More often than not we see a ‘made in china’ tag on products. And more often than not, these products are much cheaper compared to their competition manufactured in other countries. We usually don’t think much about it, but have you thought about how come “Made in China” products are so cheap? And why only China and no other countries are able to replicate it?
There are two main reasons for this:
- Cottage Industry
- Shadow Factories
Chinese government promotes cottage industries with tax breaks and incentives. These cottage industries manufacture stuff like toys to motherboards. Quality control is a myth and so is copyright. Brand names, holograms and ‘QC OK’ are mere stickers. The people make money, consumers get what they want (i.e. cheap products) but the real loser is the company whose product has been replicated / imitated.
This is the main reason why we see so many ‘made in china’ tag on many branded products as well. Most Chinese companies have 2 manufacturing factories.
One is a main factory which is called a ‘5 star factory’, which complies with all the norms. All the workers get their insurances, work place is well lit and ventilated, and the workers are paid in accordance with law, the whole nine yards. Whenever an investor or official inspects the factory this is factory that is shown.
Usually in the same place or somewhere close by there is another factory, which flouts every possible law. The work conditions are pathetic, the wage is very less compared to the minimum prescribed by the law, and workers don’t get any health benefits or insurance. This factory is called the ‘shadow factory’.
This shadow factory is not accounted for and so are the workers. The work hours are 12 – 16 hrs a day, 6-7 days a week. And according to reports the output of this factory is more than 10 times the ‘5 Star Factory’.
Whenever there is a report of a shadow factory, a crackdown takes place and just to pacify the factory is shut down and then after a few days another one comes up.
70% of companies based in China have shadow factories.
It is a gross violation of human rights and business ethics. But in China, work is the religion and people from small villages travel like nomads in search of a better pay, and most of them are employed at these shadow factories. There is a huge workforce ready to work in such conditions without complaining much, and companies are happy with the margins.
Next time your ‘made in china’ product fails, it may have come from one of these shadow factories.