China will remain a competitive and important part of the branded merchandise industry, especially in hard goods, for the foreseeable future.
It’s currently the source for most of the products we sell in this industry. Leaving Chinese factories is difficult because they have the best supply chain, low MOQs, quick production times and an efficient workforce.
This will continue even though China has some of the highest wages in Asia and one of the fastest declining populations in the world. Of course, this is barring a Chinese invasion of Taiwan or some other black swan event.
Why China Is Difficult To Replace
We’ve been trying to buy products outside of China for the past seven or eight years (and even more so after COVID) without a lot of success. In fact, we’ve had to move production of some items back to China.
I hear this a lot from other people in the industry. They can’t get the products with good quality, on time and for less when buying outside of China. The majority of the Southeast Asian factories are owned and managed by Chinese companies, anyway. They buy almost all of their raw materials and partially finished components from China.
- The bad actors will produce 100% finished goods in China, ship them to another country, change the boxes and add a “Made in …” sticker on them.
When factories in other countries import components from China, they have to pay shipping and import tax. In order to be competitive with China, they usually need larger quantities, sometimes even full containers. But, even with cheaper labor, they can’t compete with China on smaller quantities.
Because China is the origin for many of the components, Southeast Asian countries usually have a longer production time. It can be something like 60-90 days versus 45-60 days out of China. Ultimately, China has a large and diverse supply chain that can normally get most of the components within an hour drive.
China’s Demographic Problem
China’s biggest problem that affects its future economy, real estate values and ability to remain a superpower is that it has one of the fastest declining populations in the world.
This started with the one-child policy, which lasted for over 35 years and ended only in 2015.
In order to maintain a current population, a country needs to have 2.1 births per female. China in 2025 was at only one. The Chinese government is offering all kinds of benefits for people to have more children and now allows three, but it’s not working.
Peter Zeihan, a demographer, has a more pessimistic view of this problem and believes the current population is 1.2-1.3 billion, while the official number is 1.4 billion. He believes the population could drop to 700-900 million by 2050-2060, while the official government estimate for 2050 is 1.25-1.3 billion.
A side effect of this policy is that parents and grandparents focused on only one kid. These kids got educated, somewhat spoiled and don’t want to work in factories. Meanwhile, young people can’t get the jobs they went to school for and there aren’t enough jobs for all the college graduates.
Daniel Oas
CEO, High Caliber Line
The official unemployment rate for people ages 16-24 is 16.3%, but I have read that it could actually be closer to 28%. So, if a huge part of the baby making population is unemployed, how are they going to get married, buy a house and have kids?
How Can China Remain A Manufacturing Powerhouse?
Robotics and AI.
I’ve been visiting factories in China for over 25 years and have witnessed their transformation with robotics, especially over the past five years. As the workforce ages and there aren’t enough young people to replace current workers, factories are moving towards robotics and AI.
We buy mostly from medium-size factories and they’re implementing something every time I visit. One of my suppliers fully automated 10 stamping processes to manufacture the Stanley knock offs mugs. They would normally have 10 people doing this and now it’s just one person managing the line. Another supplier went from 50 people in an injection molding factory to less than 10 through robotics.
In a towel factory, a supplier automated all of the cutting, sewing the edges and adding the label on towels. It started with big 8-foot-wide rolls of fabric and after two machines, it had a finished product, all with only three people.
Now, many factories are using AI to monitor and quality control all the production lines. China deployed about 120,000 autonomous mobile robots in factories in 2025. One factory in Guangdong reportedly built a facility to build 10,000 AI-powered humanoid robots.
As these become mainstream, I expect to see these on assembly lines within the next two years. This will start with higher end products and work its way down to the factories we are buying from.
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What is most interesting is that this isn’t happening only in the biggest factories. The medium-size factories we buy from are starting to automate. They may not be able to afford the latest technologies today, but over time they will.
This is the real point: Robotics will continue to move down to smaller and smaller factories as the technology gets better and cheaper.
Are Chinese Wages Really Too High?
Chinese workers are some of the most expensive in Asia at $800-1200 per month. By comparison:
- Vietnam is $300-350
- Cambodia is $220-300
- Laos is $180-250
- Thailand is $400-600
Chinese factories have been perfecting the art of working hard and efficiently with what they had for over 50 years.
They are very productive because many workers get paid on a per-piece basis, while in most countries, they’re just paid hourly or salary. In fact, I show videos of how fast they print to my printing department employees.
The More Things Change, The More They Stay The Same
Ultimately,Chinese factories are going to remain an important part of our industry.
Yes, wages are higher. Yes, the population is declining. And yes, fewer young people want to work in factories.
But China still has the best supply chain, the most experience, the fastest production times and the ability to produce smaller quantities better than most other countries.
Robotics can and will change this even more over time as it becomes more mainstream. I can see where other countries will invest in robotics and become more competitive with China, which does include our printing facility.
But based on what I’ve seen firsthand, China isn’t going away as a manufacturing powerhouse. It’s just changing how it manufactures.
Oas is the CEO of High Caliber Line, PPAI 100’s No. 19 supplier.
