Vuvuzelas have turned out to be yet another example of how China, despite its position as the world’s manufacturing hub, often makes very little money out of its exports.
Around 90% of the phenomenally popular droning plastic horns were made in China, according to Wu Yijun, the head of the Ninghai Jiying Plastics Manufacturing company, but Chinese factories only took away a mouse’s share of the proceeds.
Wu told the China Daily that his company made more than a million vuvuzelas, which were exported to Africa in April. His price? 0.6 yuan (8 cents) to 2.5 yuan each.
In South Africa, they were marked up to between 18 yuan and 53 yuan, according to the paper, with some department stores selling luxury models for as much as 177 yuan.
"Most of the profit goes to dealers and importers. Our profit margin is less than 5 percent," Wu said. "We still don’t have international pricing power."
China’s government keeps saying it is determined to move its industry up the value chain and you can see why. Despite gross exports being a huge share of China’s GDP, once you strip out all of the money that China has to pay to import raw materials, the figure deflates rapidly.
As the West haggles ever harder on its orders, the margins keep shrinking, and if you can’t even make a decent profit on the most popular cheap toy in the world right now, it’s time to reconsider the business model.