The Manufacturing leader must evolve to remain competitive.
China’s incredible economic rise mainly relies on its ability to produce the vast majority of our products in terms of clothing, textiles, electronics and toys: on average, 62% of toys imported into France are made in China, 32.6% of imports of household appliances are from the same source. The quality issue of goods produced was however quickly raised and regular controversies that resulted from this introduced the concept of “Made in China”, synonymous with poor finishing and minimum value of the finished product.
This bad reputation has increased recently, particularly after several health scandals in Europe. Thus in 2012, among 2,300 dangerous products withdrawn from the European market, 58% were from China. A few years ago, 47,000 chairs and sofas “made in China” containing a fungicide banned from France were accused of causing allergies. Hundreds of burns were so declared.
The reasons for the decline: increased competition and poor production.
Although China has always been more or less the undisputed leader in the manufacturing scene, mainly thanks to cheap labor cost, it had to face during the last decades the rise of new producing countries such as the United States, South Korea, Japan and Germany for instance.
These countries can be illustrated mainly by a reputation of good produced quality goods, but what has really changed things is the fact that their production costs substantially became closer to Chinese costs. The development of huge industrial centers and a workforce increasingly more competent has however gradually pushed up prices. Producing in China is now too expensive. While remaining profitable, the costs are more and more similar among the different producing countries and the quality criterion is now seen as crucial in the choice of companies.
And they begin to relocate their production activities and leave China towards Inner Mongolia, Bangladesh, Vietnam and even Cambodia.
A potential revival of the Chinese manufacturing production.
China needs to attract new partners and seduce the old ones. To remain competitive, the production methods must evolve both in substance and in form. In other words, quality controls need to be more rigorous and to emphasis the compliance with international standards.
Recent statistics seem to show a reversal of the trend with an increase in demand and an honest increase in overall manufacturing output. During the last month of June, a study published by HSBC, denotes a 1.4% increase in production compared to the month of May, raising it from 49.4% to 50.8%.
That being said, what about an enterprise willing to produce at lower costs for best results and having little information on Chinese business methods?
The role of INS Global Consulting in quality control.
Costs of production getting more and more similar through time, the notion of Chinese quality is therefore the main interest of a possible partnership between a foreign company and Chinese manufacturing facility. The goal is to have the production contract dully fulfilled for the best price. A quality control of the factory must then be proceeded to make sure that such conditions are respected in accordance to the contract. How can INS facilitate such project?
A foreign entrepreneur must make sure that the other party is serious in order to perform a partnership in China. Consequently a delegate must be sent directly to the Chinese facility to proceed to such a control, as long as needed.
INS will be able to allow that by offering services that will appear to be more than useful: acquisition of Z Visa, resident permit, hiring in its name quality staff for the foreign company, performing accounting, pay monthly every employee and send the financial statement to Chinese authorities. Providing Offices will also permit for them to save time and money compared to the alternative of using a representative office, which is a more costly choice and delicate to handle for those who are not familiar with the Chinese culture.
Last point to emphasis is the fact that at the end of the quality control, 2 endings are possible: either the Chinese partner fulfilled its duty and a contract can be signed, or negotiations fail and the foreign company will suffer minimal loss due to its staying in China. In both cases, INS will have a role to perform for an optimal solution.