It has been noticed that the manufacturing cost in China has risen in the recent couple of years, but still China is the preferred destination for the American manufacturers and retailers to source parts and goods. In spite of the predictions made by the Economists that China will emerge as the strongest economy of the 21st century, the standard of living in China is relatively poor.
This is the main reason for the foreign companies ( especially U.S. companies) to manufacture their products in China or getting involved in China sourcing. On an average, a Chinese worker is paid lesser than half to an American worker. This keeps the manufacturing cost low and revenue high for the foreign companies.
China’s control on its currency value often results in cheaper exports from China. This is another major factor why this country is the favorite destination for the overseas companies. With its giant economy, this Asian country has a tremendous impact on the world’s economy. China is the largest foreign holder of U.S. Treasury bills, bonds, and notes. As of June 2017, China owned $1.14 trillion in Treasury. That’s 29 percent of the public debt held by foreign countries. China’s role as America’s largest banker gives it leverage.
Figuring out how to find a supplier to partner with, how to structure the negotiation, payment, and quality control is a critical step for the American business owners to become successful in their home market.
A Guideline on China Sourcing Strategy-
It is a good approach for the American companies to form a long term relationship with the Chinese counterparts by meeting them in person. It is specially helpful if you are willing to work with them for developing a custom product. Arranging a face to face meeting with them will certainly solidify the business relationship.
There is a great chance that the Chinese manufacturing company may increase the production price if you directly approach them. Your lack of knowledge will work against you. Keeping Chinese local who will work on your behalf is a fantastic move. Regardless of your Chinese fluency, unless a local is on the phone, they will be able to tell the difference and start to play the Chinese negotiation game in a smarter way. You need to have someone in China that is on your side.
To find your potential supplier, you can either search for a factory website or go to a listing service directory of potential customers. Alibaba.com is a great one and one of the best known. While these sites have large directories of “suppliers,” some are simply traders or wholesalers, not manufacturers. You won’t get the best price from traders or wholesalers, so you need to apply your own perseverance and knowledge in order to find your potential suppliers.