Rapid Automation in China the Growing Importance of OEM Agreement

The main reason why European and American companies manufacture goods in China because of its cheap labor. The cost of manufacturing increases a lot mainly because of labor wages and as China is a country with lower labor cost quite naturally European and American companies set up their manufacturing unit over here.

But for the last couple of years, it has been noted that labor cost has increased a lot in China and a significant amount of manufacturing work is shifting to other Asian countries such as Vietnam, Myanmar and Indonesia. US President Donald Trump’s initiative of bringing back manufacturing to the United States is another major factor behind manufacturing work fleeing from China.

The huge investment made by the Chinese government for the development of country’s infrastructure paid dividend as China is considered not only the cheapest destination for goods but also the indigenous companies are the most experienced and efficient in the world. Vast automation is taking place throughout China and the use of robotic technology is getting increased in the Chinese manufacturing sector. It is definitely going to be tough to substitute human workers with robots but we can expect that the automation will capture the assembly section. The foreign companies will get relief from facing the complex and hassle of facing China’s labor law.

“China continues to lead the growth of worldwide robotics adoption, primarily driven by strong spending growth in process manufacturing and cross-industry applications,” said Zhang Jing Bing, IDC’s research director for worldwide robotics and Asia-Pacific manufacturing. The more number of robots in the assembly line of the Chinese company will definitely increase the consumption of the Chinese products in the United States of America. It becomes highly important for the foreign businesses to select the right manufactures along with drafting a solid OEM agreement with your Chinese factory.

According to the market experts, manufacturing exodus from China is still a long way and this country will continue to dominate the sector in the coming years. You need to keep in mind that China is still the home of big manufacturing houses. It is only the lower-level or redundant manufacturing consignments that left China. It supremacy as the global manufacturing hub is pretty much intact. A finely written OEM arrangement could greatly improve how your business works, since you’ll sell and manufacture more of your product.

Many OEM agreements fail to meet the definition of the term because the dynamics of the OEM are always changing in China. So it would be clever choice if you have an experienced China lawyer in your team. A China lawyer can give you accurate guidance and complete control over the OEM agreement.

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