submerged twice and dropped countless times but luckily they upgraded me to one of their newest ones which I love the main thing I want to plug for them is their power it up contest going on right now ten winners will each get two thousand dollars in cash and a bunch of free anchor products to enter you make a video up to one minute long about an unpleasant or awkward situation caused by running out of power upload it to YouTube then share it on their page and the ten highest voted ones at the end of the contest win the link to enter is in the description so good luck aside from that please be sure to check out my podcast show makers and subscribe to this channel to get all my future videos right when they come out thanks again for watching and I'll see you next week for another Wendover productions video

44 thoughts on “Why Chinese Manufacturing Wins

  1. I hope you enjoy this video!

    There's a bit of a unique situation in this video where the sponsor is partially the subject of the video as well. This is because they were able to give me a level of access that normally would not have been possible (Chinese factories are not easy to film in.) I want to stress that I did have creative control over the video but take my presentation with a grain of salt nonetheless. I visited a well-regarded, ethical factory which isn't necessarily a reflection of all factories in China, as you may know. I also didn't cover some of the issues with manufacturing in China and other less-developed countries since I was taking a more holistic, economic view rather than a person view.

  2. They win because they're good. Examples? DJI (drones and cameras), BYD (electric buses and cars), Haier/Xiaomi/Huawei/XGIMI/Oppo (home and electronic products) to name a few. Now BMW/Volvo/Audi and many other foreign brands are making their products in China.

  3. "Why Chinese Manufacturing Wins" …. The answer is very straight forward and simple is they have " force labor law" ,and the West don't have. They force their people to work to death that is why stupid.

  4. If it is an electronic device, it probably is from China. Also, China cares about the rising air pollution. Their AQI went above 50, they started building vertical green infrastructure, investing in technology to prevent AQI rising further.

  5. China has one Edge, Cheap labor, which with automation, will not be an advantage for long. When Human become less needed to make shoes, cloths, etc. China will be in very deep shit… 20 years or less humans will not be needed to make shoes or cloths..

  6. Dirt cheap labour lol and not giving a shit about the environment. It's easy to be innovative when you don't have to worry about your people or the environment

  7. Thanks for a great video! This gives some perspective on several very important things. It's easy now to understand why USA is acting so destructive and why China keeps on surprising the rest of the world positively in almost all fields!

  8. My dad told me that Japan used to be the 'made in China' back in the 50s and 60s – if you got something that was made in Japan, you knew it'd be junk. China has been like that for a while but now all the high end stuff is made in China.

  9. Everything costs less in China, so labor costs less too, this is totally wrong i was their the main reason is the governmental subsidies and economic procedures, offshoring and manufacturing mostly in Africa to decrease the costs of labor and row materials

  10. Chinese products are garbage. Anker is different. Chinese manufacturers only have standards and ethics when they're provided by a western company. They literally fill stuffed animals with toxic waste to avoid paying for disposal. They make products that break on store shelves before they're even bought. Anker offers quality products products and I would highly recommend them, but they are completely without morals or ethics. Anker commits massive review fraud with self sales. They provide products to influencers for positive reviews. Anker has even tried to bribe me personally. I took offense and refused their free products for positive reviews.

  11. One thing that many Chinese companies can learn from Anker is to GET YOUR ENGLISH correct. For many times I see Chinese products that are otherwise perfectly usable coming with horrible Chinglish documentation that even a native Chinese speaker like me can't understand. Same recommendation goes to Indian, Mexican and other non-English countries.

  12. 3:30 that's a crock of shit. I've visited cheaper countries, and stayed with family there, spent little on food, but still spent $50 a day. And the taxis were cheaper, and mass transit even cheaper. Why do pompous, pretentious youtube "stars" lie so shamelessly and wantonly like this? I hope it catches up to you.

  13. These people have built one million kilometres of freeway in the last 30 years..used more concrete in the last 10years than the usa has used in the last century and that's a fact go have a look for yourself i did blew me away!!

  14. don't be naive. I am Chinese but ran away from China and I give service to the world to show the real face of China. There are lot of Fake comments and profile all over the internet from communist puppets. Never believe what China says but what China does. Ccp governs in a style of fake data, slogan, cheats investor. You get the essence of their faking patterns. You are a great man to talk about loudly which is not allowed anywhere else ccp are evil. China blocks youtube and foreign social media. People need VPN in China to watch this video. No international law authorizes China to block foreign social media, China blocks everything they want without any reason but giving advantages to their own companies and medias and blame other countries when they do the same. Many dictators sit at UN like China.

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