All You Need to Know About Manufacturing in China

Like all other spheres of the economy, one country that has stood the test of time and turbulence in China. The People’s Republic of China is, without a doubt, the top industrial producer and manufacturer as it sells more manufacturing goods than any other country in the world. 

The statistics support this claim—China currently exports more than USD 34 billion worth of products to other countries. Last year, the manufacturing output of China was USD 3896 billion, approximately an increase of 0.72% from 2018. Even more so, China accounted for a huge 28% of global manufacturing output in 2018, which puts the country ahead of the United States. In fact, China sent almost 18 percent of its exports to the United States last year, and this figure continues to grow as China makes headway in the manufacturing world with the passage of time. 

One thing that has particularly come to light is the expansion of manufacturing companies in China. The reason is that even in the absence of tariffs on goods that a seller sells, China proposes advanced production experiences and less production costs than other countries. 

Here we shed light on some of the reasons why China is considered the head of manufacturing in the world.

Chinese Specializations

China is the biggest exporting country in the world, as it specializes in a variety of different product categories. When we talk about the availability of a product, China is unmatchable. Customers can buy anything made in the Chinese city named Shenzhen, which is known as the center of manufacturing in Asia owing to the evolving hub of highly accessible service providers and manufacturers. Additionally, Shenzhen is the only city in Mainland China which offers visa on arrival to foreign companies and visitors. This in turn encourages them to extend their manufacturing business in China. 

Chinese Costs

China is considered a developing country by the WTO and its economy is currently one of the largest economies in the world. In fact, China is quickly advancing in technology, production abilities and becoming more industrialized, which has pushed the country into more economic reform and projects such as ‘Made in China 2025’.

Today, as China improves its industrial sectors related to economic growth and advanced manufacturing industry, the Chinese business is showing sky-high figures. It is a fact that rising wages is not a bad thing unless a company is manufacturing in China and is experiencing lower profit margins from higher production costs. In fact, a more managed industry, better infrastructure, and improved machinery can prove to be additional benefits for a businessman manufacturing in China

Shipping costs are mostly the same in Asian states. However, a businessman can experience better rates if he opens an account in China and ships over time. Similarly, shipping taxes and duties are exempted from shipping costs, especially in the main cities of China.

Competence of Chinese Production

Chinese manufacturers prefer a high minimum order quantity (MOQ). This is because as the products get more elaborated, MOQ gets smaller. Products such as plush toys and glassware may consist of MOQ based on almost 1,000 pcs, whereas more complex and expensive items such as hardware products may have MOQ of almost 200-500 pcs. For a fresh E-Commerce startup, reaching a high MOQ may not be within a company’s financial range or won’t be required for producing so many units. However, higher MOQ generally makes the price per unit a lot cheaper.

In China, small industries might be more interested in providing a lower MOQ than greater manufacturers because smaller companies do smaller businesses. A foreign company, interested in working with a small-sized business in China, has to ensure it is capable of achieving its manufacturing goals and is in compliance with the product standards. This will not only save the company time and resources, it will also avoid poor quality production.

The Global Buyers of China

Chinese higher quality products have made global buyers turn towards manufacturing in the country for a long time. In short, the main reason a buyer prefers Chinese products, even if they are substandard, is that they have pushed the manufacturer towards a cheap price. In fact, a common saying about Chinese manufacturing is “you get what you pay for”.

However, low prices come with a catch. One should be very careful not to negotiate prices down too low as a reduction in price usually ends up in a reduction of the quality of the product. If the manufacturer isn’t paid well for covering the production of the product, they are indirectly forced to make cuts that affect the production or design of a product.

The Legal Aspects of Manufacturing in China

Cheap and low-priced products generally give way to breeding of counterfeit products. A manufacturing company that comprises thousands of manufacturers implies that while a buyer may have countless choices to choose from for the right fit, he is also vulnerable to manufacturing cheats and scams. 

As part of the due process, one should particularly take measures to assess a few things when ordering a product in China; the companies the manufacturer has worked with previously, the location of the company, and the presence of a business license. All these aspects are to ensure no counterfeit products are purchased in place of original ones. 

However, since the license will be in Chinese, one needs to have the support of a reliable translation agency which can translate the product material on time. Other than that, the agency could also be asked to look through the Industrial and Commercial Bureau to see if the company is actually registered in the province they claim to be in.

The Last Word

China’s manufacturing landscape is growing with each progressive year. While not every manufacturing factory is reliable, every company has contributed to adding to the country’s GDP. As the country shows progress in the manufacturing sector, more factory owners are requesting inspection services on third-party inspection services for an outside opinion on how to improve their quality to meet customer expectations. Nevertheless, resourceful manufacturing requires active business processes backed by technology to make meaningful progress, and China is on the road to achieving that manufacturing success soon.

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Antonia November 4, 2020 0 Comments