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🇨🇳 What happened to seeing “made in China” on everything?

You know how when you get a new shirt or something from Amazon and you see something like “made in Bangladesh” on there? It used to almost always say “made in China” — why’d that change?

#1: China is no longer the cheapest option

As data analyst Cremieux writes — back in the 80s, most of Africa was wealthier than China.

Now, China is richer than most of the countries in Latin America and is about as wealthy as many countries in Eastern Europe - and this is good! What a glow up.

This means roughly a BILLION people have gotten out of poverty!

But this has some pretty big implications for doing business in China — companies used to flock to China to build and export their stuff because of (1) super cheap labor and (2) lots of it.

As the Chinese have gotten better and better at making things, they’re exporting more complex, expensive stuff - so the easy stuff to produce, like t-shirts, is out; and the more complex stuff, like electric vehicles, is in.

This means that Chinese workers are making more money as they make things that are more valuable to the rest of the world.

Yay!

But for the first time ever since China joined the World Trade Organization (WTO) in 2001, foreign direct investment (foreigners investing in companies to build things and do business in China) went negative - billions of dollars are leaving China for other cheaper options.

Now, it’s cheaper to build factories and things in other emerging countries, like Vietnam, Bangladesh, India, Mexico, and Brazil.

That’s a huge reason why you see so many products now that say “made in Vietnam,” for example.

Another surprise: Mexico is now the U.S.’s biggest trade partner!

#2: China is ruled by the eternal dictator, Xi Jinping, which isn’t good for biz

I won’t get super into this, but basically this guy, Xi Jinping, took power in 2013 and has consolidated his control over the country in the last decade. He rules with an iron fist.

Sure, China has been an authoritarian state since the Communists won the civil war in 1949. But over the last 20ish years, the government figured out that poverty sucks (shocker). To get richer, they would need to be able to sell things of value and do business with other countries.

Long-story short: they got super good at this, and all the world got excited because they thought “look, a country with over a billion people that has never bought our products! What a goldmine!”

Everyone was very happy to trade and do biz with China… until Xi came along and crapped on the party by doing what dictators do — going on power trips fueled by paranoia, and crushing industries that were doing great but intimidated him - like tech and finance. 

It got really bad after COVID hit.

Factories that made stuff for foreign companies shut down for a long time, and Xi was on a rampage.

Note down for if you ever become a dictator: companies won’t want to do business with you if, at any point in time, your government can just... take their stuff away because you feel like it.

Now, tons of companies are trying to get up and move to neighboring, more democratic countries, where things are more chill.

China’s economic recession + Xi’s desire to build a Chinese empire also don’t help — he’s got hungry eyes on land that belongs to India, Taiwan, Japan, the Philippines - you name it.

The TLDR; China is no longer the cheapest place to make things.

Still curious?

• This read on how China is mobilizing for war, which is going to make it hard to get that “made in China” swag

• Tech analyst Dan Wang always shares great insights on China

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Zach

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Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.