Deciphering China's production capacity with 'one-yuan' lighters

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Jun 13, 2024, 12:25 ET

BEIJING, June 13, 2024 /PRNewswire/ -- With global sales of 20 billion lighters per year, about 70 percent originate from a county-level city in the middle of China. How did this city achieve this?

In the Beilun District of Ningbo City, East China's Zhejiang Province, a truck carrying 1 million lighters is unloading at the hazardous goods warehouse of Yonggang Haian Logistics Co, Ltd. This truck began its journey just a day ago from Shaodong, Central China's Hunan Province. After traveling over 1,000 kilometers, it arrived at the Ningbo-Zhoushan Port. These lighters from Shaodong underwent a series of processes, including registration, warehousing, packing and customs declaration, before being loaded onto ocean freighters bound for Malaysia.

The success of this operation can be attributed to the diligent efforts made during the initial development stages.

Striving for technological innovation

Not located along the coast, rivers, or borders, Shaodong has still developed into the world's largest lighter production base, with 114 companies producing around 15 billion lighters annually that are exported to 120 countries and regions. A lighter can reveal the mystery of China's production capacity and showcase the international competitiveness of Chinese manufacturing.

Western countries are important markets for Shaodong lighters. However, some lighters from Shaodong once did not meet the flame height standards, becoming a barrier to entering the Western markets. The Shaodong Intelligent Manufacturing Innovative Institute conducted technical research to develop intelligent technologies such as rapid precise positioning for graphics and flame information collection, allowing machines to have a "keen eye" for detecting the flame size and significantly improving accuracy. This equipment has been applied to several lighter companies in Shaodong.

In recent years, the lighter industry in Shaodong has promoted technological innovation and process improvement, from research and development to production, all empowered by technology.

The lighter industry, known as a "nomadic industry," originated in Spain and flourished across Europe and the US. In the 1960s and 1970s, it moved to countries like Japan and South Korea, and in the 1990s, it shifted to regions like Guangdong Province and Zhejiang Province in China. This industry, characterized by thin profit margins, relocates to wherever costs are lowest.

A visit to Shaodong reveals the extreme cost control measures in place, helping us better understand why China's production capacity is so remarkable.

"When I first started working at Hunan Dongyi Electric Co., Ltd. in 2014, the company had not yet undergone automation. At that time, the welding workshop was crowded with over 200 workers, yet it was still challenging to produce 1 million lighters a day," said Bai Jiabao, the company's deputy general manager.

Today, Dongyi Electric's welding workshop is filled with highly efficient automatic welding machines that automatically weld components such as shells, nuts and air inlets. "Now, this workshop only needs 30 workers to weld 5 million lighters a day," Bai added.

In recent years, Shaodong has been dedicated to building a hub for advanced manufacturing. Shaodong has been promoting the automation transformation of the lighter industry, replacing injection molding and welding machines for three generations and filling machines for five generations. This steady and rapid progression has increased per capita efficiency by 30 times, reducing the labor cost per lighter from 0.1 yuan ($0.014) to less than 0.02 yuan.

It is this high level of automation that has driven labor costs down.

By upgrading through new technology and promoting industrial high-end, intelligent and green development, not only has the quality of products improved significantly - welding of lighters has become more precise, inflation has become more stable, and even the shell has become smoother - but it has also made production operations smarter.

By applying digital production management systems and solving problems, such as unclear production plans, inaccurate product data and unstable processing quality, the production of lighters is now "completely under control;" and installing smart meters on the production line optimizes factory operations.

Behind the success: Quality comes first

The complete industrial chain and strong supporting capabilities have accelerated the speed of material transfer and product iteration between factories. According to the latest Shaodong lighter industry map, 10 towns (or subdistricts) handle different segments of the lighter industry chain, forming multiple industrial clusters for international high-end machines, machines for domestic sales, design and development, and packaging and printing.

Quality comes first in market competition. Producing high-quality products relies on high-quality production capacity, which fundamentally lies in innovation. In the trend of economic globalization, adhering to technological innovation as the foundation and prioritizing product quality is the key to success for China's lighter industry.

In terms of quality control, companies in Shaodong continuously increase their technological content, with standards for high-temperature resistance rising and the proportion of products with safety locks increasing. In terms of product upgrades, they implement plans to widely attract talent to solve technical problems on high-precision components such as constant flow valves.

For research and design, they customize products according to different customer needs: Europeans and Americans have larger hands, so lighters sold to those countries are five millimeters wider than normal; Russian buyers prefer attractive appearances, so efforts are put into the shell design. For marketing services, they explore new e-commerce sales models, connecting online and offline channels and building mid-to-high-end lighter brands.

With a spirit of daring to venture out in the face of difficulties, Shaodong's companies have gradually established a global sales network, successfully expanded their business abroad, and become a "single champion" in the manufacturing industry with their products becoming popular all over the world. Currently, the Shaodong lighter industry has three national-level innovation platforms, eight provincial-level innovation platforms, over 1,000 researchers, an annual research and development investment of 200 million yuan ($28 million), more than 3,000 scientific research achievements and an annual product innovation rate of 38 percent.

Chinese President Xi Jinping recently pointed out that transforming and upgrading traditional industries can also foster new quality productive forces. The development of the lighter industry in Shaodong demonstrates that Chinese products can maintain competitiveness by ensuring high quality while offering good cost-performance ratios, benefiting consumers.

Climbing upstream in value chain

Driven by technological innovation, extending the value of lighters to both ends, Shaodong has drawn a "smile curve," becoming the epitome of China's manufacturing industry climbing upstream in the value chain.

The story of lighters "riding the wind and waves" witnesses the continuous improvement of China's opening-up. China's door to the world is opening wider and wider, further promoting lighters to better participate in international trade.

This is especially true for the Chinese electric vehicle (EV) industry.

Becoming the leader in any fiercely competitive international market does not come overnight, nor can it be achieved solely through government subsidies; it is the result of the operation of economic laws.

Chinese companies have taken an early plan in the field of new energy, investing in long-term research and development to form a leading technological advantage, said Shakeel Ahmad Ramay, the CEO of the Asian Institute of Eco-civilization Research and Development. During the Canton Fair 2024, some importers from Western countries said China is a leader in the global EV field and that they hope to purchase more EV products.

Today, China's EVs hold a comparative advantage in the global industrial division of labor and a comprehensive advantage in production costs and product design. This success stems from the long-term planning and research and development efforts of Chinese enterprises and the significant improvements in total factor productivity that bring quality and cost advantages, rather than relying on government subsidies.

In the Yangtze River Delta region, the coordinated development of industrial clusters enables an EV assembly plant to source necessary components within a four-hour drive, creating a "four-hour industrial circle" that embodies the features of a modern industrial system. According to an article on The Diplomat's website, Chinese EV companies can offer advanced technology at competitive pricing, benefiting from their inherent supply chain which lowers costs in logistics, labor, raw material, and transportation.

Fair competition is a fundamental principle of the market. Only by insisting on developing in openness, growing in competition, and daring to compete in the vast ocean of the international market can the enterprises continuously enhance their competitiveness.

From the "one-yuan lighter" to EVs, the global competitiveness of China's production capacity results from the combined effect of these advantages, fully in line with economic principles and market rules.

President Xi summarized the advantages of China's development as follows: a socialist market economy in systemic terms, a supersize market in terms of demand, a full-fledged industrial system in terms of supply, and abundant, high-caliber labor force and entrepreneurs in terms of human resources. These "four advantages" provide strong confidence for China to maintain its strategic initiative in the fierce international competition and solid support for achieving high-quality development.

From small lighters to the "three new items" including EVs, the road for Chinese products to go overseas hasn't been smooth, but it confirms a simple market rule: No matter the product, no matter what field it is in, whoever has excellent quality, superior service and fair price that satisfy market demands can win.

China's new energy industry has made real progress in open competition and represents advanced production capacity; it not only increases global supply and alleviates the pressure of global inflation, but also contributes significantly to global climate response and green transition, Chinese President Xi Jinping noted in his recent visit to Europe. Whether viewed from the perspective of comparative advantage or global market demand, there is no such a thing as "China's overcapacity problem," he added.

From 'made-in-China' to 'created-in-China'

Globally, there is a shortage, not a surplus, of production capacity in the new energy industry.

The price of China-made "one-yuan lighters" has remained unchanged for 20 years and China has become the world's largest production base and export base, but no one says that this is overcapacity, and consumers around the world continues to benefit from it.

Chinese manufacturing now makes an important and positive part of the global industrial and supply chains. President Xi once emphasized that "as we further modernize our industrial system, we will provide the world with more and better products made and created in China."

China persists in innovation-driven, green development and steadfastly promotes the transformation of "made-in-China" into "created-in-China," Chinese speed into Chinese quality, and Chinese products into Chinese brands. The Chinese manufacturing industry will not only achieve transformation and upgrading but also enhance industrial competitiveness, contributing more high-quality production capacity to the world.

From "one-yuan lighters" to the "three new items" including EVs, China will always adhere to a high level of opening-up to the world under the general trend of economic globalization. The world is also looking forward to more opportunities and contributions from China, and together sharing the progress and benefits of green and low-carbon development.

SOURCE Global Times