ABOUTGarphil Julien is a research associate with the Open Markets Institute.Yet bikes are in short supply because nearly all bikes sold in the US are imported, predominantly from China. Chinese factories produced about 95 percent of the 17 million bikes sold in the US in 2018, and they provide 60 percent of US bike component imports. Bikes made in Taiwan accounted for 6.3 percent of sales in 2019. All the world’s largest bike manufacturers – including corporations headquartered in the US – have most of their production facilities in China or Taiwan.But back in 1994, China provided only 24 percent of bikes sold here. What changed? During the past few decades, the Chinese economy has featured lower production costs from cheaper labor and raw materials, as well as lower regulatory standards, and China has benefited immensely from these comparative advantages. Many US companies, particularly in the bicycle industry, decided to move production offshore to take advantage of lower costs, whether to increase profit margins or stay afloat amid increasing competition. Globalization—spurred in part by a liberalized global trading regime with reduced trade barriers and China’s accession to the World Trade Organization in 2001—was also a key factor in China’s success.
Paramount among these reasons is the support of China’s and Taiwan’s governments to build up their manufacturing industries, mass-produce selected products, and increase exports. The number of Chinese manufacturers of bicycles or bike products increased from 38 in 1978 to 1,081 by 1995. It’s worth noting that the Chinese government’s industrial policy was quite loose, even laissez-faire: The central government gave autonomy to the provinces to build their own bases, so in 1995, these factories were producing at only 55 percent of their capacity, and many of these firms were unprofitable. In contrast, the US government has for decades not had any coherent industrial policy for manufacturing, much less a specific policy for bicycle production.“We don’t engage in a manufacturing industrial policy in the US,” says Richard Schwinn, the great-grandson of the founder of Schwinn Bicycles and founder of Waterford Precision Cycles, based in Waterford, Wisconsin. “Our policies are supporting insurance companies and financial intermediaries. There exists no infrastructure to build things that are fundamental to the bike industry. You have to import low-cost rims and bike tires, and in the US it’s so much harder to get carbon fiber needed for bikes than in China.”