“Made in China” – Quality and Perception: Background of Chinese Production and Exports

As we wrote in our last blog, “Made in China” – Quality and Perception: Intro, China has been known as a source for cheap goods with questionable quality for years. In this blog series, we’ll be exploring how China ended up with this reputation and what technological and economic advancements they have made to change it. In this blog, we’ll be writing about the background of Chinese production and exports.

By now, it is no secret that, ever since Deng Xiaoping set the stage for a gradual opening up of China’s economy in 1978, the country’s growth has been nearly unstoppable. GDP growth, according to certain measures, remained at or around 10% per year for much of the first 3 decades since opening up.  China went from a country mired in its own internal struggle and rife with poverty to the second largest economy in the world and the largest exporter by 2009, surpassing its smaller but more experienced neighbor, Japan.

Much of what enabled this incredible growth was the availability of cheap, plentiful labor. With hundreds of millions of people living deep in poverty, and the third largest landmass in the world, China was fertile ground for low cost manufacturing that could utilize the large amounts of unskilled labor available. We can see this trend reflected in Figure 1b.

By 1989, the imports coming into the U.S. from China were still largely dominated by Apparel Manufacturing Products and Miscellaneous Manufactured Commodities with 23.96% and 18.4% respectively of total exports to the U.S., both of these being labor intensive, low-value added manufacturing sectors. However, by 2010 a major shift had taken place, with imports into the U.S. from the Chinese Computer and Electronic Products sector going from 9.67% in 1989 to over 36% in 2010, a massive increase in a more technology intensive, high-value added sector. By 2017, China dominated the U.S. electronics import sector, accounting for over 61% of the annual import volume, according to JOC.com. This is in contrast, for example, to Apparel Manufacturing whose contribution to total U.S. imports from China decreased by over 15 percentage points in the same period.

So, with this much growth in labor intensive industries, how did China end up with a reputation for poor quality goods? Stay tuned for next week’s blog where we will discuss the source of this negative perception and discuss China’s major quality scandals.

 

By Buck Perley
Research by Bonnie Roche

 

All posts in this series:

• “Made In China” – Quality and Perception: Intro
• “Made in China” – Quality and Perception: Background of Chinese Production and Exports
• Made in China Quality & Perception: The Source of Negative Perception – Part 3
• Made In China Quality and Perception: Improving Standards and Improving Quality – Part 4
• Made In China Quality and Perception: The 12th 5 Year Plan – Part 5