China4B2B Blog

The last few years have been tumultuous for American companies because of the China threat and the so called China price. Competing against the Chinese has become the target of many strategic plans. It has involved matters of survival, deploying operations into China, closing operations in the USA, moving parts of the chain to East Asia, cutting costs, redefining the business or simply giving up and leaves the territory to the Chinese.
Chinese industries have been going through a familiar pattern of evolution. This has been seen before in the USA (late 1800s, early and mid 1900s), in Japan (late 40s to the 70s); in Korea (70s to 80s), in Taiwan (80s) and now we see it again in China.
Chinese have at first targeted countries not in the radar of most American and European companies. Countries located in north Africa, the middle East and South America. They started with small capacity, very low labor costs and producing with used equipment. Then moved to copy and improve the equipment in use, made locally at low cost with subsidized raw materials (like steel).
In the third phase they began to ramp up production and forming cooperatives among various manufacturers. In this way they could offer a wider product scope without incurring in higher production complexity costs. Once cash flow began to cumulate they began buying first class equipment and machinery and bringing Japanese and Korean engineers to develop robots and self contained work stations, eliminating labor, scrap while improving quality.
Their total cost structure (I call the tower of costs) has remained low relative to their counterparts in the USA and Europe for many years. However in the last four years, increases in energy costs, labor, and the removal of subsidies and low interest loans have caused an increase in their total costs. Nonetheless, their total costs are still lower than most of their counterparts in the developed countries.
Last year (2008) has been reported by the press that more than 10,000 factories closed in China due to their inability neither to sustain a profit nor to generate cash. Their razor thin profits have disappeared due to these country structural changes. In fact it was reported than more than 600 American businesses closed their China factories and returned to the USA (some to Mexico).
Just a few days ago, our China team and I attended the Shanghai 2009 Auto show. Once more it was an eye opener to see how not only Chinese car manufacturers have improved the quality of their car assembly, but also the fast strides they have made in design and engineering. When we thought the circle was being closed they have upped the ante again and pose a new threat at a new competitive level.
The pressure to develop new, different strategic thinking is even more imperative now for those in the manufacturing environment. The strides made by China in design and engineering also pose a threat to the knowledge industries in the developed countries.
We have people on the ground in Shanghai and Shenzhen alert to changes, improvements, inflection points in their knowhow and their manufacturing capabilities to maintain a fresh look at the competitive level of the Chinese (and now the Indian industry too) to foresee and assess what works competitive moves for US manufacturers.

We encourage all our readers to comment on their China experience and how they have successfully survived or positioned against the Chinese competition.

Dear Friends, 

I am just back from another trip to Asia. This time was Singapore and Shanghai. The Shanghai auto show this past April 25-28 was incredible. The new models and concept cars shown by Chinese car manufacturers were just incredible. Most impacting for me was the all solar energy car. A small car seating three with its roof made with solar panels. It measured 10 feet long by 5 wide and could run at 50 miles per hour and drive for 200 miles. 

Most incredible was the attendance to the show on Sunday where barely one could walk from hall to hall. It was packed with more than 200,000 people!! I thought the old Comdex shows were big, well this was big!! 

There were so many auto parts companies showing that it took us almost two days to visit only a fraction of them. There seems to be fewer in each auto parts category but the active ones seem more professional, speak better English and their prices are again becoming competitive. The auto industry in China has around 200 car manufacturers and more than 10,000 auto parts makers. For the first time, last month, China surpassed the USA in car production. 

Business opportunities of doing business in China are re-emerging again. With fewer producers in every industry, price negotiations are more reasonable due to pressures to fill capacity while quality offered has significantly improved. I witnessed this quality improvement in many of the products shown in the Shanghai Auto Show 2009. 

In the shipping-freight arena we found out in this trip, that there are great pressures on sea carriers for business. In Singapore the shipping business has slowed down by almost 50%. In Shanghai also a similar but lesser decline has occurred. The pressure is such that some shippers are offering to move sea cargo for only the price of the fuel used and a small administration charge. In Shanghai we found one shipper willing to move cargo for a few hundred dollars per container. It is likely that the industry is ready for consolidation in East Asia. 

I will keep you posted of news in East Asia as we visit factories, cities, places. For now, we hope to hear and read about your comments on our experiences or your own in your travels through China, Hong Kong, Singapore and other East Asian countries. Stay well and good luck to all. 

Dear friends,

Once more I am back to Singapore. My last trip was in early march. Now is late April and the weather is starting to show its seasonal strength!! Hot and humid days in Singapore are a hallmark. It is interesting to see how resilient is Singapore. its economy is coming back just from a couple of bad months early in the year. The newspapers are filled with job openings, however my friends tell me that some industries are still suffering the global recession effects.

The shipping industry, for example, has significantly slowed down in Singapore to the point that some shippers are willing to ship from Singapore to Europe for only $300-500 usd per container!! The priority is to retain their customer base. Competition has heated up so much that some shippers are starting to tumble.

The big question in averybody’s mind is if China would come out of this recession stronger and maybe more resilient. Now China is once more fostering the growth of business manufacturing. China is relaxing some rules and trying to ease loans for entrepreneurs. Some regulations are being lowered to facilitate exporting. In some regions salaries have fallen due to the slowing down of manufacturing exports from China to the world.

Next week I will be in Shanghai for the auto show and see what is new and what strategic and strucutral changes are affecting the auto industry in China. As many already know, China is close to reach similar automobile and trucks production levels than the US. This has made China the beacon of growth for American car makers (at least for the short term).

A new set of business opportunities are opening in China again, although textiles have been hit hard by the recession other metal-mechanic related industries seem to be finding global niches for their products. Other Chinese industries have turned inward to foster growth by targeting the rural areas and continue riding experience effects through volume. Examples are appliances and cellular handsets.

Pollution continues to be an issue and the new wave of manufacturing growth may hamper some of the China’s government efforts to improve the quality of air and waters.

By the way I have a chance to visit the construction site of Shanghai 2010 sustainability fair programmed for next year. They have working at a fast pace to get these new pavillions and forums ready. The site is impressive and by the looks it promises that it will be a world class event. 

Well my friends, I will tell you more about China and Asia once I visit the auto trade show.

Regards to all and wish you good business and good health,

Jesus Ponce de Leon

President China4b2b.com  and jpdel.com

Dear Friends,

Just came back from another Asia trip. This one in February and March in three Asian countires (or shall I say two countries and one special region). Yes, again, I traveled to Singapore, Hong Kong and Shanghai.

What a big difference a month or two makes. In October the economies and activity in these three cities was vibrant and seemed that the global slowdown had not reached them. But now, you can see even in Shanghai how restaurants and hotels are feeling the global recession. Most hotels in Shanghai are 60% occupied, the same in Hong Kong and Singapore.

The streets continue to be vibrant and filled with people coming and going, selling, buying, walking, talking, and parks and gardens are the delight of Shanghainese and Singaporean people. However, now it is noticeable that these economies have slowed down.

I visited a couple of factories in Shanghai and Ningbo looking for business opportunities and found that their management are actively seeking new deals, transforming their business to adapt to new opportunities to export to Asia, Europe and south America. It is always amazing to see how the Chinese adapt, look for new practical ways to change their focus and use their resources to open new business opportunities in Asia and abroad. Their factories are working at 60% or less of their capacities but still vibrant and positive in their outlook.

The pace of construction in Shanghai seems that it has accelerated, especially along the Bund (south side). I had the opportunity to eat at Jean Georges’s restaurant (he has several in New York) well located on the Bund at #3. The building is an experience by itself and the elevators are a unique experience with its dimmed lights, that reminds you of a disco, and their narrow space puts a signature of their own. The food was out of this world!! Congrats to Jean Georges and wish him success in Shanghai. By the way, the view from the restaurant (located in the fourth floor) is fantastic overseeing the haungpu river and the skyline of the new Pudong area with a full view of the skyscrapers rising tall.

I also visited a new restaurant just openned a few months ago. The Nam-1975 is a new fusion and authnetic Vietnamese food restaurant openned by my friend Brandon Lee. He hired actual real Vietnamese chefs to prepare real authentic Vietnam dishes. The experience is really great, the place is cozy and well located along the traditional Huaihai Zhong road. Well what can I say? both places are a sampling of what Shanghai has to offer in culinary excellence. Definitely next time that I take my customers to Shanghai a visit to these two restaurants is a must see, eat, wine and dine.

Singapore now is bracing for a slow down but the entrepreneurial sprit is still well and alive. I visited with a reverse logistics company, Rigelsoft. Their new venture is to link individual consumers to the repair and service centers with manufacturers by automatically registering their products’ warranties through Rigelsoft’s software in a one-for-all easy to use website. They are a good example of where the new business opportunities in Asia are, in the electronic frontier, the internet, the mobile world.

Hong Kong, is always vibrant and a power house. Our client, SCStorage continues to lead the self storage business in Hong Kong and in spite of the recession its strategies are demonstrating to be very effective. Its occupancy is higher than 95% and still growing. The recession strategies that Kevin She has implemented worked wonders and Hong Kong customers continue to seek his services in the self storage business. 

Soon I will tell you more about Shanghai, Hong Kong and Singapore. But keep in mind, that now may be the right time to look for business opportunities in Asia in sourcing, manufacturing, exporting or a Joint venture. Everyone is ready to do business in better conditions than before.

Jesus PoncedeLeon

Dear friends,

I just returned form another exciting trip from Asia. In January I had the pleasure of working in Singapore and Hong Kong. The recession is hitting very hard the United States but Singapore and Hong Kong seem more resilient. I was expecting to see Singapore and Hong Kong almost to a stand still. What I saw was a Singapore still vibrant building new malls along Orchard road and people going in and out of stores and malls as if nothing had changed. Hong Kong seemed unabated by the economic turmoil of the USA but one can feel that businesses were slowing down and unemployment rising. In spite of these concerns once more I saw the bright side of Asia during this business trip.

In the last few years the Singapore government invested in building new technology parks (nano, mobile, software, etc) and in reinforcing education. It has been promoting new start ups and supporting small businesses providing them with seed money and VCs connections. It has attracted venture capitalists and a new wave of entrepreneurs bringing their new ventures to Singapore.

I have been working with a new customer in Singapore that represents the new wave of this economic thrust. This is a small software company developing an integrated reverse logistics software www.rigelsoft.com. A big undertaking considering the complexity of the project and the many links in the industry chain that need to be interconnected. Ramesh, the founder and CEO, discovered this opportunity for the Asian markets while taking his MBA from SIU in its Singapore campus. Now he has built a strong board of advisors, rounded seed money from private investors and brought the company to life during 2008.

The mobile, pda, and personal electronics has been growing in Asia perhaps faster than in other part of the world. A year ot two ago, while teaching strategy in the executive MBA in Singapore,  I had two students who tapped into the Singapore’s government seed funds and began working on sotware for mobile applications. They were very excited because these new applications are still in their emergent stage and their potential growth is large. As many of you may know, Pixar and Walt Disney opened a design and computer drawing studio in Singapore recently. A clear sign of the strenght that Singapore is building. By the way, the casino project is moving very fast in the marina area and likely to be finished by year’s end or early 2010. Wow, it is spectacular and will bring an estimated of more than 10,000 jobs to Singapore.

Witness the iphone success not only in the USA but worldwide. Just two weeks ago a Singapore nine year old boy wrote an iPhone application and its becoming very popular (an application where you draw with your fingers on the iPhone screen and then shake it to erase the drawing and start with a clean slate again). The number of applications for the iPhone has been skyrocketing and its a glimpse of the things to come in for the mobile electronics (PDAs, cel phones, iPhones and other similar gadgets).

While Singapore is becoming a stronghold of software creativity Hong Kong continues to be the center of financial and trading activity. Although most of its manufacturing moved to Shenzhen, Dongguang city and Guangzhou, Hong Kong still retains a slew of manufacturing activity. Where buidlings emptied now they host creative artists, musicians, computer designers, web designers and advertising agencies, not to mention traders and sales reps. Small business creation in action.

New industries have sprung up in Hong Kong. A new business opportunity was envisioned by Kevin Shee, when he saw empty buildings in Hong Kong as an opportunity to create a self storage service. Eight years later, his self storage business sprung up a new industry in Hong Kong and business opportunity for local entrepreneurs and foreign companies. Now the industry has forty two competitors but Kevin’s early entry and his unique business model keeps him in the leadership position.

Hong Kong began to play an important role with the advent of Chinese manufacturiers in need of trading, marketing, negotiations, and dealing with the Western world. Hong Kong also began providing support to foreign businesses in finding business opportunities in asia, identifying reliable sourcing of components and products made in China and assissting with language barriers during negotiations and on site translations.

China4b2b (China for Business to Business) began providing these same services envisioning this emerging need. Now with personnel in Shenzhen and Shanghai, China4b2b can provide these services to Mexican and American companies wishing to find business sourcing opportunites in Asia, primarily in China. China4b2b also provides similar services to chinese companies wishing to open or conduct business in the United Sates and Mexico. Our Shenzhen office will be relocated to a more convenient area nearby the Lo Wu train station for arrivals from Hong Kong. Originally we were in the Financial Trade Center Tower but it became a little far and inconvenient for most customers. Our new location also will be closer to the convention and trade center.

In spite of the slow down of the eonomic activity in Shenzhen, Dongguang and Guangzhou, one can still see that business owners are quickly shifting their ideas and energy to create new business opportunities in China transforming their businesses. In some cases undertaking radical transformations. One in particular comes to mind. Nikko filters is a company I have visited several times before, an automobile filters manufacturer, has transformed its business into a back hoe and excavators equipment company in just one year. Nikko represents the typical entrepreneurial spirit of China; Down today, up tomorrow.

The economic situation of the United States is clearly affecting China and Asia. Recent news highlights the dire straits of many unemployed Chinese workers searching for jobs to no avail. Not only wages have declined due to the oversupply of labor but also last year a large number of manufacturing enterprises in China closed their doors. This was due to razor thin margins, an export market down, relentless competition and rising labor costs. But, in every trip I make to Asia and to China in particular, I meet and talk with entrepreneurs and witness first hand a strong desire and will to restart, recreate, rebuild again, and again the old into a new business, or find new ways, new solutions in seeking new business opportunities in Asia and China.

I strongly believe that still there are many sourcing and business initiatives in Asia that are waiting to be found and exploited. It is only getting harder to find them (by the way, many Hong Kong and China trade shows have been cancelled for 2009) making local support services like the ones offered by China4b2b more necessary and valuable.

I will be back to Singapore, Hong Kong and Shanghai during February and March visiting local businesses and assisting local customers with their 2009-2010 strategy and growth plans. Hope to meet you all during flight or on the ground in Asia!!

Wish you all a good 2009, focus on your cash generation and good customer service. The first to sustain your economics and the other to sustain your business; without customers there is no business then there will be no cash. Good luck to all.

Best Regards

Jesus A. Ponce de Leon

President

China4b2b and JPdeL and Associates

Well, 2008 has reached its last month of the year. It seems that as a business grows time seems to go faster. The more you do the faster time flies. It was a good year for China4b2b and for its customers that sought bussiness opportunities in China. Our latest customer, Fanosa, of Mexico, found great sources of chemicals at great prices in China. This shows that even with the economic troubles going around the globe, China is still capable of manufacturing and selling good quality products at reasonable prices.

Opportunity and Threat

It is true that many companies are closing their doors in China. Many of them were operating with razor thin margins and a global situation like the one we are experiencing around the globe was more than they could absorb. But as I mentioned in one of my past blogs, the Chinese people are practical and find unique solutions to everything.

I also observed in my last three trips to China that European and American based companies were also closing doors and returning to their home countries. In part due to the rising costs of manufacturing in China. In part due to shipping costs, delays at ports and inventory at sea. Nonetheless still there are regions of China where manufacturing is still active, valuable and have good quality products. Maybe it will take a greater effort to find them than before, but China4b2b will be there to assist American, Mexican and Latin American companies in finding the right sources for their needs in China; either raw materials, manufactured components or finished goods.

Our personnel under our regional manager Jephrey Lee, based in Shanghai, and our sister office in Shenzhen, located at the International Financial center tower in downtown Shenzhen, have been busy assisting our loyal customers. China4b2b is proud to serve these customers locally in China representing them in tracking their produced goods and making sure all lots and shipments are in line according to their original order.

We are expecting a tough year in 2009. However, China4b2b is ready and has all the necessary connections to open up markets in the USA for Chinese manufacturers. We also encourage all American and European companies to take advantage of our contacts in Mexico (many with local state governments) to relocate or find business opportunities in Mexico for them.

Opportunities in Hermosillo, Mexico for American and European companies.

Right now, Hermosillo city, in the northern Sonora state, is offering great incentives to American or European companies seeking to relocate their facilities. Please contact us for details.

Under a global meltdown, strategic alliances and seeking new market opportunities becomes even more important. Most companies cut costs to the bone, and they should conserve cash. According to many academic and consultants studies show the most successful companies, are those that invest in focused market opportunities and in forming strong alliances during recessions. Mexico is now a great opportunity for these deals.

China Going Global

We also have observed over the years of traveling and visiting Chinese companies, in Shanghai, Whenzhou, Ruia, Shenzhen, Nanjing, Guangzhou, Changzhou, and many other cities, how they have become more globalized.

It is amazing seeing Chinese managers learning fast and absorbing the western styles of forming deals, negotiation and closing business deals like pros. Many Chinese companies know that their future is outside China, in the global markets, and they are seeking how to, and learning how to get there fast.

China4b2b has been offering its services to Chinese companies to go abroad and help them to open contacts and channels for their products. Now is the time to accelerate this strategic action, when the recession ends those who took advantage of the contacts and marketing abroad will come out as the the most likely winners.

In closing, we saw during 2008, great many changes in the business landscape of China, we saw many companies grow and many others close, but we saw a resilient and strong manufacturing capability ready to continue growing its next stage by going global. Here we see opportunity for China42b2 to assist them because of our knowledge of the American and the Mexican markets and industries (we have more than 30 years of experience in both).

We also saw some sad turn of events when Chinese and foreign companies had to close their doors due to changing economics in and outside China, however, if history is a good benchmark, it tells us that when downturns end, well focused companies emerge as winners and more successful than before if they invest in finding and growing business opportunities through alliances and new market connections.

We are ready to support Chinese companies to go abroad and find these opportunities and help American and European companies to relocate to Mexico seeking new opportunities and cost advantages.

Dear friends, we wish all success and a sustainable and year of opportunity during 2009.

Sincerely

Jesus Alberto Ponce-de-Leon

President China4b2b

CEO JPdeL and Associates

Dear friends,

Now came October and after the great success of the Olympic Games hosted by China and the paraolympics (also a super great incredible opening ceremony) with the world economy in suspense and uncertain times, China is reacting and setting in motion mechanisms to avoid an internal tide.

The world economy is slowing down and many Chinese factories that were competing in razor thin profits are closing down their businesses. Just in the toy industry has been reported that more than 5,000 companies closed since March of this year. Other industries are also hurting. The logistics industry in Asia also has been experiencing a slow down of business since Chinese exports have decreased by 7% or more year-to-year.

However, still the Chinese entrepreneurs are finding practical ways of adjusting their costs and exporting capabilities. The Hong Kong trade fairs are filled with buyers from around the world still looking for bargains, quality products and opportunities to do business to business trades with China.

We were in Shanghai and Taipei last week and saw first hand how Chinese entrepreneurs are hard at work finding new buyers, lowering their costs and increasing their quality. China 4b2b visited a few factories including a cel manufacturer seeking business opportunities linking Mexico and the USA with Chinese producers.

The business climate in China is still strong but some factories are closing their doors. Only the most efficiently run and those with demonstrated capacity to produce with quality and with consistent delivery are still in operation. The competition is tough and costs keep creeping up in Asia.

Our trip is ending next week. This week we are in Hong Kong working with local customers and experiencing first hand how Hong Kong entrepreneurs are dealing with the slow down of the global economy. We will pass along some experiences and comments next week at our return. In the meantime, keep looking for business opportunities between USA, China and Mexico.

Dear friends and avid readers,

Last month, August, we made another trip to China, this time visiting Shanghai, Nanjing, Whenzhou, Ruian, Hong Kong and Singapore. It was a fast, furious and very productive trip. China continues to be the place to be, be seen, source, do business, connect and expect new things happening all the time.

I arrived one day after the olympics ended. The pride and festivities were still fresh and palpable in all of China. The TV stations kept showing every single event, of every single match, of every single day of the Olympics. Two TV channels were fully dedicated to show over and over again, all the matches in every sport as if they were still happening. The olympic spirit was hard to die in China.

Even Hong Kong had its own momentum after the olympics. People were still talking about the medals, the races, the champions and the banners and signs were still up two weeks after the olympics finished. The paralympics began just as I prepared to leave Hong Kong almost two weeks later. The ceremony was as impressive and colorful as the olympic openning. It was just superb and technically amazing. I could feel the pride and enthusiasm of the Chinese people even in the paraolympics.

In the business arena, China had a sort of a break from its usual frantic and no-more-tomorrow lifestyle during the olympics. Many businesses all over China slowed down or took a short break to focus on the great event. As the olympics ended all business went back to their frantic work pace. Now they had to catch up with orders, exports and production.

It is amazing how the entrepenuerial spirit is strong and alive in China. The more obstacles they seem to have (weak dollar, fewer export incentives, higher operational costs) they seem to find practical solutions to their problems and continue in business as usual. Nonetheless, the cost pressures and competition among Chinese companies continue to rise making more difficult to maintaing their margins and prices as those we experienced two or three years ago.

China4b2b CEO, Jesus Ponce de Leon, visited several factories during this trip searching for business opportunities in several industries. We had the opportunity to visit a handset manufacturer, two auto parts companies, one service oriented business, and a software company among others. These trips allow us to see first hand the sourcing quality, their manufacturing capabilities, their product quality and their export experience. In the past we have visited also chemical companies, textiles, industrial bags, plastic converters, other auto parts businesses and graphic designers.

Shanghai continues to be an impressive city with businesses emerging anew everyday. Guangzhou and Shenzhen in the south also continue to have a vibrant manufacturing and sourcing economy but it is noticeable that the city has slowed down in its construction frenzy as many buildings now remain empty or barely occupied. However, the outskirts of the city of Guangzhou are still buzzing with business opportunities for Mexican and American companies wishing to make contact and find viable cost-quality sources.

Next month in October we will be back to China with a new customer from Mexico. We will also visit Taiwan to meet some important producers of chemicals for industrial use. We hope to have the time to meet again with some of our contacts and friends in Shanghai and Taipei where we have made many friends in all sort of government and industry positions. Hope to see you all soon,

My last trip to China showed me how industrious and hard workers are the Chinese entreprenuers. Even with the challenge of rising costs their ability to find creative solutions and remain competitive is impressive. Mayn new entrepreneurs are emerging in a new wave of more skilled, more international and more adept to competitive challenges.

As you may know the China entrepreneurs emerged just a few years ago and in ashort period of time they have penetrated with their products almost every market in the world. They started selling to markets that other more advanced economies did not consider valuable to them. For example Africa, the Middle East, the Far east and south America.

Recently Dr C.K. Prahalad wrote a book on how to serve the bottom of the pyramid (the people in the bootom of the market segments with less than $100 usd per year in earnings). Before he published this book the Chinese were already serving these markets very skillfully.

Now with some years under their belt, volume gained, and international experience gained they are ready to work the more challenging markets of Europe and the USA. Thei presence in the world fairs and their English speaking abilities improving makes easier to work and make deals with China businesses.

In spite of the challenges and cost rising they remain open for opportunities and ready to make great deals for sourcing, joint ventures, open markets and exporting. I will be back wih more news in the weeks to come. Keep looking at china for business opportunities.

Welcome to China for B2B (Business to Business)

It has been now a one full year of activity in China for China4b2b!! We had great customers representing industries such as auto parts, flexible bulk containers, high level graphic design, horticulture, chemicals and now we are awaiting for mobile phones, water treatment technologies and other industries to take the plunge and make their move into China.

As many of you may already know, China is undergoing dynamic changes. Just a year ago China’s workers’ wages were 30% lower, utilities were 25% cheaper and interest rates for investment loans were only 2.5% (now they increased to 5% or more). Exports from China are getting expensive and in some industries losing competitiveness to other lower wage countries such as India and catching up with mexico’s wage level.

Recently we learned that the US maritime ports will reach their full capacity and by 2010 they will not be able to handle all the cargo from Asia. China is planning to open more than 200 maritime trading ports to be capable of handling their export growth. However at the actual rate of exports growth these 200 ports will quickly become insufficient.

We have learned to continuously collect and update the cost structures of the Chinese manufacturers. Our clients may not realize that what seemed like a good price today in just two or three months the Chinese will come around asking for a price hike.

Our customers have learned during their trips with China4b2b that not only a long term negotiation is absolutely necessary but also understanding the real cost structure of their China supplier is a must if a fair deal and a fair negotaition is sought. The Chinese are hard dealers but also they expect some respect for their efforts.

Trying to make a one-sided deal is a no-no in China. You might pull a great price for two or three orders and after that the Chinese supplier may refuse to deal again. The western company frequently comes back asking for a better price only to find out that the relationship, so hard fought for, is not anymore a reason for getting a great price deal.

Although many Chinese companies want to export, their quality and programming capabilities may not be reliable, making the good intentions of both sides, buyer and seller, fall by the wayside. Many factors contribute to this fallout. One is the constantly changing conditions of costs, labor, migration, competition and newer regulations affecting their costs. Other contributing factors are the many holidays (in january for example they close their factories for almost two weeks), and the weather. A third and also common found factor is the lack of reliable and more advance production methods and supervision. The Chinese learn fast and that is the strategic part of their capabilities. They are keen on getting the latest ideas and best practices and then they apply it to their China context. They are very practical.

We have seen over the last eight years more than eighty factories in the south (Shenzhen, Guangzhou, Dongguan city and cities in the surroundings), in the east (Whenzou, Ruian) in the Shanghai area (Nanjing, Wuxi, Hangzhou), in Jinan, Qufu, Zhengzhou, WuGang, Yangzhou, Changzhou, and in the north in Qingdao, and experience first hand how their management styles, their approach to business and their food differs. But we have seen their great strides in improving their quality, their productivity and how they move fast to acquire newer technologies. We will tell you more about their technological improvements in future blogs.

We have also experienced all kinds of food and being in very remote places of China. These experiences have helped us to gain insights and learn what to do and what not to do, how to travel and where to land, where to stay, how long to stay.

This past January while escorting and taking one of customers into the Shanghai, Nanjing corridor for several factory visits, we got trapped by the big snow storm that afflicted China and brought more than half the country to a stand still. We were fortunate of having gained some experience over the last eight years in China, on how to extricate ourselves from situations like this one. We managed to get out safe and sound and complete our entire business agenda in one week.

I will come back next time with more updates and stories of what is happening in China and what is in store for you and your company’s future. For now, keep an eye on your company’s productivity, check and frequently assess your cost structure and yes keep asking for quotes to China. If there is a low global price is still in China but better understand how it works and how it is changing !!! The success of your strategy in China relies in knowing where your product and your operation has a cost advantage and why and how these advantages or disadvantages are changing over time.

I hope to see you in China and find a great business opportunity. We will be there for you.

Jesus Ponce de Leon, PhD

President JPdeL and Associates and China 4b2b

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