Vital Sourcing China Manufacturing News

Doing Business in China Book

2005-09-19T16:21:00.000-07:00

We often say that our first job as a sourcing company is to help educate our clients about doing business in China. There is quite a bit of fear, and misunderstanding. Tim Ambler and Morgan Witzel's new book is a good resource as it addresses some current changes such the implications of China's WTO entry.

from: Doing Business in China by Lo, Joanna

source: The China Business Review, July 1, 2005.

via: HighBeam™ Research

China Manufacturing Giant - Realized

2005-09-16T22:10:00.000-07:00

This is an old article from 2002. In it leaders in Suzhou state they have a long way to go for China to become a manufacturing giant. I wonder if they ever thought a few years was a long way.

from: "Suzhou Consensus" reached by China's manufacturing leaders.

source: Xinhua News Agency, December 15, 2002.

via: HighBeam™ Research

COPYRIGHT 2002 COMTEX News Network, Inc.

China as a Manufacturing Giant

2005-09-16T22:07:00.000-07:00

This is an old article from 2002. In it leaders in Suzhou state they have a long way to go for China to become a manufacturing giant. I wonder if they ever thought a few years was a long way.

from: "Suzhou Consensus" reached by China's manufacturing leaders.

source: Xinhua News Agency, December 15, 2002.

via: HighBeam™ Research

COPYRIGHT 2002 COMTEX News Network, Inc.

China "Long Way to Go" to be a Manufacturing Giant?

2005-09-16T22:05:00.000-07:00

This is an old article from 2002. In it leaders in Suzhou state they have a long way to go for China to become a manufacturing giant. I wonder if they ever thought a few years was a long way.

from: "Suzhou Consensus" reached by China's manufacturing leaders.

source: Xinhua News Agency, December 15, 2002.

via: HighBeam™ Research

COPYRIGHT 2002 COMTEX News Network, Inc.

More Exports out of China

2005-09-08T10:52:00.000-07:00

As we are all currently dealing with impact of rising oil prices, in the sourcing industry we are seeing shorter quote windows because of the steep and continuous increase in raw material prices. But we are also seeing an increase in interest in China as the need to lower price even with the slightests margins are needed.

from: Oil prices may drive China exports by David Lague

source: International Herald Tribune, September 6, 2005.

via: HighBeam™ Research

Technorati and Vital Sourcing

2005-09-08T10:46:00.000-07:00

Vital Sourcing

Sourcing Reports

2005-09-07T06:58:00.000-07:00

Good Sourcing Guides

from: Taiwan Flat Panel Exports Expected to Jump 32 Percent in 2005;.

source: PR Newswire, September 2, 2005.

via: HighBeam™ Research

COPYRIGHT 2005 PR Newswire Association LLC

China as an Emerging Power

2005-09-07T06:50:00.000-07:00

from: CHINA'S EMERGING POWER IS ON CENTER STAGE LEADER'S SEATTLE VISIT HIGHLIGHTS COMPLEX RELATIONS.(Business)(Column) by Bolt, Todd Bishop^And Kristen Millares

source: Seattle Post-Intelligencer (Seattle, WA), September 3, 2005.

via: HighBeam™ Research

COPYRIGHT 2005 Seattle Post-Intelligencer. All rights reserved. Reproduced with the permission of the Dialog Corporation by Gale Group.

floating the Yuan

2005-07-25T15:55:00.000-07:00

The Chinese government has just released the nations currency peg on the US dollar - sort of. They have only allowed for a small variance. While currency traders may laud the move as a step in the right direction the overall effect in the manufacturing and industrial world is minimal.

The greatest factor in rising Chinese manufacturing prices has been the increase in raw material costs. A stronger Yuan means they can buy cheaper raw materials, and this, in effect, nulifies any increase in labor wage and/or operating costs.

The move comes in a fashion typical of China - slow, deliberate, and moderate.

Improving Conditions for Chinese Workers

2005-05-23T17:16:00.000-07:00

Reports out of China recently have hinted at improved work conditions, particularly for women. A recent article in MANAFN brings this issue to light.

One of the positive effects of the Communist ascendance in China was to vastly improve the role of women. The communists taught millions to read and write and to understand political issues and the larger community - this as opposed to their traditional roles rooted solely within the family. Once Deng Xiao Ping opened Chinese doors to capitalism there came a flood of workers seeking the better paying jobs in China's first Special Economic Zones (SEZ's) located in southern China across from Hong Kong. Most of these workers were sent out of the interior of China to send money back home to their families. With the decrease of communist rhetoric in China there was a resurgence of the traditional family unit and men were expected to provide income while women reared children. This naturally meant most of the workers who went down south were male.

As more and more factories opened and more opportunities for employment opened up factory owners were able to capitalize on the fact that fewer workers were women and they had to accept lower wages to find work.

What is happening in China today is an increase in production in new regions of China - most notably in around the Shanghai area. This has made keeping workers - men and women - much more important to the Southern factories then it had previously been. Better benefits and safer conditions as well as more equal pay for woman have been the result. During a recent visit to Shenzhen, I was fortunate to meet a number of factory owners that are progressive in their thoughts about workplace advancement. It’s simple economic equilibrium between supply and demand.

It is important to bear in mind the conditions in the interior of China are still dismal when compared with the Southern and costal regions most western reporters are familiar with.

As the head of my sourcing company I have the unique pleasure of taking many of my clients on their first visit to China. Inevitably what they see and experience shatters any preconceptions of China being an old oppressive industrial nation with terrible working conditions. Is there room for improvement yes, but as the article that I have brought to you attention clearly shows, improvements are happening.

My personal experience is that each person finds a renewed spirit about business and even more important a better understanding of the Chinese business environment and people.

China and the Environment

2005-04-05T18:23:00.000-07:00

In a recent article in Wired magazine (April 2005) they have an article entitled "China's Next Cultural Revolution" The article centers around the automotive industry and makes some important points about China's environmental situation.

People often call us to complain about China's environmental situation, but they would do well to note that China only uses 2% of the world's gasoline. The automotive industry is growing fast, but they are estimated to reach only 50% of the US by 2020. And China is doing more for electric and hybrid cars than most any other country - they provide a much more open market condition in which to sell such cars. Shanghai is even going so far as to consider making downtown accessible to only electric cars in the future.

It's a good article with interesting side bars.

China as Rising World Power

2005-04-05T17:35:00.000-07:00

In an article in Entrepreneur April 2005 Richard Branson mentions "All our expansion plans are overseas: China, India..." as well he goes on to say that "Even the smallest, youngest companies, should not be frightened to go overseas. The opportunities in the world are immense--China has a growth rate of 9% to 10% a year.....go there and enjoy it."

Bold advice from on of the world's most successful entrepenuers. We could not agree more. Although to rush into China on an enterpreneur's budget is risky business. Minimize this risk by developing a clear "China Strategy" and talk with someone who has experience in China to get a feel for where to go in China.

Remember, China is an immense country divided into many different localities, each with its own customs and business climate. Be prepared and be flexible.

For more info, I have written a white paper titled "The Truth About Sourcing in China" for those interested in taking the first steps in conducting business in China.

The Chinese Way to Brand Identity

2005-02-15T10:13:00.000-08:00

In the Feb. 13 edition of The New York Times William Holstein, editor in chief of Chief Executive magazine recently interviewed Oded Shenkar, professor of international business at Fisher College of Business of Ohio State University and the author of "The Chinese Century" in regards to how Chinese are seeking increased brand identity in the US market.

The article The Chinese Way to Brand Identity [log in required] provides excellent insight into why market entry for Chinese companies will be remarkably different from the way the Japanese or Koreans did it in the 80s.

In having worked with many Chinese manufacturers, we see there is great opportunity for US manufacturers and marketers to work with the Chinese to bring product and brands to market in the US. The article states, "Both Haier and Kelon started with niche products, such as small refridgerators used mostly in offices. They are gradually expanding. They already are opening manufacturing facilities in the United States. Because of the nature of their products, there are substantial shipping costs from China."

As we always preach, it will be critical for US marketers and manufacturers to have insight into the Chinese business culture and learn how to effectively create partnerships and trust between them.

Good Sources of China Info

2005-02-13T14:49:00.000-08:00

I was reading an article on CNET NEWS.com the other day titled Sourcing in China Not a Sure Bet that was very well written and quite accurate. It begins by echoing what we've always maintained - that companies tend to jump into the China market without putting in sufficient time, energy, and money to really understand the nature of how their items are made or sourced.

The article is very automotive-centric but the advice it gives is sound and applicable to many industries. Of particular note are the five criteria it sights in evaluating if China is right for you. Basically any project requiring a good amount of labor makes sense and anything where you're looking at high overheads makes sense. Issues to bear in mind when thinking about manufacturing in China are transportation costs, lead times, and engineering demands on the Chinese. Where the article falls short is on a cultural understanding of the Chinese people and companies one might be dealing with. The concerns mentioned are all good ones and necessary ones, but companies looking to get into China should also be asking themselves; "who will understand the poeple involved and work to protect my best interests?"

A note on the concept of decreasing overheads: for most mid-size consumer products companies the cost of building molds is a big attraction. An injection mold that may cost $10,000.00 in the US is likely to cost only $4,000.00-$5,000.00 in China. The per units costs will most likely be less, but even if the transportation and development costs make it a wash, the building of molds, and of a network for future savings on molds is not to be taken lightly.

All in all the article is a good source of important information and issues to bear in mind, just don't forget that any business is only as good as the people involved.

Impact of Textile Quota Removal for China

2005-02-02T09:56:00.001-08:00

What opportunities does the eliminations of textile quotas provide to US manufacturers?

Quotas, unlike tariffs or duties, impose a set limit on the number of a given product allowed to be shipped to the country issuing quota. What the removal of quotas for textiles from China it is our belief the US will see a sharp increase in Chinese manufactured garments, table linens, drapes, etc. China already has many factories in place to supply their huge domestic market and the cost to add capacity is minimal. With the removal of quotas they will be able to take advantage of slightly higher profit margins on exported goods. The cut and sew business is an incredibly labor intensive industry. China’s median wage of around $0.60 per hour is still the lowest in Asia. People who argue that having Mexico so close to the US, and thus cutting down delivery times, makes it an attractive alternative would be wise to keep in mind the $2.50 an hour wage rate.

There are about 550 million migrant workers throughout China right now. In years past they flocked to the Southern China coastal region of Guangdong, near Hong Kong. With the rapid development of the Chinese infrastructure in the past 3-5 years, the ports of Shanghai, Ningbo and Xiamen are increasingly busy. We project seeing a rapid increase in textile manufacturing due to the development of the infrastructure in these regions, the lifting of US quotas, and the relative proximity to the middle of China where a great number of those migrant workers come from.

What segments in the Chinese textile industry seem to be most prepared to expedite the opportunity?

Certainly the Chinese are poised to impact the basic cotton clothing industry enormously. These types of facilities are everywhere in China supplying both the export and domestic markets and they simply need to add more machines at a very low cost to increase their output and capitalize on higher demand for exported products. Makers of household textiles should similarly be well prepared for significant and rapid growth.

Under pressure of strong lobbyists the US is putting restrictions on certain categories of products, which may limit their impact on US shelves. Gowns and brassieres have had heavy duties leveled on them and we will see most industry lobbyists arguing for anti-dumping legislation. This will hinder certain industry sectors in China from impacting the US market as profoundly as they otherwise would.

What are the most important questions I need to ask myself before going into China for textiles?

The first question to answer when contemplating any China strategy is: “Am I willing to put in the time to succeed?” Even in industries where the product is known, and manufacturing expertise is mature, it takes considerable time and energy to navigate the business landscape of China. The cultural differences are profound, and it takes a long time to understand the nature of any company or organization. How can you know whose hands are in the pot? How do you make sure quality standards are met and kept up? How will you handle any Chinese imposed export duties or issues?

Secondary questions you should answer are: How will I get there? Do you do business their now and have someone who can help you? Are you manufacturing textiles somewhere else and have no idea how to get into China? One of the most important aspects of doing business in China is maintaining an on-the-ground presence either yourself or through a solid partnership.

Financing is always a critical factor and one that needs to be deal with immediately. Ask yourself: “Do I have the financing to buy from China?” Most all companies exporting products from China will need either a deposit or letter of credit. Any manufacturer willing to work without one is more than likely making too much money on your deal. It boils down to risk and reward. If the reward is big enough they’ll risk not being paid. If they’re working on thin margins they will not take the risk. The safest bet for both parties is a letter of credit.

Insights and Opinions on Manufacturing in China

2005-02-01T22:06:00.000-08:00

Vital Sourcing is dedicated to educating companies and individuals about the Chinese business cultural and more specifically manufacturing in China. My partner Jason Sprong is a firm believer that our job is first and foremost to be advocates and teachers of best practices for sourcing and manufacturing in China. Yes we are a sourcing company, but our real job is to provide the insight and understanding about what it takes to successfully conduct business in China.

We welcome comments and input and are very excited to join the blogosphere.