Mike Bellamy from Passage Maker gave an interesting talk at the Cross Border Summit on April 16. He listed what changed in the past 10 years for companies buying in China.

1. Project mgt by Chinese factories 

Chinese factories and exporters are still pretty disorganized on the average. As I wrote recently, this is due to deep cultural traits…

2. Intellectual property rights 

The Chinese legal system got much better. Usually, protecting one’s IP is not very complicated for foreign companies.

3. Quality control 

Manufacturers along the coast have gotten more reliable. But many manufacturers in inland provinces are 5, 10, or even 20 years behind in their understanding of export customers’ requirements and in their application of a proper quality system.

(I would add that it depends on the industry… When customers make quality non-negotiable, factories do make an effort.)

4. Legal system

It got better. Enforcement is usually not a big issue if the buyer has a good contract. (I would add, especially in the big cities along the coast.)

5. Compliance for selling into China 

Sometimes standards are higher in China than in European or American markets. The Chinese Customs reject batches or fine foreign companies regularly.

6. Export orientation of the economy 

Beijing is pushing for a more domestically-oriented economy. Sometimes the buyer has “sell” his project to a factory that is not very interested in selling abroad.

7. Factories on the move 

A factory that has been reliable for 5 years might move (in order to pay lower wages) and its on-time delivery and quality performance suddenly go down. Buyers should monitor their suppliers closely to avoid surprises.

8. Cost of doing business 

Average cost of labor has gone up a lot. This has been well documented. Cities increase the minimum wage but actual wages for most manufacturing operations are usually higher than the legal minimum.

9. Benefits of being in China 

Fifteen years ago, there were not many foreigners on the ground. Nowadays, being located in China doesn’t give any advantage over competition.

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I would add a couple of important changes.

Transportation is much easier, along the coasts and in some axes inside the country. The fast train lines made it much easier to access factories in what were remote areas, or to visit 2 factories that are 300 km apart in the same day.

Many more factories are able to deal directly with foreign customers, who can find them more easily than ever through trade shows or online directories. Transparency is still an issue, but there are many ways to get a background check done on a potential supplier. The problem is, many small buyers get scammed because everything looks easy and safe, and they lower their guard.

Any other important changes? What do you think?