Why do you think that the Chinese apparently have a cost advantage in the production of pencils? As we all know that China is a country with a large population of people. With a lot of investment and professional people in China, it has become a strong foreign competition in producing pencils.
With the high technology of machines in China, it is said to have more cost advantages in costs, material and production or even labor costs. Apparently, China has a cost advantage in the production of pencil is because of the low inflation rate.Inflation can be defined as a rise in the general level of prices of goods and service in an economy over a period of time. It means as the general price level increase, each unit of currency buy less goods and services. So with the low inflation rate of china, the product is cheaper and gives benefits to the poor which they are able to purchase it. It also allows real wages decrease and causing lower standard of living which eventually affect the population. One of the benefits of the low inflation rate is consumers and businesses able to make long-range plans.
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Second, China has a high level of population, so the labour is cheap compared to the US labours which results in lowering the costs. This is because there are many people in China which needs job and job available is not enough for everyone, therefore people are willing to work with a low pay. So, China is a country with good advantages of producing product. The cheaper labour cost of China also lowers the cost production of pencils. Besides, employers also provide free or subsidized housing and social facilities and provide free health care for the labours.With the available of raw material in China, it could be cheaper compared to the sources which US is being supplied for the pencil production. The abundant resources and raw material of China make it easy for making outputs.
Since low quality products have no guarantee, the goods produced are cheaper since the cost is also low. As a result, the government can save more wages as their production. 2 Next, the Chinese companies can lower the quality parameters for a production which results in lower cost in production which is compared with US.For example, the factories that the Chinese pencils might not be sophisticated state of the art factories which reduce their overhead costs than the US factories where high quality factory standards are being maintained. Lastly, is the low interest rate in China. Since China is a non democracy country, so the worker can be forced to work in a cheap wages rate. It gives benefits to businessman for setting up their business in China compared to US as the interest charged rate for the production is low which result in low financial costs for the companies.
China had import new technologies from foreign countries as made big profit over the pencils sold. (482 words) Question 2 Do you think that lobbying the U. S government to impose antidumping duties of pencils from China is a good way to protect American jobs? Who benefits the most from such duties, who loses? What alternative policy stance might the government take? In order to protect the American jobs, I think that the decision that made by US government can be accepted.US government used the method of impose antidumping duties of pencils from China is to protect American jobs is a short run protection on the risks of the people losing their jobs. Impose antidumping duties is certainly important because if a country sells its products overseas at a price lower than the cost of production, there is no one else that can compete with that. With such, antidumping results in maintaining the price level in the market and balance it. As a result, this would help in recovering the situation.
In this case, US government has benefited within this policy. Antidumping duties provide chances for US government on manufacturing different products where the prices would 3 be competitive with the imports. By this, sales were allowed to be continued. US government solved the problem that endangered them when Chinese pencils entered the market with this policy. Since China has low cost in production, they can import their pencils into US with a large amount if US government did not impose antidumping duties.China benefited in this as the companies had been forced to be ingenious when they faced the hurdle. Chinese pencils might lower the cost and even improve the quality in making pencils.
The experiencing in this case leads the Chinese to become a stronger and competitive party. On the other hand, consumers were the loser. Both the citizens are not allowed to purchase cheap China pencils, where the costs of the Chinese pencils were being higher up from the original prices for times.The consumer had been asked to pay for more than the amount the products valued. The government was benefited, but the consumers had to suffer the exorbitant tariffs on their daily usage. An alternative policy stance the government might take is US government do had its lost part in this policy. With this policy, the Chinese market share was not interfere with it but continues to grow after a small belch.
China continued to improve their processes and become better and stronger to making those cheaper pencils to compete with the others.US had created a chance for the Chinese by the policy and this may lead the US to have future trouble on enemy China a strong country. Lastly, the government is proposed to introduce certain policies such as promoting innovation domestically. This would help where the invention by domestic saves an amount of money on hiring foreign professional to analysis. The government can encourage firms to set up foreign subsidiaries to take advantage of some of the low costs.