China is well-recognised as the manufacturing hub of the world. As a retailer, no matter how big you are, there is a good chance you will source some, if not all, of your products from this manufacturing super-power.
In recent years, consumers and retailers have become more aware of the working conditions of people in China. Buyers want to know if the person who produced their goods has been paid a fair wage and treated well. Often, this will influence their final decision.
If you’re a retailer and you want to confirm you’re doing the right thing and supporting ethical manufacturing, here’s some background about manufacturing in China and what you need to know about sourcing goods that are ethically produced:
How did China become the world’s manufacturing hub?
According to shieldworksmfg.com, the term Made in China first appeared in the 1940s after
World War II led to manufacturing boycotts with Japan. However, while it has been around for decades, it is only in the relatively recent past that Chinese-produced goods have become ubiquitous across the world.
In the 1940s, China did not have the manufacturing infrastructure it has now. However, through the 1990s and early 2000s, China implemented incentives to make buying Chinese manufactured products appealing to international retailers. These incentives saw a huge rise in Chinese manufacturing, bolstering the country’s economy and setting it on the path to its current manufacturing dominance.
Unfortunately, the massive scale of production has led to some concerns.
How has China maintained its hold on manufacturing?
Investopedia lists five main reasons why China is the ‘world's factory’:
- Lower wages
With a population of around 1.41 billion people, China has a massive workforce. More people wanting to work means manufacturers can offer lower pay.
Unfortunately, critics say China’s child work and minimum wage laws are less stringent than in other countries. While this results in lower production costs and lower costs at market, businesses working with manufactuers in China often don’t have access to a companies labour rules and processes.
- Business Ecosystem
China’s business ecosystem has evolved to accommodate manufacturing on a grand scale. The country is now proficient and prolific in terms of manufacturing thanks to the business ecosystem that supports it.
- Lower compliance
Historically, China has not enforced the sort of strict rules and regulations that control manufacturing in the West. Regulations are not only in the form of workers’ rights but can also cover intellectual property rights and environmental and ecological concerns. (Who hasn’t been tempted by a far cheaper version of a designer item?) This helps to keep costs down.
- Taxes and duties
Chinese products are not subject to value-added tax (VAT) or import tax. This makes products cheaper again.
- Currency
China keeps a check on the value of its currency, the yuan. This strategy keeps prices low for other countries.
What are the ethical issues with manufacturing in China?
Obviously, lower wages and lower levels of compliance are cause for concern when it comes to ethical purchasing.
Whether you are a retailer or a consumer, it doesn’t feel good to buy something knowing it has been made by a child or someone who has been paid unfairly.
Environmental and ecological issues are also at the forefront of ethically-minded retailers' thoughts. Lack of proper compliance laws can lead to aggressive resource extraction and poor ecological and environmental practices in manufacturing.
Finally, there is the issue of intellectual property theft, also known as knock-offs and bootlegs. Buying knock-offs takes money away from the legal owners of design or concept and usually means you are receiving an inferior product.
The good news is it is becoming easier to support ethical manufacturing in China.
How can responsible retailers overcome ethical manufacturing concerns?
If you wish to run a retail business, importing goods from China usually makes financial sense. And because manufacturers want your business, they are now realising they need to step up when it comes to corporate social responsibility.
Here is how you can trade more ethically with China:
Ethical manufacturing
- Certifications
There are a number of international certifications that manufacturers can gain which confirm that they are practising ethical manufacturing.
One example is the SA8000 Standard. This certification programme is available to organisations around the world. To receive the SA8000 Standard, a manufacturer must confirm that it treats workers fairly and maintains the highest social standards.
Some industries have specific certifications that show they are ethical:
- The apparel/clothing industry has the Worldwide Responsible Apparel WRAP All Producers – Code of Conduct
- Toy manufacturing has the International Council of Toy Industries – Code of Business Practice
- Electronics manufacturing has the EEIC Code of Conduct.
Whatever your industry, ask your sourcing agent to check your manufacturer has certifications to show they are ethical.
- Clothing manufacturing in China
The fashion industry has had its fair share of ethical concerns over the years, including ethical manufacturing concerns. Along with the WRAP Code of Conduct mentioned above, you can check that clothing manufacturers are above board in other ways.
Organisations like Baptist World Aid keep an eye on the fashion industry to help retailers buy from ethical sources. Its Ethical Fashion Guide scores and ranks brands according to how successful they are in achieving ethical goals. This can help fashion brands to figure out where they can improve in terms of sourcing clothing ethically.
- Find the right manufacturers
If you’re researching manufacturers, try to find businesses that offer open-door policies to demonstrate their ethical manufacturing. They should be able to answer questions about their ethical practices and standards.
- Use a sourcing agent
Identifying certified and ethical manufacturers can take time, which is why it makes sense to work with a sourcing agent if you plan to import goods from China.
Unless you speak Cantonese or Mandarin or you have someone working for you on the ground in China, barriers in geography and language make it difficult to communicate with manufacturers. This can set back your efforts to identify an ethical manufacturer who also meets all your other requirements.
A quality sourcing agent will take over and do all this work for you. They will have existing contacts who can shorten the process of finding an ethical manufacturer and arranging a contract with them.
At Epic Sourcing, we have teams in China as well as Australia and New Zealand. Ethical manufacturing is important to our business and our clients, which is why we are very careful with the manufacturers we recommend.
When you use a sourcing agent, you will be able to tell your customers that what you’re selling has been produced ethically. This means workers are paid and treated well, and the environment is considered as part of the production process.
As China moves towards more ethical manufacturing practices, we are proud to help our clients support the factories that have high standards and follow best practices.
Want a reliable sourcing company that cares about sustainability and human experience? Reach out to Epic Sourcing today.
