The Chinese economy continues to power ahead with an average GDP growth of 8.9 per cent over the last 30 years. Last year’s rate was 8.7 per cent, and this year’s could be higher.
Austrade’s senior trade commissioner in Shanghai, Christopher Wright, points out that most Australian manufacturing busi nesses are now impacted by China, from sourcing to production and marketing, and that this is leading to increased investment by Australian companies in China. On the other hand, there is also escalating investment by China in Australia, particularly in technology, automotive and resources.
“China is still a developing nation with high demands for energy for building infrastructure and commodities. The drivers for Australian companies to invest in China are becoming more powerful,” Wright told Manufacturers’ Monthly in Shanghai.
“Manufacturing in China is very diverse. The country is still very good for high-labour-content man ufacturing in sectors such as tex tiles, which includes the process ing of materials such as wool into high value-added product for the development of textiles.”
Wright says there are three ways for local companies to manufac ture in China: on a contract basis with a Chinese company; estab lishing a wholly-owned Australian enterprise; or developing a joint- venture with a Chinese firm.
Support in China
Sino Trade Winds (STW) is an Australian-owned company that assists clients to develop, certify, procure and manufacture products and components in China. The company works across industries to ensure that these products are of the highest quality, meet client requirements, are cost effective, and are delivered on time.
Director, Stephen Read, says STW’s knowledge and experience, Chinese language skills and understanding of the culture pro vides clients with an edge when doing business in China.
He emphasises that to get a project right from the start, a number of critical success factors should be considered. “For example, never select a factory because it is the cheapest. You get what you pay for, and China is no differ ent. Of course price is important, but don’t forget about service, capability, overall commitment to quality, and communication skills. You wouldn’t deal with a shoddy operator at home, so why do it in China,” Read said.
“Also, you should assume noth ing and clearly define your requirements in detail as if you were explaining it to someone that has never seen or heard of your product before. Detailed drawings, materials specifications, and pack aging and shipping requirements should be provided.”
Read believes that where possi ble it is wise to finish your product at home, then send over complete engineering drawings and require ments, or even better, a complete finished prototype. Getting an ini tial prototype right the first time can save you and the factory a lot of time and money.
“Unless you can afford the time to go to China for every order, be prepared to use someone on the ground to act on your behalf. They can not only check the goods when they are finished but manage the production schedule,” he advised.
“If you do not appoint an agent, spend the time to get to know the people at the factory, because these relationships are critical in working with Chinese suppliers.”
Overhead costs
STW co-director, Todd Pearson, says that with a labour force of more than 900 million, Chinese workers remain among the lowest paid in the world, and that the average Chinese labour workers’ annual income is around A$1,800.
“As labour costs increase in the more developed cities along the eastern seaboard, factories are either moving west to take advan tage of the cheaper labour or fill ing their rosters with migrant workers from the western provinces to keep labour costs down,” Pearson said.
“Though energy and water and some other input costs might be slightly higher than in developed countries, the size of the manufac turing sector in China allows Chinese factories to take advan tage of massive economies of scale on raw material inputs, and plant and equipment costs, allowing them to balance out the some times inflated energy costs.”
Austrade 13 28 78, www.austrade.com.au
Sino Trade Winds, www.sinotradewinds.com