Outsourcing manufacturing to China caused a huge shift in how the world does business. This outsourcing increase has forced companies to stop thinking locally and start thinking globally. Here are three reasons outsourcing to China has created a better world economy.
Trial and error is the mantra of many entrepreneurs. The major problem with each of these change cycles was the incremental cost incurred with little return. By outsourcing to China, many of these business visionaries reduced cost per revision, which led to more products reaching the open market. Struggling businesses are also able to reduce their costs by outsourcing. Increased profit margins meant fewer units needed to be sold. A struggling company can then keep their doors open and preserve jobs.
China has the largest rare mineral market in the world. This vast marketplace is one reason China can produce electronics at a reduced cost. These low-cost electronics have allowed the world to share information and grow in efficiency. African nations are finding cellphones more economical to run than landlines. Furthermore, the one laptop per child project gave developing countries many new education possibilities. China also produces nearly half of the world’s steel, which has led to more economical building production worldwide. On the flip side, China’s demand for timber was a primary reason the American lumber industry rebounded quickly after the housing recession.
Outsourcing has an interesting effect in the countries receiving this new business. When class mobility becomes easier to obtain, whether poor to middle-class or middle-class to rich, more demand is created. Those that develop the products for outsourcing also become consumers of the products.
The lower design cost, availability of materials, and increased class mobility make outsourcing manufacturing to China a very practical idea. This practice not only benefits China, but the entire world.