Sourcing & Import from China Tips and Guide

Opportunities To Boost Your Profits Into China Rural Areas
Tier 1 cities in China are mainly Beijing, Shanghai and Guangzhou where most of the major enterprise had sunken their teeth long ago. However China had more than hundreds of cities which was considered Tier 2 with population of more than 1 million each which represented untapped massive market potential. In this article, an overview of how we can tap into this massive scale of abundant resources are discussed.

China with her growing population can be categorized into three basic zone, newly developed area, developing and rural areas. Unlike other nations where the gigantic enterprise just wrap up and uproot themselves and move to lesser developing places to leverage on lower human and operating expenses. China had it unique advantages to progress inlands. In facts, million of rural workers dynamically relocate to urban cities to seek better employments vehemently as part of their birthright. Many had encountered differential degrading working conditions and wages as compared to their urban peers.

Chinese authority is facing a delicate situation of balancing aggressive growth which concentrated along the coastal area and inner rural developments, the social fabric and infrastructures represent a critical factor of which if uncontrolled will led to massive scale of instability which may weaken the Chinese superior competitive edges as a whole in her efforts to attract foreign investments.

Early signs were detected when the factories in golden triangle area discontinued production when their laborers who most if not entirely return to hometown for holidays and decided not to return to work as they found better jobs at home. Certain industries in the coastal areas also didn’t received warm welcome as before by the local administrative especially if they are involved in high energy consuming and environmental polluting activities. Many need to take turn to schedule for production shutdown due to rationing of energy resources.

In fact, the Chinese Government encourages many well established manufacturers and retailers to explore inlands as an effort to balance prosperities and growth between urban and rural areas. Big names operators like P&G and Danone had restructured their luxurious and imported products and services to cater for the less fortunate rural consumers with lower cost packaging and materials. For example, branded soft-drinks cost only 30% more as compared to local made equivalents.

The race to remain competitive also had significant impacts to big scale manufacturers where thousands of rural workers are given accommodations and meals to offset the higher standard of urban livings. Thousands of unskilled and semiskilled workers sleep, eat and work 7 days a week virtually at the same location to keep up with the production outputs. Better terms are negotiated between the management and workers to avoid losing the work forces back to their respective home towns where conditions are improving dramatically on a daily basis.

Cultural heritages had trained many supervisors to be aggressive where verbal and mental abuses, such as shouting and rude manners to achieve their production outputs with their operators. Physical and heated arguments are not uncommon scenes one can expect to find in thousand if not hundred of thousands of manufacturing facilities scatter all over in China.

With increasing pressure on infrastructures on public transports, private cars and living conditions, the lures of seeking an employment in urban area had started to lose ground. Matters are made worse as due to the communism system, the local district practice profits sharing among it registered residents where thousands of RMB are distributed as a results of rental and land incomes. Many were doing pretty well and travel overseas regularly whereas their rural counterparts can only hope they are never born. All Chinese residents are registered with their respective territory account and relocation had to be approved by the relevant authorities. The contrast of an urban and rural Chinese in terms of their respective employment, education and financial status had never been so obvious before.

Management of their fellow rural and urban citizen’s expectations become a top priorities as nobody likes to be left behind in the full steam of growth Chinese had experiencing for the past few decades. In the past, everyone was being assigned a job and accommodation by the state own enterprises and with more than 500 of them declaring bankruptcy last year alone, many had been “exiled” into the free enterprise market to take care of themselves.

So, how can an individual like you and me take advantages of this wind of change?

1) One can start sourcing higher margin products from the tier 2 manufactures where their overall operating cost are lower where the quality standards are preserved.

2) One can joint ventured with manufacturers which are operating from rural areas to leverage on the increasing bargaining powers.

3) One can negotiate with lower cost products if you can identify their lower cost of producing the goods based on the manufacturing location

4) One can repackage products with lower packaging and materials cost to cater for the massive rural markets where the volume can make up the shortfalls in lower price.

5) One can identify manufacturers with high potential to become as big scale as their urban counterparts to groom the relationship to grow with them.

6) One can invest on the local rural properties with potential of extremely handsome returns in long run.

Believed it or not, some Taiwanese manufacturers who had set foot in China more than a decade ago had reap in huge profits with the escalation price of lands. In other words, these entrepreneurs make the seemingly unrealistic explosive fortunes from the warehouses, lands, shop-houses and factories they acquired in the course of running their business.

In summary, the same opportunities had already presented itself on rural areas exactly like what had happened 20 to 25 years ago in urban areas. One can regards China as a mixture of countries in varying stage of economic progress where the same language and system is in placed. With improving transportation on land, sea and air, another wave of China made products which swipe across the globe like nobody business is highly possible in the next 5 to 10 years. Remember the remote controlled cars which could easily cost a fortune 10 years ago, now they are made so affordable and everyone can afford to buy one for their kids. China made automobiles, heavy machinery, consumer products and even aggressive Chinese businessman are everywhere. Like what someone told me, if you cant beat them, join them.

By David Foo

By David Foo
Author is the founding member of the of the
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