Small Commodities Create Great Wealth
With the fast improvement of economy, more and more wealth is controlled by less and less people, most of us can survive, but we can’t enjoy life. The most important thing for us is to earn more money and create more wealth.
On the verge of graduation, there are three questions I am thinking about everyday: Which job should I search for? How much money should I earn to survive? How much money should I earn for enjoying my life? My major is not as popular as computer science. Actually I realized that it is hard for a economy major student to find a good job to support whole family members. As we know, being a successful business man can earn a lot of money every year which is much bettter than being a staff. If you want to go into business, which products you want to choose to sell? The high-tech products? Without a doubt, high-tech products have high level of profits which is attractive. However, for a recent economics graduate and people with low education levels, it is impossible to create a high-tech product to sell. If you have enough money to build a factory and buy enough machines to create high-tech products, the patent fee will make your profit at a very low level. Your products will not be competitive. Therefore, I think international trade is a good way for us, especially for small commodities. Here are some of my thoughts, they maybe helpful maybe not. I have no confidence about my thoughts since I have never sold any products.
Ignore the impact of the Corona Vrius(I believe we can beat it someday), the environment of international trade is much better than 20years ago. More and more countries have joined the process of export and import, more and more goods and services are traded among different countries. The best evidence to prove the international trade becomes more and more important is called the “Trade-to-GDP Ratio”. “Worldwide trade-to-GDP ratio rose from just over 20% in 1995 to about 30% in 2014.” (cited from Wikipedia) My hometown is Yiwu, China where owns the biggest small commodities market over the world. In 2016, the per capita GDP in Yiwu is 88,823 yuan around 13,600 dollars which is much higher than the national average of 53,817 yuan around 8,290 dollars. Why citizens in Yiwu is richer than in other cities in China? The most important factor is the Yiwu small commodity market offers more than 210,000 jobs, and the main business in Yiwu is export. Therefore, in my opinion, even though small commodities are less competitive, they still can create great wealth for people. Since the price of labor and raw material is much lower in China than in other countries. Not many people would like to spend their money to update their high-tech products and most of people would not care about the consumption on small commodities because they are so cheap.
The first key point you should care about for selling small commodities is the quantity you can sell, not the profit for each one. So which small commodity would be a good choice? Recently, I noticed that prices of keychians are such different in China and America even though they are almost same and made by same material. For example, my sister owns a keychian factory in Yiwu, China. The main business of her factory is couple keychians. For one normal couple keychain in amazon, the price is $3.99 like the picture shows. Suprisingly, the cost for each one in my sister’s factory is about 1yuan(around $0.15), and she sell it about 2yuan( around $0.31) in Chinese electrical market. The profit seems to be very low because you can only earn 0.15 dollars. However, the rate of profit is about 100%! If you sell it in American electrical market, your profit will be higher.
The second key point is the taxes and transportation cost. If you want to be a business man and sell commodities, you should know the differences in the tax imposed on commodities in different countries. For U.S. as an example, the taxt imposed on commodities during the international trade follows the 60/40 tax rule. Section 1256 contracts have lower 60/40 capital gains tax rates: 60% (including day trades) subject to lower long-term capital gains rates, and 40% taxed as short-term capital gains using the ordinary rate. ( cited from Section 1256 Constracts https://greentradertax.com/trader-tax-center/tax-treatment/section-1256-contracts/) The next problem is the transportation cost, by using the borderlinx calculator, I got a elstimated transportaion cost of 1ton keychains like the figure shows is about 56,764 yuan( around $8,743), and the quantity of one ton keychains is about 50,000. So the transportation cost for each one is about $0.17). After minus the taxes and tansportation cost, the estimated profit for each one is still higher than 2 dollars. Furthermore, the price of the couple keychain I showed before is one of the cheapest couple keychain in the Amazon. If you want and can take the risk, you can buy other types of keychains in China and sell them in America. The cost of different types does not vary greatly. Searching the most popular type, and sell it!
The last key point I think is which type of market you should pay attention to: the physical market or the electrical market? Acoording to my living experience in China, the electrical market is more and more important in people’s life. People are enjoying using electrical platforms to buy goods and services because they can choose the most fitable from a lot of types. Many of my friends have made money from online shops. It is a trend that electrical market will attract more and more people and investment. However, I think the physical market is still important in America. As the saying goes, do not put all your eggs in one basket, you can also pay some attention to find some offline sales channels to sell your goods.
In the last, every investment has risks, the thing I am talking about is the advantages of international trade and one way can help me benefit from the international market. It is an immature idea but I decide to have a try!