Take a Smart China Manufacturing Approach by Avoiding all the Related Risks

Opting to manufacture products in China is a sensible business decision for most of the Western and the US companies. The benefit in China is way beyond simply having low-cost manufacturing and skilled labor. A qualified sourcing community, investor-friendly regulations and various shipping options are some of the finest reasons that make China the best place to start manufacturing your product. Whether it is a second or third tier market, almost all the markets in China offer promising business opportunities.

According to BusinessKnowledgeSource.com, some companies have reported savings as high as 50 percent in salary payments alone. For companies experiencing a shrinking market or loss of business because of an influx of competitors, overseas relocation can make a substantial difference in their bottom line, and perhaps even prevent a business from failing altogether. For businesses with tight budgets, this can be a great way to maximize their bottom line.

However, there are many issues that come with the China manufacturing. But if you can deal with the potential risks in a proper way, the rewards will be greater than the risks. In this blog, we are going to share some of the China manufacturing risks and the best possible solutions to handle them.

IP Security Risk in China

Depending on your industry and your product, the security of your intellectual property can be a major concern in China. It is a well-known fact that China is a nation that poses a grave risk to IP. To be successful in China, companies should develop an integrated IP protection strategy that reflects the nature and extent of the IP problems they face and is grounded in a realistic assessment of internal goals and resources.

Cultural & Language Barriers

Differences in cultural norms may be difficult to navigate and language barriers may complicate effective communication. Appointing an experienced China lawyer or a local China representative is perhaps the smartest way to overcome this problem.

Quality Control

Chinese-made products often suffer from poor quality. Foreign businesses should offer product specifications early on (before an order is placed). Include all the details, such as material, approved components, dimensions, color, finish, logo artwork, etc. A large number of manufacturing companies in China now produce items that perfectly match the US and Western quality standards.

From cheap labor and the manufacturing capability to take your product from raw material to final output, all at an affordable price are some of the multitudes of China manufacturing options available. Manufacturing a product in China is almost always significantly less expensive than manufacturing it domestically. In China, foreign companies can manufacture premium tech products as well as cheap, low-quality toys.

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Prospects of Shifting Manufacturing Units Out of China

The U.S. has levied 25% fees on up to $250 billion worth of goods imported from China. China-based manufacturers are already in the process of shifting production outside of China. The possible outcome of the US-China trade war was quite perceptible, that is the recollection of manufacturing units out of China. A year into the trade war with Washington, more than 50 global companies, including Apple and Nintendo, have announced or are considering plans to move production out of China, according to the Nikkei Asian review.

The US-China Trade War & the Relocation of Manufacturing Units-

The US government has imposed tariffs on $250 billion of Chinese imports as part of its year-old trade war with China and is threatening duties on another $300 billion in shipments. In the first half of 2019, China’s exports to the U.S. fell by 8.1% to $199 billion, according to the National Bureau of Statistics. Trump administration’s trade war with China made it essential for the global companies to better prepared than others to shift out of China if necessary. Companies that rely on China for production of goods to be sent to the United States are also concerned about other potential Chinese retaliatory measures, such as increased regulations or customs delays. China has ramped up pressure on American companies as trade tensions escalate.

Possible Manufacturing Destinations Apart from China-

Vietnam and India are quickly emerging as the two alternative manufacturing destinations apart from China. Both the countries have skilled labor force, relatively good infrastructure and they are heavily investing in growing their logistics capabilities. Vietnam and India are rapidly increasing their market share in manufacturing categories such as footwear, garments and electronic products. A steady stream of manufacturing businesses have also moved operations to these two countries, including Foxconn, Apple, Panasonic, Nintendo, Samsung, and LG. Along with Vietnam and India, Mexico, Indonesia, Bangladesh and Malaysia are also coming out as a front-runner for getting the attention of the US and the European companies for opening up the production units.

Tough Task of Shifting Manufacturing Out of China-

The task of shifting manufacturing out of China is way more challenging than it seems. Over the last couple of decades, China has established itself as the finest manufacturing hub of the world. From infrastructure to manpower, government assistance to a reliable sourcing agent community, China is tailor-made for opening up a manufacturing unit. There is hardly any other country that can match the Chinese manufacturing strength. The facilities, smoothness and fast services overseas companies enjoy in China cannot be found anywhere else.

Relocating production units outside China that has built up a massive ecosystem of logistics and other facilities will be a complex, expensive and time-taking process.

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