When I read articles from American newspapers, it seems like the USA buy most of China’s exports. Wrong!
European countries purchase about as much from China as the US, and then there is the rest of the world–this last category is the one that receives most of China’s exports. And its share is growing!
Mike Bellamy explains this trend in Chinese Exporters and New Markets:
In the past 15 years, if there was a China sourcing play to be made by fortune 500 companies, the move was done long ago. All of the big American companies and most of the medium sized companies have found their suppliers in China and have settled into a stable relationship. But the big and medium sized companies in developing countries — in places like Latin America and former Soviet states — are just now getting around to jumping on the China sourcing bandwagon.
Well, not only are these countries late to the outsourcing game, but their economies are often growing much faster. I heard many stories about Russians or Brazilians who are eager to spend their cash. Their QA processes are typically very light, by the way, and they often get burned. It is part of the learning process, I guess…
Ten years ago, if you showed me a pie chart of [Hong Kong trade show] attendees, I bet 70% of the buyers were from Developed Western Nations (N. America, Europe, Aus/NZ). These days I bring Spanish and Russian speaking co-workers with me to handle the growing number of buyers from those areas of the world. I bet the number of attendees from Developed Western Nations is under 40%. That doesn’t mean orders are slowing down for the sellers, it just means the factories are adapting to the new buyers.
Very true! And these newcomers are the ones who sustain China’s continued growth in exports.
Manufacturers like to diversify their portfolio of customers, especially since the brutal recession that hit North America two years ago. So they welcome this new source of business.
The takeaway for importers? Chinese suppliers often have to turn some customers down. They have the choice of whom to serve. Make sure you are seen as a good customer.
This issue is interesting as a political issue in the US as well as in its practical implications to those importing from China.
My anecdotal experience with suppliers of truck parts in China suggests that many of them were exporting to Europe before coming to North America. One curiousity I have noticed is that one of the most common truck brakes — a German brand named BPW – seems to be the most common brake shoe in production in China. This brake is used in the Chinese domestic market as well as export to Europe and elsewhere. It is particularly interesting that the market – Chinese and European – insist on a higher level of process quality for welding than the North American customers. Fully automated welding equipment is the norm for aftermarket producers of this brake, while North American importers settle for manual welding. So the typical brake shoe factory I visit has both technologies in use. When I ask why they don’t use the automated system for the (similar volume) North American products, I get vague answers; I have concluded that the North American importers are less demanding. So, at least this North American importer is upping the ante.
As to the political issues of Chinese imports to the USA, on a general top-level basis, it is true that Chinese imports have increased. However, imports from higher cost Asian countries – Japan, Korea and Taiwan– are decreasing; as a result the total Asian import percentage has been stable for over ten years. Easy enough to see…. Japan, Korea and Taiwan are taking advantage of lower cost labor in China, particularly for assembly operations. In many cases these companies are keeping the complex operations (e.g. the most sophisticated IC fab plants) in their countries while putting the screwdriver operators in China.
So, anyone who feels defensive in explaining to their neighbors and friends why they are sourcing in China – here’s some ammo for you.
Brad,
Very interesting. I have also noticed that price-sensitive American importers often settle for a quality that is lower than that requested by most Europeans.
Regarding political issues… As you write, China is still mostly an assembler and a packager in many industries, and they import a LOT of components. The situation is not as simple as it seems to be.