Why some made-in-China goods are cheaper abroad

16:07, April 13, 2010      

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People who often go to Europe and the United States know that at the shopping malls the clothes, shoes, caps, PCs and other products are cheaper than the same products sold at Chinese markets, despite the fact that many of them are made in China.

For example, a Coach handbag may be sold for 2,000 yuan at Beijing Xidan, which amounts to nearly 300 U.S. dollars, but at a U.S. outlet store, it may be sold for less than 100 U.S. dollars. And a Hugo Boss formal suit is usually priced at 300 or 400 U.S. dollars but it may cost more than 10,000 yuan, about 1,470 U.S. dollars, at a Chinese store.

Maybe you have learned that the made-in-China iPhone sells in the United States for less than 200 U.S. dollars, but in China it goes for anywhere between 3,000 to 4,000 yuan, some 440 to 590 U.S. dollars.

Another thing may surprise you. In Washington, some 30 minutes drive from the city proper, you can spend 400,000 U.S. dollars to buy a detached villa, including the land and a garden. But an economist from the U.S. Department of Commerce was shocked speechless when he heard that such a thing would be impossible in Beijing.

So you can find many Asians, especially Chinese, at the shopping stores in the United States during the shopping season after Thanksgiving Day. In some Coach specialty stores, I even found eight out of ten customers in line were from China. Why? Because the prices are much cheaper.

Many factors cause the phenomena and tax is the main reason. But even if we exclude taxes, such as those levied on imported luxury cars, there is still a large price gap.

In the era of globalization, Chinese earn only a small profit from the manufacture of goods in China, but the Americans earn large profit from the brands.

Why are products produced in China priced much cheaper in the United States, but higher in China? It makes little sense because the freight costs of shipping the items overseas should add quite a bit to the price.

This also arouses some Americans concerns that they believe China is guilty of dumping goods or pumping up subsidies. This becomes an excuse that the United States uses to impose countervailing duties and anti-dumping sanctions against Chinese goods. But we know it is not true.

Some people think we should examine the Chinese system to find an answer. For example, the poor distribution channel and the lack of credit transactions in China force the manufactures to turn to foreign markets. Furthermore, monopolies and huge profits in some industries drive them to seek maximization of profit.

But what is certain is that the price gaps between markets at home and abroad are not caused by just one factor.

While the income level of Chinese people has increased significantly, there is an obvious gap compared to that of the developed countries. China strives to promote economic restructuring, but Chinese people still rush overseas to buy cheaper goods produced in China. This may cause the external flow of Chinese purchasing power and become a barrier to expand domestic consumption.

By People's Daily Online

(Editor:梁军)

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