Which country is the world factory in your minds? China or India?
What are the necessary conditions for becoming a factory of the world? It is known that factories cannot live without labor and capital. Relatively cheap & abundant labor and sufficient capital are essentials to becoming a factory of the world. We will introduce the differences between Indian factory and China factory. Then we will tell you why Indian factory cannot replace China factory.
Eight problems why India cannot become the factory of the world:
1. Cultural bias. In India, there is a deep cultural bias to industries and industrialists. India was ruled by some big corporation. Many Indians cannot look at industries positively. Most Indians think farm work and office work is more holy than factory work. In the same salary, they would like to choose farm work or office work.
2. Engineering education. Compared to the four big industrialized nations: Germany, Japan, China and USA, the engineering education in India is poorer. If nobody wants to work in factory, then how to improve the skills?
3. Environmental protection. In India, if a big company causes pollution to their earth, this company will break down. Although it's all about the environment, what confuses me is this double standard. Few measures are taken to prevent farmers from destroying the environment (depleting groundwater with free motors). But for a large factory, there are obstacles in every aspect.
4. Land laws. India has land laws which make it hard to acquire large areas of land for building factories. If you build factory, you need large units of land. If an area has fertile lands and water, this land will become farming land. Water resources in India is lacked. Moreover, building factories in non-fertile deserts is impossible. So there is difficult to build factory in India. Compared to India, China has a vast land with rich resources. China has born advantages on building factory.
5. Infrastructure. India has not invested too much on electricity. Power outage often happens in India. What’s more, you can see the roads, ports and warehouse. And see how much they invest in these infrastructure. Compared that, China invests much money in these infrastructure. Though India and China both have large populations, you can see that electricity in China is very rich.
There is a huge gap in India's infrastructure construction according to the latest Global Competitiveness Report of the World Economic Forum, India's infrastructure ranks 85th out of 148 countries. Chen Fengying, director of the Institute of World Economics of the Institute of Modern International Relations, believes that the current Indian infrastructure is equivalent to the level of China in the 1980s. Its basic construction in accordance with the standards of China's medium cities will be a huge investment in India. There are huge gaps in the construction of railways, railways, highways and ports. If India wants to catch up with China, it will not only fill the traditional infrastructure gap, but also increase investment in new areas such as fiber optic networks and modern public facilities.
Chinese have a good spirit that they can do a thing fast and perfectly. Different from the country Japan, France or German, in their opinions, build something slowly will have better outcomes. But Chinese concept is that you can do fast and in quality, people’s ability is no upper limited.
6. Power shortage. Although electricity price in China and India is roughly the same, India ’s power shortage is severe and power outages often occur.
7. Low labor efficiency. Indian laborers have a low level of education and poor learning ability. Chinese workers can generally become skilled workers within three months, while India requires more than half a year. On the other hand, Indian laborers like to be lazy. Highly educated people are disdainful of doing transactional work.
8. The tax rate is high. India has a wide range of taxes, which overwhelms many businesses and has a clear tendency towards local protectionism.
Why China can become the world factory?
a. In terms of cost. in the past when undertaking low-end industries, labor costs were very low. Labor costs can also be seen from per capita income. However, labor costs will continue to increase after 2010.
b. From the perspective of industrial clusters. China has already formed cluster advantages in many fields such as home appliances and electronic products. For example, why can drones develop rapidly in Shenzhen? Because Shenzhen has a cluster advantage, they can supply any accessories you need. No country other than China has this advantage. That many technical products are now innovated in the United States and handed over to Shenzhen to complete the production of products is a very efficient collaborative relationship. I think the industrial cluster is a favorable condition for becoming the factory of the world.
c. From a market perspective. China's extremely huge market naturally has the advantage of becoming a factory of the world. First of all, when you satisfy the domestic market, you can generate many large enterprises. A huge market, a large population, and high-quality labor will form a huge cost advantage, sales volume affect product price, price is competitive advantage.
d. In terms of efficiency. China's labor force is very high-quality and its production efficiency is the best in the world. Efficiency itself is one of the criteria for measuring cost advantages. Apple CEO Cook has described it before, which is one of the reasons why Apple mobile phone production is not willing to relocate to the United States.
e. From the perspective of the distribution of oversea Chinese in the world. there are as many as 30 million oversea Chinese in the world, and the overall economic strength of the Chinese is relatively strong. In particular, the economic advantages of oversea Chinese in Southeast Asia.
f. Geographically. the world's three major economic zones: Western Europe, North America and East Asia. China and Japan, South Korea, Taiwan(China), Hong Kong (China)and Singapore are very close to each other.
g. When talking about factories in the world, you can’t help mentioning the role of Chinese government. The government is desperately engaged in basic investment. The Chinese government's investment everywhere is unprecedented. Other countries have not worked as hard as the Chinese government. To be honest, the Chinese government has made great effort to engage in economic construction.
h. Supply chain. This is also a very critical factor in becoming the factory of the world. The supply chain includes supply of production materials, equipment and spare parts.
Raw material supply, for example, if you open a clothing factory in India or Africa and take an American order, you will need some kind of fabric, printed zipper buttons, specified specifications of threads or specified packaging materials. However, these things are very difficult to find locally, they need to be imported by placing orders with up and down stream manufacturers for a long time in advance. Coupled with customs clearance, you need at least 3-4 months to prepare. Adding production time and completing an order, half a year is considered fast.
If your factory is in Dongguan, Guangdong Province, China and the up and down stream manufacturers are nearby, one week is enough for you to prepare the raw materials and accessories. Can't catch up with production? There are many subcontracting manufacturers. From receiving orders to delivery, one month is more than enough. Morever, the price of purchasing raw materials and auxiliary materials is lower, the production cost is cheaper, even the cost of intermediate links is less!
I. Machinery and spare parts supply. If you open a clothing factory in India and you buy machinery and equipment from China, Japan or Taiwan, you need a lot of spare machines and accessories, otherwise your production line may stop at any time. If you need accessories or factory maintenance personnel in Guangdong, they will arrive within an hour!
After you read this article, you must know why China is the world factory.
