China powers the world and is eating the global export lunch. Call it a massive dislocation because there is no comparison. The US is sub-8% even as most expect China to hit 25% as a result of the covid-19 black swan. This is not changing anytime soon as China is ramping up more trade surpluses against the U.S. because everyone likes good deals. Yes, despite the trade deals from President Trump, the trade imbalance has exacerbated under his watch.
Visit a mall and see those stores with “Proudly Made in America” merchandise. Admire the flags, move around, and then make way towards Walmart to buy Made in China version. There is a reason that is happening: pricing. Yes, at Walmart, you can spend just 30% of the amount for something fairly good enough, and that product was stocked from China. Saving money is not a political agenda – that is why you have Walmart in Blue and Red states. Everyone likes to save, and China makes that possible using the construct of Minimum Viable Quality (MVQ).
Without the cost context you can think that the cheap one was a poor job. It is indeed not a great quality product but that was by design. That is what the market for toys wants because the kids rarely use them for days before they are discarded. It is a mass market product which has to be affordable to make sense. That does not mean that you cannot make very expensive toys only few can afford. But what is the purpose? Put a $260 XL in a toy which would be dumped within days?
The deal is this: the construct of quality has no meaning until the price of the product is put into considerations. I always ask entrepreneurs to build for the Minimum Viable Quality (MVQ) bounded by the product target price which market will respond. You can build rockets to fly around the world: that is an engineering possibility. But does that make a business sense if no one can afford it? Ask the makers of Concorde for answers.
China is China. Alipay processed $18T worth of transactions in 2019; Visa and Mastercard combined for $16T. Visa and Mastercard served the whole world, yet China beat them. In the last 10 centuries, China has dominated at least 6 times. Sentiment or not, hate or like, I want to ask you one thing: What is Your China Strategy?
Tekedia Mini-MBA edition 16 (Feb 10 – May 3, 2025) opens registrations; register today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
---
Register for Tekedia Mini-MBA (Feb 10 - May 3, 2025), and join Prof Ndubuisi Ekekwe and our global faculty; click here.
When we run numbers without context, it becomes quite challenging for ordinary people to understand the finer details. And if you are quick to reach a conclusion, you may miss out on the underlying issues.
First, why are made in USA goods more expensive than made in China? Is it a question of capacity or it has something to do with culture? What is the minimum wage in China compared to USA? And also, how many people are keen to emigrate to China compared to the USA? If you are discussing trade imbalance without objectively examining each of these questions, then you may end up with false outcomes.
Yes, everyone likes cheap items, but will everyone be willing to earn lesser wage? And also, what happens when there are no jobs, because all manufacturing jobs have been shifted elsewhere?
When we understand how one choice affects the other, we become more circumspect when comparing or celebrating two environments that are grossly dissimilar.
Nigeria is bleeding, yet not many people know why, they will simply shout leadership or corruption, but look deeper, it’s much more than that.
There’s no China Strategy, rather it’s a case of choices a people make with respect to survival of their economy.
Choice matters.
I believe there is a China strategy which is all encompassing. This strategy includes the low wages, extended work times etc. like you said Francis, choice matters and China I believe have been deliberate in all they do. Their penetration in the Middle East; uses pricing strategy to oust European competitors in Utility plants and construction projects across the GCC. I can tell you that these structures meets the minimum standard the project sponsors have asked for. So what ever way you look at it, it a strategy. Yes wages are generally low in China, but the number of Billionaires are growing geometrically there. This means that their strategy is working. It’s your choice to drive a 12 firing cylinder car instead of 4 or even one with two stroke engine. Choice and life style is equally a strategy.
Rise and dominance of China in International trade is a keenly thought strategy built on economy of price. It worked well for their society given the population, communist philosophy and cheap labor as well as other worlds waiting to consume cheap and not ready to produce. USA is a different world where driving force is living large, capitalism, uncompromise quality as well as American image. America is not known for labor exploitation. While American goods are synonyms with quality, same cannot be said about made in China products; this to me is a symbol to identify with. It doesn’t matter how many billionaires come from the side.
America is America, China is China.