Sourcing & Import from China Tips and Guide

The China Business Review looks at China’s export powerhouses: the Wenzhou model, the Dongguan model and professionally managed manufacturing groups. Over the past two decades, China’s manufacturing industry has experienced a major transition, as shown by the shift in exports from primary products to electronics and machinery. In contrast to state-owned enterprises (SOEs), private firms and joint ventures have thrived in China and have become the backbone of the country’s export zone.

China’s export powerhouses fall into three main categories, each with different competitive advantages: the Wenzhou model, the Dongguan model, professionally managed manufacturing groups.

Wenzhou model

When a promising new product is introduced, often by a foreign company, throngs of Chinese SMEs crank out the product within a few months’ time. Heated competition sends prices down soon afterward and the competition expands overseas. Most Wenzhou companies remain in the copycat stage; many of them suffer from lack of technology and management talent.

Dongguan model

The Dongguan model is similar to the Wenzhou model, except that Dongguan’s development has been driven largely by Hong Kong and Taiwan companies. Dongguan companies are skilled at exploiting new opportunities in China’s emerging market. But the Wenzhou and Dongguan models typify the problems most Chinese private companies face: Their value chains of research and development (R&D), production, and marketing are heavily focused on production. In contrast, American, Japanese, and European companies spend far more on research and development and marketing than on production.

Professionally managed companies

Professionally managed companies include transformed SOEs and domestic companies created by professionals with science or management backgrounds. This group of companies competes at higher levels of technology and larger scales of economy. Many companies have direct international involvement, with branches and even factories overseas. The best example of the emerging Chinese multinational is Haier Group, China’s largest home appliance company. Haier has actively engaged in technical innovation, scientific management, capital operations, mergers and acquisitions, and multinational expansion. In just 15 years, it has transformed itself from a small SOE burdened with Â¥1.47 million ($177,536) in debts to the world’s fourth-largest home appliance manufacturer, with sales of more than $12 billion and 30 manufacturing bases and 8 design centers worldwide.

Source: This is an excerpt from an article originally published in the May-June, 2005 issue of the China Business Review.

Manufacturing Process 

In tropical Guangzhou it is very common for people to go out to public swimming pools in the evening hours after work and cool down with a nice swim. The pools become very crowded with people practicing their strokes, socializing, and playing games… You must pay a small fee to enter and then you can store your things in your locker… But be on the lookout, the swimming traffic in a GZ pool is every bit as crazy as the traffic on GZ streets!

Guangzhou Swimming Pool

Taken at Swimming Pool




Mr Bean - Joke

To all Employees:

Effective January 2007


Dress Code

1. It is advised that you come to work dressed according to your salary. If we see you wearing Prada shoes and carrying a Gucci bag, we assume you are doing well financially and therefore do not need a pay raise.

2. If you dress poorly, you need to learn to manage your money better, so that you may buy nicer clothes, and therefore you do not need a pay raise.

3. If you dress just right, you are right where you need to be and therefore you do not need a pay raise.

Sick Days

We will no longer accept a doctor’s certificate as proof of sickness.

If you are able to go to the doctor, you are able to come to work.

Holiday Days

Each employee will receive 104 personal days a year. They are called Saturday & Sunday.

Compassionate Leave

This is no excuse for missing work. There is nothing you can do for dead friends, relatives or co-workers. Every effort should be made to have non-employees attend to the arrangements.

In rare cases where employee involvement is necessary, the funeral should be scheduled in the late afternoon. We will be glad to allow you to work through your lunch hour and subsequently leave one hour early.

Toilet Use

1. Entirely too much time is being spent in the toilet. There is now a strict three-minute time limit in the cubicles.

2. At the end of three minutes, an alarm will sound, the toilet paper roll will retract, the cubicle door will open, and your picture will be taken.

3. After your second offence, your picture will be posted on the company notice board under the “Chronic Offenders” category.

4. Anyone caught smiling in the picture will be sanctioned under the company’s mental health policy.

Lunch Break

1. Skinny people get 30 minutes for lunch, as they need to eat more so that they can look healthy.

2. Normal size people get 15 minutes for lunch to get a balanced meal to maintain their average figure.

3. Chubby people get 5 minutes for lunch, because that’s all the time needed to drink a Slim-Fast.

Thank you for your loyalty to our company. Remember we are an employer of choice and we are here to provide a positive employment experience.

Therefore, all questions, comments, concerns, complaints, frustrations, irritations, aggravations, insinuations, allegations, accusations, contemplations, consternation and input should be directed elsewhere.

Management

Above is just a joke, but there are really some cultural difference between Western management and Chinese management. I will be sharing one example of the Chinese management style as the following. Basically I share some ideas of what you should do when you are meeting up with Chinese Businessman.

he Business Meeting with the Chinese

Preparation

Try and work out the management structure of the Chinese organization. Often the person with the most impressive title is not the one who makes the decisions.
Carry plenty of business cards to distribute.
All documentation should be presented in both Chinese and English.
Language should be kept as straightforward as possible to assist the interpreter.

Using interpreters

An interpreter will be required at most meetings and their role is central to the success of the negotiations.
Ideally a member of your staff should be trained up as he/she will understand the nature of the business under discussion.
An interpreter?s understanding of local dialects (i.e. Shanghaiese) is vital for accurate comprehension.
Before the meeting, check that your interpreter can translate technical or business related words, as well as any numbers which may be mentioned
All documentation should be available to the interpreter.
Agree on signals the interpreter can use to let you know if he/she cannot follow what you are saying.
The process will be slow with an interpreter, so be patient. Take breaks often, as this will allow the interpreter to fully brief any additional remarks made during the conversation.
If your interpreter?s sentences are consistently shorter than yours, take a break to check they fully understand what you are saying.
If your party includes other Chinese members, do not make your interpreter lose face by having the other members openly question their translation, except in moments of serious confusion.
Attempt to make eye contact through the interpretation process.

Gift giving

Corporate gift giving is an expected part of the Chinese business scene. Make sure the gifts take the form of objects and not money. Items like pens or a book from your native country. All gifts should be wrapped, but do not expect them to be unwrapped in your presence.

Business Meeting with Chinese

Competing and Collaborating in China with Bi-Cultural Competence

aintaining quality controls, as well as communication channels, is key to successfully operating in China. Once your company finds a Chinese partner, how do you structure the relationship? Some companies make frequent buying and audit trips to China or use a full-service sourcing agent. Though this is an easy way to test the waters, it fails to capture many of the long-term advantages of sourcing from China. Setting up a PRC representative office to manage sourcing operations may be a better choice.

The representative office is relatively simple to establish, although it cannot export goods on its own account. Another similar option is to set up a sourcing coordination center in Hong Kong, which allows control of shipping and more security over transactions (at the expense of higher operating costs and greater distance from the manufacturing plant). Companies with longer planning horizons, more management heft, and a commitment to the Chinese market may choose to set up a wholly foreign-owned enterprise (WFOE), a more popular means of entry than the joint venture Some companies acquire a PRC firm to jumpstart their WFOE formation.

No matter what route you take, maintaining high product quality will be challenging. For critical components with a low tolerance for error, having an employee on the ground to monitor the manufacturing process is indispensable. For other goods, regular onsite inspections, random product sampling, and periodic holistic evaluation of supplier operations generally suffice. One US company holds monthly online performance reviews with each vendor. These reviews are public to competing suppliers, creating a unique info-sharing and peer pressure environment. The company also conducts direct performance reviews two to four times per year, depending on the sensitivity of the product. Quality maintenance, delivery performance, inventory, and cost savings should all be reviewed, with the supplier submitting specific evidence to show that it is verifying process control and implementing agreed-upon standards (local and otherwise). If there are breaches, the PRC supplier must have a non-negotiable timeline for returning to the standards.

The rules for quality control hold equally true for social responsibility standards. In many cases, the PRC vendor is aware of the local environmental, health, and safety standards but is uncertain what action to take to meet these requirements. If forced by local content requirements to choose vendors less savvy about regulatory compliance, a company may need to invest resources to educate and upgrade the supplier. One of the benefits of this approach is the usually favorable relationship that develops between the vendor and the buyer.

Strong communications systems are critical to supply chain management. According to sourcing firms, the order-to-delivery lag can be as short as twelve days but can run up to eight weeks. If demand changes unpredictably or there is no capacity for excess inventory, good communication between China suppliers and US clients becomes crucial. One US company uses an online supplier databank to allow Chinese suppliers to submit all documents, including invoices, online and also to enable buyers to track purchase orders.

Communication is also necessary between the head office and the office responsible for China management. For multinationals or companies with multiple business lines, good online technology also encourages local operations to coordinate buying efforts and thus maximize the cost savings that Chinese procurement brings.

Don’t rest on your laurels (or your cost savings)

Finally, companies already in China cannot afford to be complacent. It is no secret that the PRC manufacturing environment is changing quickly, especially in terms of diversification. Companies should plan annual or biannual reviews of their product lines to see if sourcing or logistics operations need to be modified. Sourcing consultant ThreeSixty Sourcing Inc. estimates that even their clients with operations already in China often achieve cost savings of 25 percent. Other sourcing firms cite inability to keep track of regulatory and operational developments as a primary reason that companies retain them.

The standing lesson from the failed wave of foreign investment in China in the 1990s is that companies that refuse to adjust to changing local conditions put themselves at a disadvantage. As the Chinese say, “It is the flowing water that stays fresh” (liushui bu fu). This is true not only in the PRC consumer market, but also in the manufactures market.

Source: This is an excerpt from an article originally published in the Sept-Oct, 2004 .issue of the China Business Review. Reprinted with the permission of The US-China Business Council, Washington D.C.

American Chamber of Commerce in China - Intro Video



Business With Chinese


Subtle Art of Doing Business with the Chinese, Part #1



Subtle Art of Doing Business with the Chinese, Part #2



Subtle Art of Doing Business with the Chinese, Part #3



Subtle Art of Doing Business with the Chinese, Part #4



Subtle Art of Doing Business with the Chinese, Part #5



Subtle Art of Doing Business with the Chinese, Part #6



Subtle Art of Doing Business with the Chinese, Part #7



Subtle Art of Doing Business with the Chinese, Part #8



Subtle Art of Doing Business with the Chinese, Part #9

As with any other large city in China, (or throughout the world for that matter) one should use caution when crossing the street. Soon after this photo was taken a truck narrowly missed the elderly gentleman walking toward the pharmacy. Not all crosswalks have “Walk” and “Don’t Walk” signals so you must use your eyes and your own discretion. I will not repeat this warning in my other China pages but I felt Guangzhou is probably the most dangerous city in China for street crossing so I put it here.

Guangzhou Street