You need to understand how the Chinese manufacturing works. Everything is about volume.
Nike may get a chinese factory to make 100K pairs of shoes (just one model). The Factory will not make exactly 100K pairs, they will make 105K pairs. The extra 5K pairs will have many takers in the local market.
Each pair may cost the factory $5 and sold to Nike for $8 (which is over 60% markup) which NIke sells for $$$. So these extra pairs sold to local buyers for $10 which then get sold on Aliexpress or Ebay for $20 including free shipping across the world, which is still way cheaper than a NIke store.
Are these genuine product? of course they are.
Would the chinese local buyer buy a fake product for slightly less e.g. $8? The fake factory do not have the automation to churn out the volume required, so their raw materials are more expensive, requires more manual work, so they can only ask for smaller margin.
The factory producing genuine goods cost them little to churn out the extra 5K. So local buyers too, know that they need to sell genuine product overseas if they were to make good money.
I have visited factories in China and their production cost is low mainly due to automation and volume. The equipment they used are made overseas - Japan/German etc. Although labour cost is still cheap but it is no longer the driving force on cost. it is automation and volume. But buying from ebay and not holding the goods in your hand before purchase do pose a problem.
Of course the biggest buyer of Chinese goods is USA. With Trump tariff, it affected the volume but local automotive volume is still huge. The Chinese companies still sell the same price to USA. But USA importer get slapped a tariff by Uncle Sam. If importer raise the price to consumer, the goods price differential becomes less and therefore less attractive.
How do the Chinese government deal with this? They lower the RMB exchange rate.
Chinese still sells for X RMB . US importer used to pay $8 before tariff but with tariff, it is now $10. Once RMB is devalued, the importer pays $8.50 including the tariff. Good for importer, USA consumer and Uncle Sam.
That is why Trump call them currency manipulator.
Won't the lower currency affects the raw materials since China need to import them from overseas? in theory yes but in practise no, the currency of the rest of the world fell against the USD.
China still buy them at more or less the same price. They will just have less billionaire per year due to the trade-war uncertainty.
Nike may get a chinese factory to make 100K pairs of shoes (just one model). The Factory will not make exactly 100K pairs, they will make 105K pairs. The extra 5K pairs will have many takers in the local market.
Each pair may cost the factory $5 and sold to Nike for $8 (which is over 60% markup) which NIke sells for $$$. So these extra pairs sold to local buyers for $10 which then get sold on Aliexpress or Ebay for $20 including free shipping across the world, which is still way cheaper than a NIke store.
Are these genuine product? of course they are.
Would the chinese local buyer buy a fake product for slightly less e.g. $8? The fake factory do not have the automation to churn out the volume required, so their raw materials are more expensive, requires more manual work, so they can only ask for smaller margin.
The factory producing genuine goods cost them little to churn out the extra 5K. So local buyers too, know that they need to sell genuine product overseas if they were to make good money.
I have visited factories in China and their production cost is low mainly due to automation and volume. The equipment they used are made overseas - Japan/German etc. Although labour cost is still cheap but it is no longer the driving force on cost. it is automation and volume. But buying from ebay and not holding the goods in your hand before purchase do pose a problem.
Of course the biggest buyer of Chinese goods is USA. With Trump tariff, it affected the volume but local automotive volume is still huge. The Chinese companies still sell the same price to USA. But USA importer get slapped a tariff by Uncle Sam. If importer raise the price to consumer, the goods price differential becomes less and therefore less attractive.
How do the Chinese government deal with this? They lower the RMB exchange rate.
Chinese still sells for X RMB . US importer used to pay $8 before tariff but with tariff, it is now $10. Once RMB is devalued, the importer pays $8.50 including the tariff. Good for importer, USA consumer and Uncle Sam.
That is why Trump call them currency manipulator.
Won't the lower currency affects the raw materials since China need to import them from overseas? in theory yes but in practise no, the currency of the rest of the world fell against the USD.
China still buy them at more or less the same price. They will just have less billionaire per year due to the trade-war uncertainty.
