China has managed to change its global economic standing in a very short period of time. The country has pulled itself from the ranks of a developing nation into a major economic world power. According to the US Department of Commerce, China has a population of 1.3 billion and a $2.6 trillion dollar economy. China is now considered the 4th largest economy in the world. This statistic is important for both the USA importer and exporter to take seriously. If your company does not include China in its business model today, large opportunities for growth and development are passing you by.
First, for the USA exporter, the weakened value of the dollar and the strong economic standing of China create large opportunities for US companies to sell their products abroad. For example, smaller emerging cities like Hangzhou and Qingdao currently import over $4 billion dollars worth of products from the USA today. These cities specialize in a number of industries. For example: textile, apparel, and food/beverage processing are very lucrative. If your company produces equipment or supplies that cater to these markets, the sales opportunities are endless. Of note however, you will see greater sales success by hiring agents or distributors throughout China that can represent your products in targeted cities.
For the USA importer, China is an important market to consider when your business is looking to manufacture private label products or purchase finished goods and raw materials. Since labor rates in some regions of China are as low as 17 times less than US labor rates, companies are sure to see considerable savings. The Caveat: one should be aware of possible anti-dumping and high import duties that could be added to the cost of your product. Also, be aware that shipping wait times may be longer than expected. With heavy shipping volume in and out of China today, wait times at Chinese ports (after product has been manufactured) could be as long as 2-3 weeks before products are even released for international delivery.
China is divided into economic regions throughout the country. Before you begin sourcing, you must be familiar with the production and product specialties in some of the regions.
Pearl River Delta Region (Guangzhou, Shenzhen, Hong Kong, South-East): Specializes in textile, apparel, toys, garments, plastics, tooling, metal, electronics, and home appliance manufacturing.
West Central Region (Chengdu, Chongqing, Mianyang): Specializes in IT, telecommunications & aviation product manufacturing.
Bohai Rim (Beijing, Tianjin, Qingdao, North East territory): Specializes in chemical, pharmaceutical and optical production.
Yangtze River Delta Region (Shanghai, Nanjing, Hangzhou (capital of Zhejiang Province), South- East Coastal): Specializes in Automotive & plastic molding.
Sourcing from China is a process and will take time. There are cultural, legal and financial issues that must be considered when you are finalizing any transaction. Culturally, the Chinese vocabulary does not possess the English word “NO”. This means, the word “Yes” can be used more often than expected. Therefore, answers to your trade and manufacturing questions could be confusing. Legally, if contracts are required, be sure to use a lawyer that can speak & write Chinese. It is critical to have clauses in your contracts that will protect your intellectual property and/or patents & trademarks. Financially, stick with letters of credit for payment until you are familiar and comfortable with the factories you work with. Lastly, be sure to compare pricing, shipping and payment terms with at least 3-4 suppliers. Hopefully, the ideas presented here will encourage you to consider expanding your business operations into China. The long term rewards can be great.