What Makes China Cheaper Than Domestic?

The outbound consumption of Chinese tourists is increasing. When the government constantly seeks solutions for expanding domestic demand, the consumption of foreigners is so hot. Why is it so? Why is "made in China" cheaper than abroad?

Economic mode only cares about production, regardless of consumption?

The Losangeles times website reported that products made in China are often more expensive in China than in the West.

The laptop purchased from the apple flagship store in Beijing is no different from the one sold in the US. The only difference is the price, which is 460 dollars more expensive than the US price.

A pair of labels made in China

In China's world factory, this is really a strange thing.

China is famous for producing cheap products for Western consumers, but not always for its own people.

Despite China's prosperity, China's consumption expenditure is growing, but China's economic model basically considers production rather than domestic consumption.

Related paction leads to special "price difference".

In the Shanghai business daily, Qiao Xinsheng said that the goods made in China are cheaper abroad than in the domestic market, mainly due to the following reasons: first, related pactions lead to a special "price difference" in Chinese commodities.

As we all know, China's foreign trade export enterprises are a very special group. 30% of the export enterprises belong to the processing enterprises, and 40% of the export enterprises are concentrated in coastal areas.

These enterprises are carrying out the trade policy of "two heads". Most of the raw materials come from abroad, and most of their products are exported to overseas countries.

This special pattern of foreign trade determines that many products exported by foreign trade enterprises can not enter the domestic market at all.

Of course, foreign export enterprises do not want to earn high profits in overseas markets. However, in order to avoid China's tariffs, these export enterprises, when signing export contracts, try to lower prices. If the products produced by these enterprises are sold in China, the affiliates of foreign export enterprises can not get enough profit from related pactions, so they have to raise their prices.

This is the fundamental reason why the price of export goods is cheaper than that in China.

Huge paction costs in China

Secondly, the Chinese market is a fragmented market. The entry of enterprise products into the domestic market requires huge paction costs.

For example, an enterprise's product entering the domestic supermarket not only needs to pay the entry fee, but also has to pay all kinds of guarantee money.

Nowadays, most of the supermarkets in big cities are Sino foreign joint ventures or foreign invested enterprises. They restrict the sale of some enterprises' products locally by setting up trade thresholds.

If enterprises want to enter their sales channels, they must pay 15% to 20% of the sales revenue, which is a burden that can not be borne by those who are just starting up.

Moreover, in order to support local enterprises, some local governments have artificially set up some trade thresholds to prohibit the sale of products from foreign enterprises into local markets.

Many enterprises, in order to expand their sales channels, have to make an article on sales and paction costs, pay discounts and commissions directly or indirectly, and ensure that enterprises can form sales outlets in China.

In recent years, China has strengthened supervision over the retail market, and prohibit some large retailers from charging entry fees.

As a result, some comprehensive large retail enterprises take the way of leasing counters or production companies with their own salesmen to pfer sales burden to production enterprises.

Under such a trading pattern, some production enterprises have to abandon the domestic market and seek foreign trade export channels instead.

Although the sale of products abroad increases the cost of pportation, it can significantly reduce paction costs. Therefore, the prices of products produced by these enterprises abroad are cheaper than in the domestic market.

The financial cost of domestic trade is higher

Third, the financial environment is also an important reason for China to make foreign prices cheaper than domestic ones.

Trade can be divided into two parts: cargo delivery and fund settlement.

Due to the lack of a good credit environment in China and the lack of timely settlement or debt repayment, trade in China is facing huge credit risks.

In order to reduce their risk, banks often make their own calculations in terms of capital settlement, which leads to many of the payments that should have been paid off because of the reasons of financial enterprises.

Although there are huge credit risks in international trade, financial risks are lower than those in domestic trade, as countries generally abide by trade agreements and business practices.

From the perspective of industrial chain, because most foreign trade enterprises play the role of processors, there is almost no credit risk in export trade.

In other words, export orders come from abroad, raw materials processed from abroad, settlement funds are mainly used to purchase raw materials, and paction costs in financial links are relatively small.

Many export trade is actually a paction between some overseas family group enterprises, so there is no settlement risk at all.

Because the financial risk of export trade is relatively small, and the financial cost of domestic trade is relatively high, the price of foreign trade products sold abroad is objectively cheaper than in the domestic market.

The unique tax system and monopoly have raised the price.

Fourth, China's unique tax system is also a reason.

Our country not only promulgated the "three funded enterprises" law, but also formulated various tax incentives for the "three funded enterprises".

Many "three funded enterprises" engage in foreign trade export operations. On the one hand, they enjoy preferential treatment in China, and on the other hand evade state taxation through related pactions.

Mainland enterprises can neither enjoy the preferential treatment of "three capital enterprises", nor can they evade state taxation through related party pactions. The prices of products sold by mainland enterprises in China are naturally much higher than those sold by "three funded enterprises" outside China.

This is unfair competition, which is a special trade discrimination.

In addition, because of the monopolistic operation of state-owned enterprises in China, the domestic prices of some products or services are much higher than those of overseas prices.

Analysis of this phenomenon is somewhat helpless.

Most of China's reform and opening policies are phased products, which hide behind very complicated political, economic and diplomatic factors.

Now our country is in the period of readjustment of the system reform. The state must revise its foreign trade export policy, take a comprehensive look at the market competition environment in China, and establish a good legal platform for the fair competition of enterprises.

Otherwise, Chinese products will face more and more anti-dumping and countervailing accusations in the foreign market. The macroeconomic regulation and control policies of the Chinese government to stimulate domestic market demand are also hard to put into practice.