Zita Chan and Haruka Yan
F.5D
Economics Report of China Trip
1. Introduction
On the 18th of June, we have visited the Longchang Toy Factory in Dongguan and travelled around the
Dongguan city to learn about the recent economic development of the Dongguan city. The Longchang Toy
Factory is a typical example to represent the rapid industrialization and urbanization in Mainland China.
In this trip, we also visited the Humen Museum of the Opium War and the Fort Weiyuan, to learn about
the history of Dongguan and the historical reasons for this city to be developed into an industrialized city
nowadays.
2.Observation during the trip
a. Division of labour in the LongChang Toy Factory
LongChang Toy Factory, is specialized in producing toys, which is a secondary production, to turn the
raw materials into final products. There are different production lines in the factory producing toys such
as robots. This is an example of complex specialization, different production lines specialize in a
particular sub process or production stage of a good. For examples, some production lines are
responsible for making the mold of the toy, some are responsible for the assembly work of the toy and
some are doing the quality check for the final product.
When a firm engages in specialization, there are a few advantages as well as disadvantages.
For advantages, firstly, the productivity can be increased as workers are assigned job that they can do
the best, they repeat the same task everyday and they become skillful in this particular task. For
example, workers can make the mold of the toy at a faster speed when they practice more. Also,
specialization favors mechanization, as it is easier to design and make machines for simple tasks.
Moreover, the training time for the workers is saved as they do not need to learn special skills to
perform simple tasks. Therefore the time needed for producing each toy is shortened and the
productivity will increased.
Secondly, the producer goods in the production can be fully utilized, for example the machines, as
each worker only need one machine or one producer good for his own production stage and these
machines are used repeatedly, therefore, less producer goods are needed.
Thirdly, the living standard can be raised after specialization, as the productivity is increased which
encourages trade and exchange for a greater variety of goods such as selling toys or robots produced in
LongChang in China to overseas market (USA, Europe) and buy electrical appliances form other
countries (Japan), and hence the quality of life is raised.
For disadvantages, as workers need to repeat the same task every day, the work may become dull
and monotonous, the productivity may drop.
Also, over-interdependence of different production stages may be resulted, as if one stage of
production is affected, the other production lines will also be affected. Just like the case in LongChang,
if there are problems in making the mold of the robot, the assembly work will also be affected.
Specialization will also result in highly standardized goods, which may limit the choice for consumers.
Apart from these, workers in these factories are only trained for one skill, they cannot find another
job easily, when the demand for that skill drop, workers will lose their job and the risk of
unemployment is high.
b. Economics of scale and diseconomies of scale
The LongChaung Toy Factory is a large scale factory, which has different production lines in different
buildings, as shown in the photo, the whole area is belong to LongChang, which also include the
residential buildings for the workers to live in. there are around 1500 workers working in this factory.
Such large scale of production may bring both positive and negative impacts to the industry.
For the advantages in large scale production, they are called the economics of scale. The LongChang
Toy factory can enjoy the managerial economics of scale, as the factory practice specialization with a
high productivity, so the production cost can be spread among the large output, the average cost is
lowered. Also the firm enjoys the purchasing economics of scale, as it can buy the input and producer
goods in bulk and enjoy discount. As this production uses a lot of machines, the firm can also enjoy the
technical economics of scale, due to the large output, the cost of using machines can be shared.
For the disadvantages, as there are too many workers in the factory and in different production lines,
the management cost is higher and it is more difficult to have communication and supervision on each
worker, there will be lower efficiency and the firm suffers from the managerial diseconomies of scale. In
order to expand the firm, large sum of money is borrowed from the bank and the factory needs to pay a
high interest rate for this hugh sum of capital, the factory will suffer from the financial diseconomies.
Apart from that, the firm may suffer from marketing diseconomies of scale as the output is increased
continuously, the market become saturated and extra cost is incurred to explore the new market. The
average production cost is therefore increased.
3.Reflection
In this trip, I have experienced the rapid economic growth in Mainland China, as there are
urbanization and industrialization around the city. I can see more private cars driving on the road
replacing the bicycle in the old days, people’s living standard is increasing. And China as the world’s
factory, production plants in China can produce high quality goods and sell to foreign countries, which
also contribute much to the economic growth in China.
I can also see the well planning of the city, the transport network is very convenient which makes
the factories located in suburbs more accessible, attracting more workers to work in the factories.
Throughout the whole trip, I have learnt to explain the real life situation using the economic concepts,
and to related the different concepts into the same issue.
4. Division of labour
Zita Chan
Part1,2a,3
HAruka Yan
Part2b,4