China Opportunities Outweigh the Challenges

Posted by: Todd Cornell - Cultur668 on Monday, November 26, 2018

The 124th annual Canton Fair took place in October this year (2018), and it was bustling with buyers and suppliers! There is no doubt that this is the place to go for product and manufacturer sourcing of nearly any type. The Canton fair has been taking place yearly since 1957. It started as a small tradeshow and has grown to be one of the world’s largest and most influential trade fairs. The Canton fair, which takes place in the city of Guangzhou, the province of Guangdong, AKA Canton, is only one hour from Hongkong and 30 minutes from Shenzhen, China.

The fair is divided into three “Phases”; 1) electronics & transportation, 2) household & gifts, and 3) clothing & outdoor. The sheer size of the fair is nothing short of mind-boggling with three areas, each with up to 16 halls and multiple floors. The expanse can be overwhelming, and the possibilities are unlimited. Pictured: Mr. Kevin Zhou, Canton Fair International Executive (left).

Source Products Direct

The Canton Fair is a great place to source products. If you are looking for a basic product that your company can label, it is easy to find a large assortment of products that factories will gladly allow you to label with your own logo and create a basic product that is your own. This can save initial design, sample creation, and factory setup costs... not to mention the time it takes to finalize and manufacture a product from drawings. Simply source a product that fits your needs and discuss with the manufacturer about labeling the product with your company image. Many times, colors and accessories can be added or changed to create a unique product that is your own by using the factory’s base product SKU.

Depending on the scope of your business, you will find a large selection of manufacturers and trade companies. Obviously, pricing is better when you deal directly with a manufacturer, although, working with a trade company may be more expensive, it may alleviate some challenges for those not well-versed in Chinese language and culture. Many times, however, when you ask if they are a factory or a trade company, the reply will be “factory”. It may be difficult to know one way or the other. The only way to be sure is to visit the factory.

Source Manufacturers Direct

If you are looking for a manufacturer able to manufacture your company’s unique product design, you will have access to a plethora of manufacturers with which to discuss that possibility. In this situation, you would be best to avoid trade companies, this would only complicate the communication and management process. Many times, trade companies will not have the vested interest or product knowledge required and will fall back on the factory for support. It is not uncommon to have things lost in translation and culture habits when you add this extra, and possibly costly, layer. I highly recommend that you deal directly with the factory. Plus, by visiting one factory, you will most likely have access to other factories able to manufacture the same or similar product. In China, it is not uncommon for product manufacturing hubs to develop in one city, therefore you may have a broad range of other potential factories you could visit while in that city, allowing you important comparison opportunities. Finding them, however, may be the challenge.

Cultural Considerations

While the opportunities are unlimited in China, establishing a mutually beneficial and amicable relationship may make or break a business deal. Tweaking the approach will likely afford you leverage to get the best deal or the best treatment. I recently consulted for one company who informed me that the big boss from their Chinese manufacturer didn’t visit them when he visited the States. This is a big red flag. It insinuates that the relations between the purchaser and the supplier are not good. After finding this out, I was not surprised by other challenges that they had shared about their project, which had been ongoing for some time before they reached out to me for guidance.

The cultural differences between business in China and most of the rest of the world are significant, however, I have always said that the differences between China and the US are most likely the largest, possibly poised on opposite ends of the spectrum. The US tends toward transactional strategies as a mode of conducting business, whereas, traditionally, China regards business as a sort of relationship, almost a friendship, where respect and harmony are important for successful business relations. The Chinese tend to be willing to give more to people they like. The opposite would hold true for those who are not seen in a positive light.

No matter what interactions your company has with China, be sure you have someone on your side who is clearly working for you, not just being paid by you. Opportunities abound in China but if we have the wrong people crossing the bridge it could foster inconceivable challenges.

Todd Cornell is a member of the Global Chamber®, and his home chapter is Denver. He has managed and negotiated US manufacturing projects in China and is highly fluent in written and spoken Mandarin. Contact Todd.






 

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