If you are considering setting up or moving your manufacturing operations to China, you are not alone. China is one of the world’s biggest manufacturing hubs and a top choice for companies from around the globe. However, many other countries are trying to get in on the manufacturing game. So, how do you know if China is right for your manufacturing needs? This article will briefly lay out the current Chinese manufacturing landscape and explain the pros and cons of manufacturing in China.
Chinese Manufacturing Landscape
China is a huge, diverse country, with many major cities and business centers. Each major city (or region) offers vastly different business and manufacturing opportunities. Each of the cities discussed below is an important business and manufacturing center.
Shanghai is located on China’s central coast roughly equidistant from Beijing and Guangzhou. Shanghai is an important economic, financial, trade, and shipping area in China. It is one of the world’s largest and busiest ports. The main products manufactured in Shanghai are communication equipment, automobiles, textiles, electronics, steel, chemicals, petrochemicals, and biomedicine.
Beijing is located north of Shanghai at the northern tip of the North China Plain. Beijing is an important manufacturing hub for the pharmaceutical and electronics industries. It is also a leader in bio-engineering and information technology.
Tianjin is located south of Beijing on the west coast of the Bohai Gulf. It is Beijing’s sister city and another manufacturing giant. Tianjin is a leader in aerospace and aviation, mobile phones, automobiles, and alternative energy products.
Guangzhou is located in southern China, north of Hong Kong and Macau, on the South China Sea. Guangzhou is the main manufacturing hub of the Pearl River Delta. There are thousands of factories in each of the city’s manufacturing zones that manufacture a variety of products.
Shenzhen is located in southern China directly north of Hong Kong on the South China Sea. Shenzhen is known worldwide as an electronics manufacturing hub.
There are many pros and cons of manufacturing in China. Like any business decision, each pro and con should be carefully considered based on your specific company needs, including your product, your budget, quality and quantity needs, etc. Below is a non-exhaustive discussion of considerations each company should make.
Pros of Manufacturing in China
Lower cost: It is often cheaper to manufacture in China. Although you must factor in shipping and duties costs which won’t apply if you manufacture domestically, it is still likely cheaper to manufacture in China. Keep in mind, all prices are negotiable, so you can be aggressive in your negotiations.
Higher output and quick turnover: Chinese manufacturers are known for their high capacity and quick turnover times. Many Chinese factories have the capacity to produce large orders in a timely manner. When a Chinese manufacturer tells you he can have your order done in four weeks, it will likely be done in four weeks. Read Globig’s recent article, Your Chinese Manufacturing Contract.
Better service: Because Chinese manufacturers want your business they will often go out of their way to get it. Remember, service levels may change once you have signed the contract, so your expectations for your ongoing relationship should be clear.
Access to Chinese market: The Chinese market has grown rapidly over the past few years and now represents a huge part of the global consumer market. If you’d like to enter the Chinese market, manufacturing in China will make it easier, faster, and cheaper.
Cons of Manufacturing in China
Intellectual property protection costs: IP protection and enforcement is expensive and high risk in China. Although you likely understand your need to protect your IP in China when you sell your products or services into China, it is also important that you understand that you need to protect your IP from infringements by your manufacturer. You also need to understand the costs and time required to detect and enforce your IP rights in China. Always use an attorney well-versed in Chinese law, which will likely be a local attorney. You can find IP attorneys in the Globig Marketplace under Patent Services and Trademarking.
Finding a reputable factory: It is not easy to find a reputable Chinese manufacturer, but there are a lot of resources and help available. Learn more about how to find a reputable factory in the Globig Knowledge Base section on Manufacturing in China.
Higher minimum order requirements: Chinese factories often have lower profit margins, so they tend to have higher minimum order requirements. If your company cannot accommodate high minimums, you may need to manufacture elsewhere. It is likely you will be able to find a factory that is willing to product smaller orders, however the price per unit will likely increase.
Shipping: If you choose to manufacture abroad (anywhere) you will incur the extra costs of shipping, which includes tariffs and duties. You should calculate your total cost, including shipping, tariffs, and duties, when you compare the cost of manufacturing abroad to the cost of manufacturing in-country. Furthermore, the additional time it takes to ship products should be considered.
Quality: China still gets a bad rap for poor quality manufacturing. This may or may not be true based on the manufacturer and the product(s) you are manufacturing. A great way to manage and regulate your manufacturing process is to hire a trusted local agent. You or your agent can then make in-person inspections for quality and conformity. Globig’s article, Your Chinese Manufacturing Contract, explains how to include product quality provisions in your manufacturing contract.
Stigma: Unfortunately, there is a stigma around products being made in China. Because this stigma is not likely to change, it is something that you will have to learn to live with if you decide to manufacture in China. People buy products manufactured in China every day throughout the world. Some of the world’s highest selling brands manufacture their products in China, so don’t let this be the deciding factor. Remember, people shop with their wallets before their patriotism.
Language and communication barriers: Working in a foreign language is challenging, but working with another culture adds an additional dimension. Chinese business culture is nothing like western business culture, which means you must be even more diligent with your Chinese business relationships. Learn more about Chinese business culture in the Globig Knowledge Base.
Choosing where to manufacture is an important, and usually early, business decision that requires a lot of research and consideration. Selecting the wrong factory because you are busy, in a hurry, or don’t have the right resources can cost a lot of money and time. The pros and cons discussed above should be considered and given the appropriate weight based on your business and manufacturing needs.
Globig is here to help with your business expansion needs around the world. Join Globig today for free business resources and expertise on China and other countries, and through our Marketplace, access to vetted attorneys and experts around the world.
Related Articles You Might Like:
How to Find a Reputable Manufacturer in China
Payments Into and Out Of Mainland China
