|Chinese Geopolitical, Cultural & Infrastructure Issues |
Outsourcing in China can be a challenge for anyone. Although China is currently experiencing some of the greatest economic growth in human history, this growth is happening at an uneven pace and can present many challenges to firms looking to outsource or set up production in its territory. For over 50 years infrastructure development (water, power, roads, communications) was determined by a command system with a political agenda. Thus there can be abundances and shortages of just about everything needed for sound manufacturing depending on what you want manufacture and where you operate in China.
China’s new free market system is addressing some of these issues and has created some opportunities with new enterprises and old privatized state run companies. Yet foreign partners and investors must be guided carefully through this system. Currently in China, there are issues that Western manufacturers have not had to deal with since World War II. Although most foreign investors realize transportation (roads, railroads, intercostals shipping) can be troubling, they forget manufacturing basics can be too. For example, in many places in China, electrical power is rationed many months during the year. Factories can only operate in the evening and early morning hours near rapidly developing municipalities. Moreover, as there is no national power grid in China, so one factory may be restricted to only 10 hours of manufacturing per day, while another factory across the street can run 24/7/365 days a year.
Many other problems may also haunt Western Companies efforts to outsource in China.
An understanding of Chinese culture is also critical for the success of any venture in China. For example, Chinese philosophy urges people to be humble and not be confrontational, which, is often incorrectly interpreted by Westerners as a lack of or over confidence and ability to manufacture products to specification. The Chinese emphasize friendship (“Guanxi” in Chinese) or trust at a personal level. Thus, given China’s immature market economy and uneven development, the personal network of your Chinese partner may substantially affect your business model and whether you can smoothly do business in China.
Moreover, its not enough to just go to Asia to reap the benefits of inexpensive labor. Even within China, labor costs and the advent of technology have created pricing disparities. Smart companies must employ experts to give them a better advantage. It’s not enough to search for suppliers over the Internet. After all, the last thing you want to do is set up relationships with Asian suppliers and then find out that your domestic competition has gone overseas, done due diligence, and established the better relationships giving them a greater cost savings and stronger competitive advantage.
GAC Enterprises Limited is committed to helping you solve these problems. Our clients establish outsourcing partnerships in Asia to be more competitive in their domestic markets. We look for the right manufacturer, with the right communicative mindset, and the right location, for you to partner with. We foster this relationship so that that both parties view their companies as part of an international venture.