What it really means to be ‘Made in China’ | CNBC Reports

made in China we've become accustomed to seeing the label on products manufactured in the world's second-biggest economy but buying one of these products in China instead of say the US doesn't guarantee you're getting a better price so why is that and what does it truly mean to be made in China [Music] to start looking for some answers I visited to shopping hubs Los Angeles in the United States and Beijing in China with 2 1 3 3 thank you fish it Chinese tourists have built a reputation for being big spenders abroad spending a whopping 277 billion dollars in 2018 much more than any other nationality a lot of times people think that purchasing something in China will be inexpensive but that isn't always the case so how much of a difference are we talking I sought out four products from four popular Western brands to compare starbuck H&M Adidas store a Godiva store u.s. brands are everywhere I look in this area I even just spotted a Red Lobster to keep things consistent I'm using 2019 average for an exchange rate the products I'm comparing our standard black t-shirt hmm grande cappuccino Godiva chocolate axis it and an adidas hat [Music] I feel like this shirt would be half the price in the US but I'm wrong the shirt at H&M is priced nearly the same in the US and China a grande Starbucks cappuccino will cost you $4 63 cents in Beijing but in Los Angeles California 3 dollars 95 cents in this case of Godiva chocolates called pearls is priced at $7 24 cents in Beijing but only 3 dollars 95 cents in LA and this adidas hat will set you back 42 dollars 27 cents in China nearly double the price of a similar hat in the US my small experiment has made one thing clear pricing is complicated so much so that websites have popped up like the Mac index a site that compares Apple product prices from around the world so many ads for Apple here in this area according to an analysis by tech insights the cost to make an Apple iPhone pro is 490 dollars and 50 cents yet according to the Mac index the price to buy one is one thousand three hundred eighteen dollars in Japan one thousand four hundred seventy seven dollars in the u.s. one thousand six hundred fifty eight dollars in mainland China and more than two thousand dollars in Turkey and Peru prices vary across countries due to factors like the demand tariffs and tax refunds and then there's the supply chain the network of people organizations activities information and resources involved in the creation of a product Apple's current CEO Tim Cook is considered by some to be a mastermind in supply chain he first joined Apple in 1998 with a mandate to clean up the company's manufacturing and distribution over time he closed factories and warehouses instead opting for contract manufacturers many of those contract manufacturers are in China that's great for Apple's profit margins but it's certainly not praised by President Trump who has asked Apple to make its products in the US but that may be easier said than done if say iPhone production was moved to the US instead of China different analyses show the price for the consumer to go up anywhere from 30 forty dollars to hundreds of dollars to even 30,000 or $100,000 that's partially why despite Apple pledging to invest more money in America manufacturing it maintains China as its hub for making its gadgets when you say made in country acts it's really an oversimplification of what it really is that's omar slim a senior portfolio manager at global asset manager pine bridge you know when you hear about made in this country or that country it's really quite relative and it's a simplification of things because it's most likely made in a number of countries here's an example let's say we want to make Klaus Anya for dinner if Jeff cooks the ground beef and prepares the cheese Sara makes the tomato sauce and layers the ingredients into a pan and Blair who bought all the ingredients puts it in the oven who gets the credit for making the lasagna now let's apply that to Apple's iPhone while the phone might say made in China some parts of it come from other parts of Asia Europe and even the US but here's the catch even though an iPhone may be assembled in China it's still tariffed in China as a US product because Apple is an American company the brand makes that clear with it's a Qing designed by Apple in California how they're treated in terms of customs they will be treated as a US product so regardless of where they come it's essentially a US product same for Chinese products going into the US and saves for for instance European cars China became a popular manufacturing hub in the 1980s after it started to open to the world it became known for its cheap labor costs blacks regulations and business friendly environment as China's manufacturing sector grew it took the crown from Germany as the world's top exporter in 2010 today it's followed directly by the USA in Germany while Made in China has become synonymous with cheap and low quality products China is hoping to change that in 2015 it launched a made in China 2025 initiative which aims to shift its economy from low-end manufacturing to high-end high-tech products and it could already be well underway in 2017 Tim Cook said China lost its place as a low labor cost manufacturing nation many years ago so if so why is so much of its manufacturing done there well because of the skill and sheer volume of Engineers he said saying Apple's products require advanced tooling and engineers in the US you could have a meeting of tooling engineers and I'm not sure we could fill the room in China you could fill multiple football fields the us-china trade war resulted in a tit-for-tat increase in tariffs on many products with increasing costs being passed on to consumers many companies are looking to diversify their supply chain instead of being so reliant on China that sentiment has only grown following the corona virus pandemics hit on the global manufacturing industry along that supply chain there will be some companies that instead of manufacturing it in China if they could they could try to replace in fact companies including Apple Microsoft and Google are reportedly looking into moving some of their hardware production from China to Vietnam or Thailand but that might be harder than it sounds but other countries will have a hard time to compete along with the fact that the infrastructure is China is quite good along with the fact that in certain countries would not want to compromise their relationship with China the reality today is that a product likely has many components which are sourced globally a phone may be designed in the US but it's screen could be sourced from South Korea the sensors and microchips may be from Taiwan or Germany with its assembly in China so the next time you see a product with the words made in China remember that the full story is seldom pure and never simple hey guys it's Upton thanks for watching check out more of our videos and let me know in the comments do you think that China will remain the world's manufacturing hub while you're at it subscribe to our Channel and I'll see you soon

Channel: CNBC International

Views: 1,441,828

Keywords: CNBC, cnbc international, cnbc reports, made in china, made in china behind the scenes, made in china supply chain, global supply chains, what is made in china, made in china products, how things are made in china, are things cheaper in china, is it cheaper to buy in china, global prices, the mac index, mac index, cheapest places to shop, where is it cheapest to shop, where is it cheapest to buy an iphone

Id: oU5JAavtB2k

Length: 7min 57sec (477 seconds)

Published: Mon Mar 23 2020