Why is Everything Made in China?

tackling a pretty thorny subject. So in the United States, there's been a lot of talk about the trade war between the US and China, as both countries are slapping tariffs on goods and the whole world is watching an anticipation of a potential global recession. Now, this trade war has the potential to affect lots of stuff, obviously, including

a lot of electronics. Now, chances are the price of your next computer, smartphone, tablet, or you know whatever other electronic device is going to be a little more expensive than earlier models because companies are going to pass on the cost of these higher tariffs to customers. Now, this leads up to a question, why are so many devices manufactured or assembled in China? How did we get to that point, and to understand that, we need to understand

the history of industrialization in China. So this episode is really going to be all about China's journey to becoming an industrialized country, which honestly didn't happen that long ago, and how it then became the go to place to have electronics assembled before moving on to stores around the world. So this is a pretty complicated topic. It involves trade, politics, and economics, and they all have a lot of variables. So this is not as straightforward as technology tends to be.

Because with tech, typically something either works as the designer had intended it to work, or it doesn't work. And if it doesn't work, with diligence, skill, and maybe a little luck, you can trace the reason that the tech isn't working, and you can figure out the cause of that, you can address it. But economics and politics, those are a lot more squishy than tech, and addressing one thing

could throw something else out of whack. So I'm gonna do my best to kind of give an overview of where we got or how we got to where we are. So to understand the story, we really have to look at China's history over the last couple of centuries. And I know that seems like it's overkill, but I think it's really important to kind of understand the historic cultural influences of China and how that has shaped the modern day China. And I'm gonna warn you there really aren't

a whole lot of good guys in the story. I'm gonna tell I'm sad to say so. The United Kingdom kind of entered into the Industrial Revolution really in the midst mid eighteenth century, so the mid seventeen hundreds, but it really got going in earnest in the nineteenth century or the eighteen hundreds, but China would lag far behind. At that time, the China government was an imperialist government.

It was led by the the the Qing dynasty, which had been in control of China since the mid sixteen hundreds. Now by the eighteen hundreds, this dynasty was starting to deal with a progressively more unstable China. A large part of that came from foreign interference, and a ton of that had to do with British merchants who were smuggling opium into China. This is one of those terrible parts of the story. We've get into a whole part of why China is the way it is largely because of

illegal drugs coming into the country. So the British merchants what they were doing was they were buying up opium in India. They would then travel to China and they would sell it for a large profit. Meanwhile, the Chinese we're dealing with a very real opium crisis. Addiction rates were on the rise. It was causing a lot of

social and economic unrest. So the dynasty moved to address the social and economic issues that were growing as a result of this illegal trade, and the Chinese government uncovered and destroyed more than a thousand tons of opium the British merchants had hidden in warehouses in Canton, China. Canton, by the way, was the one place that China was allowing to be open to trade from UH with foreign parties like like the British. Other cities were off limits.

China had very strict trade restrictions and was pretty insular. It wasn't very much welcoming the outside world to come into it quite as much. UH. Even though China has a very long long history with international trade, with stuff like the Silk Road, tensions between Chinese officials and British sailors grew over time, and then a couple of drunken British sailors killed a Chinese villager, and the Chinese government understandably wanted to apprehend the sailors and try them for

this crime. The British government, however, was not keen on its citizens being subjected to the authority of another government, and so they refused to hand over the sailors, so tensions would continue to increase. The Chinese government then created a blockade around Hong Kong to prevent British tradeships from passing it. The British government didn't like that either, so they commanded British warships to break up the blockade, and

this was the beginning of the First Opium War. The British forces were outnumbered, but they had superior weaponry and equipment, and so ultimately they won out over the Chinese forces. Britain was able to occupy the Chinese city of what is now Nanjing in August of eighteen forty two, and

the Chinese government was forced to negotiate with Britain. As part of those negotiations, China signed on to some trade agreements that were incredibly favorable to foreign merchants, specifically British sailors, and put China at a disadvantage. It did, however, have the effect of turning several of China's coastal cities into centers of trade and opening those up two British traders,

so it was no longer just Canton. And this is also where Britain would gain control of Hong Kong, which they would then hold onto until nineteen seven, when they were relinquished the territory and China regained sovereignty over it. But that's a story for a different podcast. That's one that's still having some repercussions today. Now, if that were all that this dynasty had to contend with, maybe it

would have remained in power in China. But the nineteenth century also saw a period of natural disasters, had stuff like droughts and floods. I mean, keep in mind, China is an enormous country. You can have droughts in one part and floods in another part. They can happen. At the same time. The government also was raising taxes on people who really couldn't afford to pay them. Uh, and it created an environment in which people were unhappy with how things were, and so they decided to rebel, and

that's why we got the Taiping Rebellion. Now that story gets super complicated, but the quick summary of the Taiping Rebellion is that it was the bloodiest civil war ever anywhere in all of history. The dynasty was ultimately victorious. They were able to stop the rebellion, but millions of people died in the process, and the government was in

a weekend position afterward. Complicating matters further is that while this civil war was happening, the Chinese government would also have to deal with a second opium war, this time against not just Britain but also France. The war started after Britain sought to expand its trading rights in China and essentially used an event in which Chinese officials boarded a British ship and arrested several sailors as an excuse

to use a warship to bombard Canton. The French joined in, and then hostilities increased until the British were able to occupy the city of Tianjin. The Chinese government again was forced to capitulate to disadvantageous trade deals with the West, including a law that now made it legal to import opium into Shanghai. Now, the Chinese government recognized that one of the reasons that the British and French were so successful in the Opium Wars was due to China's lack

of industrialization. Around eighteen sixty, the dynasty the government began massive programs in an effort to industrialize China, but for many reasons, those efforts failed, and getting into all those reasons would take a podcast of its own, but a lot of it had to do with very different economic and political structures in China compared to those in the UK, which had of course already industrialized. The failures put the

government deep in debt and people were suffering. The dynasty would hold on to power until around nineteen eleven nineteen twelve, but these events that happened in the mid eighteen hundreds effectively sewed the seeds for the dynasty's demise. So it was pretty much doomed based upon this, this group of things that all happened around the same time, with the

various natural disasters, the rebellions, and the opium Wars. So the reason I'm spending so much time on this is to give you guys an understanding of where China was as a country. It had lagged far behind the United Kingdom, which had become industrialized nearly a century before the Opium Wars had started. And in place of this dynasty was a new government system called the Republic of China, which

was modeled after Western governments, particularly the United States. In fact, the Constitution of the Republic of China called for a separation of government powers into different branches in a very similar way to the United States, with executive, judiciary, and legislative branches. Now that's not to say this transition went smoothly. Various regions in China fell under the rule of regional war lords. They asserted their own control of their particular territories,

and they essentially ignored the Republic. Also, not long after the founding of the Republic, there was another big shift in politics. So over in Russia just next door, Vladimir Lenin lad the October Revolution and established communism as the system of government for Russia. Now, the ideal of communism is that all class distinctions within a population are stripped away. You no longer have upper, middle, and lower classes. None

of that exists anymore. There's no such thing as private property, and the government is there to ensure that every person works and is paid according to their abilities and their needs. So if you're able to work, you work, and then you are paid according to how much you need in order to survive. Ideally, everyone in such a society would receive the support needed to in turn be a productive member of that society. Concepts like profit are meaningless in

that idealization. But that's not really how communist governments have tended to shake out. Rather, a lot of those government has ended up being authoritarian structures that used government owned assets to maintain power over the general population. So while it was based on ideals of everyone is equal, it turns into the animal farm example of some people are

more equal than others. The idea of such a system in which people of a country are the ultimate owners and the means of production was a very powerful one, though, which explains why so many people signed on to that idea, even though it turned out in practice it never really manifested that way. Now, the Communist Party established a presence in China in nineteen twenty one, which was just four years after the October Revolution in Russia. While all this

turmoil was going on. China failed to kick off an era of industrialization and fell further behind. Joseph Stalin, who took over Russia upon Lennon's death in nineteen four would essentially, through force of will, lead Russia through a process of industrialization. But this process had tremendous costs and precipitated a terrible famine in Russia. And you would think that that would serve as an example for China. But we'll get to

why that wasn't anyway. Starting in nineteen thirty one, Japanese forces began to invade and occupy parts of China, and a guy named maud Ze dong Uh climbed the ranks of the Communist Party in the nineteen thirties. Eventually he

would become the chairman of the party. Now, after World War Two and after two decades of what was essentially civil war, Mao established the People's Republic of China in nineteen forty nine with the Communists in control of the country, and so they essentially erased the Republic of China, and now you had the People's Republic of China. It was not really a republic. The communist government was more authoritarian than that, uh and Maw as chairman of the party,

was effectively the new head of state for China. The United States, already wary of communism and in the early stages of the Cold War, cut off trade and a lot of diplomatic ties with China entirely. At that point. Now we're gonna skip ahead to nine, Mao decides to follow Stalin's lead and through sheer control, try to force China through industrialization. He comes up with a five year plan.

He calls it the Great Leap Forward. Now, Mao wanted to overtake the United Kingdom in industries like iron and steel. But they call his particular strategy a mistake is to drastically understate the results and the Great Leap Forward. Communities in China were upended to meet Mao's vision, and they were villages and towns were transformed into calm UNEs. Many

tasks were collectivized, stuff like childcare. They would all be put into a centralized system and a few people would be charged to handle looking after whatever those centralized tasks were. Some people would be dedicated to farming, but a lot of people would be sent to work in small manufacturing facilities. Now also encouraged Chinese citizens to build backyard steel furnaces and smelters in an effort to produce more steel within China and thus reduced the country's need to depend upon

foreign sources of steel like the UK. So citizens were actually expected to meet quotas of steel production, and in an effort to actually meet these these government mandated quotas, a lot of people were melting down useful stuff because they didn't have any access to anything like or where they could make steel by you know, smelting or so. Instead they were melting down like pots, pans, tools, stuff that they actually really needed so that they could try

and meet these quotas. The problem was that the steel that they were producing was pretty much useless. So not only were they getting rid of things that they really needed, they were producing steel that couldn't really be used for anything. Now, on top of that, the farming practices that Mao insisted upon adopting would end up causing enormous environmental harm and ended up dropping crop yields over the next couple of years. So what followed was, just like in Russia, a terrible

famine within two years. The Great Leap Forward was largely abandoned. Certainly was abandoned before the five years were up. Historians estimate that somewhere between twenty million to as many as forty five million or more people died as a result of this initiative. The attempt to produce steel had terrible consequences. People were deforesting large sections of China in an effort to fuel the smelters they were using. This in turn

led to erosion and flooding and other problems. And the farming practices, as I said, they hurt the productivity of the soil. Even early on when there was a bumper crop of of food. In that first year, they actually produced more food than they had anticipated. A lot of that food ended up going to waste because there weren't enough farmers to harvest it, all so rotted in the fields.

Mao's brute force approach to industrialization had failed and resulted in the deaths of millions of people, and China was lagging even further behind. Mal was not yet finished with his efforts. I'll explain what I mean by that more in just a moment, but first let's take a quick break. In the wake of Mao's failure with the Great leap forward. The Chairman of the Communist Party faced a lot of criticism and opposition within the party, and that's pretty understandable.

His efforts had plunged China into a crisis of monumental magnitude, with millions dying. Mostly those were people from rural cities and the interior of China, because officials were shipping a lot of the food that was being produced at the farms in those areas off to the coastal cities. So the urban centers were getting more food than the rural centers where the food was actually being grown, and so the people who were growing the food were ironically starving

to death. Other members of the Communist Party worked to kind of sideline now. In fact, there was a plan for mal to retain the title of Chairman of the Communist Party, but for it to be mostly a ceremonial title with no real power attached to it. Now obviously did not care for that one bit. Meanwhile, over in the Soviet Union, while the greatly forward was kind of progressing,

there was a huge ship in politics. The Communist Party was still in power in the Soviet Union, but they had just renounced Stalin, who had died a few years earlier, and so this was a move for Russia the distance itself from the politics of Joseph Stalin, who was truly

a terrible dictator. Mal was worried that this indicated a shift in the Communist Party in general that would ultimately have him removed from power, and there was a distinct philosophical disagreement on the nature of communism between the Soviet Union and China, and then the Soviet Union would cut ties to China. In the process of this, they were called some of their technical experts who were working in China who were trying to usher along this industrialization which

had not yet really succeeded. And in nineteen sixty six, Mao calls for what he called a cultural Revolution, with the stated goal being to sort of squelch the revolutionary forces that Mao said were attempting to overthrow the Communist Party and deny China It's place among the world's superpowers. Mal would end up inspiring a lot of young people to to carry out this vision, and they formed groups called the Red Guard, and they would act out against

perceived enemies of Mao and his vision for China. Sometimes that would actually include fighting with other Red Guard groups, so you would have two different Red Guard groups throwing down with like heavy weapons. Within a year, the various Red Guard groups had captured and assaulted many leaders in various regions of China, and China's official armed forces would also engage in combat with the Red Guard groups, so

this became a multifaceted kind of internal struggle. Hundreds of thousands of people died in this and the country teetered toward anarchy while mal was trying to reassert control. Regional authorities would start to collect young people, specifically students in urban centers, and then ship them off to work in hard labor in the countryside in an effort to kind of squelch this intellectualism that they viewed as a dangerous

um pursuit, something that would lead to unrest. Some leaders of the Communist Party were tortured and killed by members of the Red Guard. The revolution continued for a decade as Mao did his best to maintain his position as the leader of China, and in nineteen seventy six he died at age eighty two after a series of heart attacks, and that's when the Cultural Revolution really ended. It ended with Mao's death and also the arrest of several other

high ranking members who were helping Mao. So after Mao's death, a veteran of the People's Liberation Army or p l A, that's the official armed forces of China ended up assuming control of the country starting in nineteen seventy eight. That person was Deng Xiaopeng. Now Dean would dramatically transformed China's economic The country would reverse its policy of discouraging foreign investment, though I should mention that Mao had really started down

that pathway. Now had actually met in secret with Henry Kissinger in the early nineteen seventies and later much more publicly with Richard Nixon. But beginning in earnest in nineteen seventy nine, China began to initiate drastic economic reform measures. Rather than take a centralized, state run approach to the market, the government began to allow some free market activity and began to delegate much of the authority to provincial and

local governments, thus decentralizing the whole process. Around nineteen eighty six, China established its open door policy. The country welcomed foreign investment and the creation of a private sector within China that would be guided by market forces, not by a centralized authority. By the early nineteen nineties, China would become the third largest economy in the world. The United States

and Japan were in positions one too. China offered up tax incentives to encourage foreign investment and began to import foreign technology to augment the country's manufacturing capabilities, and started building out factories in its various regions, largely along the

coastal regions. Deng would simultaneously re established the Communist Party's hold on the government, quelling all opposition, as would be particularly evident during the Tianamen Square event in nineteen eighty nine, and the party would maintain control even as the Soviet Union dissolved and Russian President Boris Yeltson banned the Communist Party from operating in Russia. Now, this uneasy balance between a free market approach to the economy and the more

authoritarian approach to government led China into unprecedented growth. According to a June twenty, two thousand nineteen report from the Congressional Research Service, China's economy has effectively doubled in size every eight years because the private enterprises have to respond to market forces. They must adapt to remain competitive. Previously, state owned enterprises really just had to meet state mandated quotas. There was no competitive reason for you to try and

do better. You weren't. You weren't rewarded for making more than your quota. You weren't even rewarded for making better quality stuff. So the free market definitely had a big influence in this. China's technological sophistication has depended heavily upon the adoption of foreign technology rather than relying on a domestic source of innovation, and that has been a really

huge issue, particularly recently in China. The country built a lot of factories, and they were specializing in everything from textiles to plastic. Manufacturing factories abounded in industrial centers in China, again mostly near those coastline cities, and the country began to build out factories that could build all sorts of other stuff, not to mention facilities where workers could assemble

finished projects like smartphones. In fact, that's one of the things China is mostly known for, is not making stuff, but for assembling, for putting it all together. Many of the chips and other elements in the smartphones would actually come from other places like Europe or the US or Japan, but the assembly would happen in China. This leads up to why so many electronic devices are put together in China, and there are a few really big reasons, so I'm

going to try and touch on all of them. One reason probably the one that is cited the most frequently, although it's not necessarily the most important reason is the cost of labor in China is much lower than in many other parts of the world, like way way lower. So an entry level manual job at fox Con, which is the company responsible for an enormous percentage of the electronics being assembled in China, including pretty much all of Apple's electronics, the starting salary at one of fox cons

factories is four thousand, two hundred dollars a year. That's three fifty dollars a month, or about eleven dollars and fifty cents per day. So that's one way you can save a ton of money if you're an electronics company, is by offshoring all this work to a country where the wage is incredibly low. But there are a couple of other elements that are at least as important, if not more so, because there are other places in the world that actually pay workers even less than what you

would find in China. One of the reasons that is just as important is that that low cost and labor is that there's no shortage of people seeking jobs in China. There is an enormous under employed workforce in China, and because it's under employed and they are eager to work, it is very easy for a factory to scale up

production in response to a demand from a company like Apple. So, for example, every year, Apple holds its big event in September where it announces the latest in usually it's it's phone line, and then it follows that up by releasing the new phone. Well. Obviously those phones have to be well through the manufacturing process by the time Apple gets around to announcing it in September, and there need to

be enough to meet the initial demand. So production for that super secret phone begins much earlier, and typically you see companies like fox Con ramp up in June because that's when they start putting together these phones that have to be ready by September. So in those cases, fox Con needs to scale up. They don't want to have

full capacity all year round. There's no need for it, but when the demand calls for it, they can scale up and hire a bunch of people, and they will hire thousands upon thousands of contract workers who will have a limited contract to work there for a certain number of months, and those folks can join onto the company essentially overnight to meet the demand and scale up production. That's just not possible in places like the United States,

so China's workforce can meet quick turnaround deadlines. On top of that, in China, it's not unusual for people to live extremely close to the factories. In fact, a lot of these factories, Fox Con in particular, have dorms set up where people can live in the dorms for a fairly low cost and work right next door to where they're living, or kind of next door to where they're living.

And that makes a huge difference too, because it means that if the company gets a call in the mill of the night in China that a change needs to happen in the design of a product, they can make that change, call in the workforce, get them out of bed, get them over onto the assembly line, and start churning out phones with this new, updated change and not have

any problems in the supply chain. And speaking of supply chain, if you've listened to some of the recent episodes of tech Stuff, you've heard me talk about supply chains a lot. The supply chain is incredibly important for any business. Making a supply chain efficient and dependable is critical. And because there are so many facilities in China that can manufacture components from screws or maybe they cut pains of glass to make displays, it makes logistical sense to locate much

of the manufacturing process in China. The more you can concentrate the production of these various components within a region, the more efficient you can make the whole supply chain, and the faster you can react to market demand. That also translates to big savings for the part of whatever company is ultimately marketing this product. Big savings means that then if you're this company, you can mark up the price to a hefty amount and sell it to the

final customer for a nice profit. You keep more that filthy lucre yourself, so while you're saving money on the production costs of the electronics, you're making tons because the final price tag. And Apple is particularly good at this,

with really high profit margins for many of its products. Now, the flip side of all of this is that the people enjoying the electronics, people like me, are doing so at a really tremendous human cost, and it's a human cost most of us can't see, and I would argue it's one that a lot of us can't even really imagine, in large part because of the truly massive scale of manufacturing in China. So let me paint you a picture here.

Fox Con, the company I mentioned earlier, has tons of factories, but one of the ones that gets a lot of attention in particular is located in Shenzhen and is called fox Con City. At least that's the nickname for it. That gives you an indication of how big this manufacturing facility is. It really is like a city. Now. The official name for this site is the long Wa Science

and Technology Park. The number of people working there is astounding, and there's a pretty wide range of estimations about the total number of employees working at that particular site, because again, the demand could call for a larger number of people at one time of year and a smaller number for a different time of year. But the range tends to be between two hundred thirty thousand on the low side,

up to near half a million people on the upper side. Now, I don't know what the average number of employees are if you were to take the full year to consideration, but I think we could probably summarize it as a whole bunch of people. I mean, two thirty thousand alone, that's a that's a lot of people. The park has more than a dozen factories inside of it, and from what I understand, it would take you more than an hour to walk all the way across it. There are

also lots of other facilities within this park. They're including a hospital, movie theater, restaurants, a bank. Uh, there's a television network located there. There's also those dormitories there, which is where about twenty five percent of the employees of the park live. Uh. Those employees are frequently working twelve hour shifts six days a week to get one day off. That's it. Another fox Con city is in xeng Ju,

which is in the Hanan province. Now, according to Business Insider, this facility can produce as many as a half million iPhones in a single day. The same article that gave me that information are a pretty disturbing bit of data. Now. According to the article, which in case you want to look it up, is called Inside iPhone City, the massive Chinese factory town where half of the world's iPhones are produced. The cities around Shinshu are given quotas for the number

of workers each place should provide the factory. So, in other words, let's say that you're you've got a village that's close to Xingshu, you might have a specific quota saying you have to send twenty people to serve as employees of this factory. Now this sounds terrifying to me, but I should add that the city is in one of the poorer provinces of China, and there's actually not a shortage of people who want to earn a living

by working in fox Con. There are a lot of people who are clambering to get a job there because jobs in China are scarce, at least jobs that pay anything close to the wages that fox Con does. Because even though those wages I cited earlier very low, it's still high compared to other jobs in China. The Business Insiders story also states that some of the schools around this particular fox Con factory requires students to work at

the factory as part of their credits towards graduation. Now, the work tends to be limited to a specific task if you're on the production line, so the production line employees have to repeat the same task hundreds of times per day, and assembling a device like a smartphone could require several hundred steps, So employees are arranged through the production line to do one of those steps over and over and over again before it then gets handed off

to the next employee to do the next step. And that step could be a something like soldering an element on a circuit board, or it could be polishing a screen, or it could be just you know, inserting a screw and tightening it. It could be anything like that. It could be really tiny, and then you just keep doing that all day long. When overtime is available, a lot of people jump at the chance to work overtime. They might work a twelve or fourteen hours shift before heading

back to the dorms. Rent and the dorms tends to be around twenty five dollars a month, and sometimes you don't think of it as rent. Sometimes that's more like you're paying for electricity. But whatever it is, it ends up being taken out of out of people's paychecks kind of reminds me of the company store days, as is made immortal in the song sixteen Tons. Then when nightfalls, the night shift comes in, and the night shift does the same thing that the day shift does, only of

course they do it overnight. And according to that same Business Insider article, the overtime pay can boost the monthly salary up to seven five dollars a month. That translates to an annual salary of nine thousand, four hundred twenty dollars. Now that is assuming, of course that you were able to get steady year round work at overtime, but you can't, Like I said it, the demand for work changes throughout the year, so you wouldn't necessarily be able to have

that level of salary all year round. And a lot of the reports say that most people end up working at the factory for about a year before they search for work somewhere else. That turnover is incredibly high, but again because there's such a huge population of underemployed people, that's not that hasn't really been a big concern with the part of factories. They can very quickly replace people when we come back. I'll talk a little bit more about where China is today and what all the tariffs

and stuff mean in the short term. But first let's take another quick break. Okay, So China factories are assembling most of the world's electronics. From the perspective of a company designing electronics, marketing the things, you know, a company like Apple or Samsung or Amazon, you can understand why they're doing this. I mean, it's cheap, it's scalable to your needs, the supply chain logistics workout. It also hinges on the economic realities of living in China. That's a

little harder to get your mind wrapped around. And in the last segment, I described the conditions around assembling Apple products. But please note that is just an example. It's a very high profile example because it's been the news several times since. But I am not trying to single out Apple here and say that company in particular has been guilty of this. Pretty Much every major electronics company is dependent upon Chinese factories at some point in their production process,

a lot of them in that assembly part. And there are a lot of reports that suggest fox Con is actually one of the better companies operating in China in this regard. This is particularly difficult to understand when the reports came out in two about Fox KHN employees committing suicide.

The economic realities for China are such that jobs at places like fox Khn actually represent a more lucrative way to earn money than a lot of alternatives that are available to your average Chinese citizen, particularly those Chinese citizens who live in those interior cities far from the coastal cities. China has a very long way to go before conditions improved to a point where most of us would feel

comfortable learning about how our gadgets were being assembled. This is a process that took decades and more than a little violence. In other parts of the world. The history of industrialization is a history that's also filled with unions, demonstrations, riots, and more so for China, we have to remember it's very early days now. Going back to the story about

the suicides, the reports were shocking to Western audiences. Fox kN after all, was pretty much working as the manufacturing and assembly arm of Apple's products, and Apple's image was a company that made aesthetically pleasing technology for a customer base that frequently thought of itself as enlightened, maybe even a little bit elitist, and this contrasted in very ugly ways to the reports of how things were at the

fox Con facilities. So in two there were eighteen reported suicide attempts at the shen Jin fox Con facility, almost all of which involved people climbing to the top of a dorm building and jumping off of it. Of those,

fourteen people were confirmed dead. The reports were shocking around the world, and the world turned its focus to fox Con, which attempted to address the issue in various ways, including, and I am not making this up, they installed nets around the base of the buildings to catch people if they should throw themselves off the roof rooftops, which is pretty terrifying now. According to fox Con employees and former fox Con employees, the culture at fox Con was largely

responsible for the suicides and attempted suicides. A lot of people said the work was really boring and repetitive, and the hours were really long, but that wasn't as big a factor as the tendency for management to publicly humiliate workers who made mistakes. The allegation was that fox Con managers would use shame and humiliation to cower employees, and that, combined with the high stress and monotony of the work, is what led to a lot of people breaking down.

Companies like Apple have put pressure on factories in China to improve conditions, though the extent to which that's been done, or even the extent to how hard these foreign companies like Apple have actually pushed the Chinese factories is still a matter of some contentions. Some people say not enough has been done in either case, but it is true that companies like Amazon, Apple, and Samsung and more could

use leverage to force improvements in Chinese worker conditions. China is also in the middle of a shift in its economic model. So up to fairly recent times, the earlier model really stressed rapid economic growth at any cost. The thought was China has to catch up to the rest of the world. However, when you say any cost and you take it to heart, then you end up racking up a lot of actual costs in the process. In this case, we're talking about pretty severe ones, stuff like

environmental damage, pollution, over capacity for production. You know, China built too many facilities in some cases, so there was you know, the supply was exceeding demand and that's not good for the long run either. There is also a lot of issues with corporate debt, as China was creating these various loan structure ars out of its state run banking system. So China is now shifting to a less aggressive economic model, something that's supposed to be more sustainable.

It's trying to invest also in innovation instead of relying so much on foreign companies and foreign technology to come to China and then for China to just act as like the final assembling station for all these other companies. China announced a vision of this future in which the country would be innovating and designing products, not just assembling them.

And they announced this back in It's the initiatives called the Made in China twenty twenty five, and there's an overarching goal of turning China into quote a world manufacturing power end quote by twenty nine. Now, recently there's been a lot of reporting about companies moving manufacturing out of China entirely or at least in large part, and part of this has to do with wage is in China

slowly improving. So here's the sad thing about capitalism, right, is that as conditions are improving for people in one country, companies start to look to move manufacturing out of that country because the improving conditions equate to rising costs. Rising costs equate to lower profits. Lower profits equate two, I don't want to be here anymore ya capitalism. So it's cheaper to make some stuff in other Asian countries like Vietnam.

And in fact, some people refer to this as factory Asia, and that the companies that are making these products or designing the products are kind of juggling which country should

do the manufacturing and assembly. Now, on top of this rising wage issue that companies aren't necessarily crazy about, there's the tariff situation, and the tariffs put these expensive, uh well expensive tariffs on all these different products coming in and out of China, and that as a result means that companies have to figure out how to deal with that added cost of production, and most companies are going to pass that on to the customer because otherwise you're

talking about eating into profits. One work around around this, which I know is a bit repetitive, but it's really sneaky, at least in my opinion. The workaround is to move the final assembly of a product to a different country like Vietnam, but still depending upon Chinese facilities to supply

various components for this finished product. But because the actual product would be assembled somewhere other than China, the company responsible for that product could say that the product was made in or assembled in Vietnam as opposed to China, and by pushing the final production step out of China, a company could avoid having to pay some of those pesky arra. Meanwhile, there are other issues that China is

having to face in this same time. One of those is that you know, they had that enormous population of underemployed working age employees, people who are the appropriate age to work in factories, and I say appropriate age. There's also been a lot of allegations of child labor issues in China, which I didn't really go into, but there's a lot of accusations that that sort of stuff happens

throughout China as well. But that number is actually going down, the number of underemployed people in China who are able and willing to work, and that's largely because China has had a lower fertility rate for several years. China institute a one child policy, which then meant that families were having fewer children, and it means that the population itself was starting to shrink, and so as a result of that, you have fewer people of the correct age to go

to work to fill up all those positions. This is not necessarily always a bad thing, but because China's previous economic model depended upon having a very readily available workforce and under employed workforce that you could tap into when you needed it in order to spur rapid economic growth,

that was the real issue. Now that China is trying to shift away from that model, it might be able to better serve the citizens who need work and to provide them better wages, but that is an issue that China is facing right now, is this reduction in that enormous labor force. On top of that, the other things that are kind of on the horizon that China is

a bit worried about are things like automation. Automation would be beneficial on the bottom line for a company's spreadsheets, but it's not great for you know, your your population that is largely dependent upon repetitive, mundane work. I mean, that's that's the sort of work that is ideal in order to automate. Right, If you can put automated systems in there, they could take over a job that would normally be done by, you know, hundreds of employees. You can save a lot on costs in the long run.

And because China has worked so hard for so long too, almost criminalized intellectualism. There were there were long periods where the school systems in China were effectively shut down as all these different periods of strife were going on. It puts China at a slight disadvantable more than a slight disadvantage, at a disadvantage when it comes to pursuing innovation. The country is trying to do a lot to counteract that today. Now, as I said at the beginning of this episode, this

is a very complicated type of of topic. Uh, there are a lot of things I haven't really gone into a huge amount of detail on. I've taken a very high level for a lot of this, but I wanted to kind of explain what was going on, why so many things are being made in China. You hear the excuse, Oh, it's just cheaper, but why is it cheaper there? You have to ask that question too, And again, some of

it is about the wages. Some of it's about supply chain, some of it's about the readiness of a huge workforce that can scale up a process very rapidly and thus cut down on any delay times between changes in production. All of these are factors that are important for things to be made in China, but it's also the sort of stuff that's happening in other areas, particularly in Asia, and it's why a lot of the companies that had been relying on China have already started moving out even

before the tariff situation became a thing. There are companies we're looking to move out of China and stop depending so heavily upon China itself, largely because again, those wages were starting to go up and that was beginning to

impact the bottom line. Fun times, this is the sort of stuff I don't like to think about when I sit there and look at a cool new device or gadget that I really want to get my hands on, because as I started to think about what actually goes into making it, I start to feel perhaps my desire to own that piece of technology isn't important enough to justify all the stuff that happened On the flip side.

If it didn't happen there. If if the jobs had not existed in China, there'd be people who arguably be even worse off than they are already because they wouldn't have had a job in the first place to earn that money. So it's very difficult to get my mind around it and to accept how ethical or unethical the whole thing is. It's a very very complicated problem. And this is what happens when you get into a world where you have a global economy with this capability of

manufacturing and having your manufacturing processes all around the world. Uh. I'm very curious what you guys think about this, and also if you have any suggestions for future episodes, you can reach out to me. The The address for our humble little podcast is tech stuff at how stuff works dot com, or you can pop on over to our website that's tech stuff podcast dot com. That's where you're gonna find an archive of all of our past episodes. You'll also find links to where we are on social media.

You can reach out there if you prefer on Twitter or Facebook. You also find a link to our online store, where every purchase you make goes to help the show. We greatly appreciate it, and I will talk to you again really soon. Tex Stuff is a production of I heart Radio's How Stuff Works. For more podcast us from I heart Radio, visit the I heart Radio app, Apple Podcasts, or wherever you listen to your favorite shows. H