What causes China’s low prices?
The China Price Project tried to figure out what causes China’s low, low prices, the prices that have allowed it to capture “70% of the world’s market share for DVDs and toys, more than half for bikes, cameras, shoes, and telephones; and more than a third for air conditioners, color TVs, computer monitors, luggage, and microwave ovens.”
Their conclusions are that lower labor costs account for 39%, China’s clever practice of locating related factories near each other (which lowers shipping costs and makes it easier to coordinate) accounts for 16%, and the efficiencies permitted by the flood of investment into China account for 3%. As for more standard government policy issues, export subsidies account for 17%, undervalued currency for 11%, counterfeiting and piracy for 9%, lax environmental and safety standards for 5%.