Why are Chinese products very cheap

Many online sellers are amazed at the incredibly cheap or even free shipping offers from Chinese retailers. How can it be that the dealers from China can offer such inexpensive shipping to Germany or Europe and even for low-value goods?

China a developing country?

Many merchants are not aware of the reason for this and lies in the special nature of China as a member of the Universal Postal Union.

The Universal Postal Union (UPU for short) dates back to 1874 and still contains an old regulation that assigns the Chinese the status of a developing country and therefore grants them more favorable conditions in cross-border postal traffic.

What does that mean? Shipments from China are subsidized. Both a private person and a Chinese company pay only a very small contribution to the cost of transport to countries outside of China. The fee to be paid does not even cover the full costs incurred for transport within the destination countries.

What the Universal Postal Union has to do with the prices of Chinese dealers

The Universal Postal Union or the Universal Postal Agreement regulates the financial compensation payments, which are based on the difference in the amount of mail transported in both directions. This calculation is weighted with country-specific factors that are based on service quality, country size, per capita income, etc.

This means that every country that belongs to the Universal Postal Union (and these are almost all recognized states) has to deliver incoming mail from abroad on terms regulated by the Universal Postal Union. In Germany, for example, DHL is obliged to deliver parcels or letters from China. However, the costs incurred for this are only covered to a small extent by the shipping fee. And the larger the shipping volume from China, the more not only local online retailers suffer from this favorable regulation. Also the logisticians based in Germany or other European countries who have to transport these shipments.

According to Patrick Kessler, President of the Swiss Mail Order Association, Swiss e-commerce retailers pay three to four times more for the delivery of their goods than Chinese retailers.

Does the special position of China in the Universal Postal Union topple?

So as long as China retains its special position as a developing country in the Universal Postal Union, international online trade will be extremely distorted.
This competitive advantage annoys many German retailers. There are already some national organizations within the UPU that are trying to oppose this. For this purpose, a working group against the preference for China in the international postal business was set up, which wants to work to ensure that the compensation payments agreed between the participating countries are adjusted and that the preferential treatment of China is reduced. A decision can be expected for the next Universal Postal Congress in Istanbul in July 2016 at the earliest. We will report on news on this topic here in the blog.