One of my colleagues recommended this great site called Wordle. It creates visual clouds of all of the content in a blog or document. Here is a cloud of China Works blog. Looks like we talk about China and Manufacturing a lot!
The China Works Wordle!
March 4th, 2010Manufacturing Goes Greener
February 14th, 2010It’s all about the car in China. Manufacturing news in Chinese state media is currently dominated by stories about Chinese automakers’ profits, new auto industry investments and impressive projections for passenger car sales growth.
Beyond the automobile, however, the other major manufacturing sector to grab the headlines is renewable energy production. Indeed, China has just announced plans to “build a national renewable energy centre to further shore up development of the industry,” according to the state-run China Daily newspaper.
The establishment of the new centre is “in the preliminary planning stages,” according to Han Wenke, Director General of Energy Research Institute, but it will “be responsible for policy-making, key project and programme management, market and industrial operations, database and information platform establishment as well as international exchanges,” according to the report.
Further details are not yet forthcoming, but China’s new renewable energy centre is being heavily supported by the Danish government, which has agreed to invest up to USD18.5 million in the initiative between now and 2013.
China is the world’s third-largest producer of wind power, and produces around 40 per cent of the world’s solar photovoltaic products, according to official figures.
Chinese Automakers Confront 2015 Challenge
January 31st, 2010Ningbo-based Geely turned heads around the world when it recently announced the USD2 billion purchase of Volvo. Why, analysts, wondered purchase a car brand that GM was so desperate to offload?
GM’s financial woes aside, Geely was assumed to be using the purchase as a springboard to greater visibility – and sales – in the global auto market. That may have formed part of the planning, but another interesting factor has also emerged.
State media reports that Geely plans to double Volvo’s annual car output by building a new factory in Beijing, as it seeks to turn the Swedish-born car brand into a profitable entity by 2011. By producing up to 300,000 Volvo cars, Geely hopes to install Volvo on the Chinese government’s approved list of cars for official purchasing. That could prove to be a lucrative move for Geely, which has openly admitted strong governmental support for its Volvo purchase bid.
Meanwhile, Shanghai Automotive Industry Corp (SAIC), a joint-venture partner of both GM and Volkswagen, has announced plans to double the output of its own-branded cars – to 180,000 vehicles this year, according to comments made by company chairman Hu Maoyuan at the World Economic Forum in Davos.
SAIC purchased the rights to collapsed UK car manufacturer Rover back in 2006, and now sells a range of cars, called Roewe, closely based on Rover technologies and insignia.
With China having set its domestic automakers the task of producing 50 per cent of passenger vehicles sold in the country by 2015, this promises to be another headline-grabbing year for car manufacturing in China.
Rising Output Brings The Spectre of Inflation
January 18th, 2010China’s factory output grew at its fastest rate on record in December – a month in which manufacturing activity soared in key Asian production economies.
The HSBC China Purchasing Managers’ Index rose to 56.1, up from 55.7 in November, reaching its highest level since the survey began in April 2004. This growth rate is expected to be sustained, and possibly even accelerated, in the coming months, as export orders improve and domestic public investment remains strong. Also in December, India saw its fastest manufacturing growth for seven months, while South Korea’s manufacturing output was at its highest level since August.
In China, the result of heavy government stimulus spending and the wider availability of bank credit in the first half of 2009 are raising inflationary fears. In December, Chinese manufacturers raised their prices at the fastest rate in 17 months.
Some analysts say, however, that overcapacity in many key industrial sectors and tighter monetary control – last week the Beijing government raised the reserve requirement for Chinese banks in an attempt to drain excess liquidity from the economy – may be enough to stave off the threat of unmanageable inflation. Either way, sourcing and manufacturing companies will need to remain very vigilant on pricing trends in the coming months.
The ultimate China sourcing checklist – a beginner’s guide to manufacturing in China
January 7th, 2010When you’re sourcing from China for the first time it can be difficult to know where to start, so the team at China Works have put together this comprehensive list of things to look for from the start to the end of your manufacturing project. Follow these steps to ensure your China sourcing project has the best possible chance of success:
A) Before you start
1. Determine if sourcing from China is right for your product or service – sourcing from the Far East can deliver significant costs benefits, but before you start you need to ask yourself many questions – such as can you afford to carry more inventory, are you willing to give up some control to achieve your cost savings, what is your ROI? Determine if it is better to manufacture your product locally or in China before you start
2. Determine your outsourcing model – are you looking to simply buy from a specific factory, or are you looking to set-up a strategic partnership or joint venture with that factory
3. Finish your product development at home and prepare proper CAD/engineering drawings – do not expect the factory to quote based on changing, incomplete or no drawings
B) Finding and selecting a factory
4. Prepare a comprehensive information pack for the factory – many factories receive multiple RFQs (request for quote) every day. Ensure they take your RFQ seriously by providing drawings, specifications, realistic purchase volumes and target prices
5. Find a quality factory using a China sourcing agent or a manufacturing directory – companies such as China Works can help you find quality factories from their existing pool of factory contacts. Alternatively you can use sites such as www.china-quotes.com, or www.alibaba.com to find factories yourself. Visiting international trade fairs is also a good way to meet potential factories face-to-face
6. Send your information pack to factories with the right capabilities for your project – ensure you pick the right factory for your project – for example don’t send an RFQ for a $5,000 project to a factory normally used to dealing with $100,000 projects. You will find your project is quickly put to the back of the priority list if a big order comes in
7. Understand each factory’s payment terms – Some factories may ask for 100% upfront, while others will be prepared to get going for a 30% downpayment. Likewise some may require a telegraphic transfer of funds (TT), while others will be prepared to accept a Letter of Credit (LOC)
8. Determine your import duties – Import duty is based on the HS code of the products you’re importing, the country you import from, and destination you import to. For example metal components sent to the UK from China are typically have a duty rate of 3.7% (of the ex-works price)
9. Work out your landed costs with the help of a freight forwarder – Many factories will only quote on an ex-works or FOB basis (i.e. the price from the factory gates or at the port) meaning you will have to determine shipping costs, VAT and duty for delivery to your warehouse. This article features a good summary of the different quotation terms – Shipping Terms Summary
10. Select your factory based on service, pricing, lead times and terms and conditions – choosing a factory based on price alone is a recipe for disaster. If one factory comes back 30% cheaper than all the others it will likely be too good to be true
C) Placing your order
11. Agree clear terms and conditions with the factory that clearly specify what will happen if things go wrong – if you’re worried about losing control of your intellectual property ask the factory to sign an NDA. These are beginning to carry more weight in China and a reputable factory will be worried about their reputation if they are accused of stealing IP. Also remember to confirm the legal arrangements for disputes, and terms of payment
12. Work out who you’re actually buying from – typically you may be buying from an export agent or ‘trading company’ rather than the factory itself. Ask the company you’re dealing with to clarify their role and their relationship with your factory
13. Ask the factory to prepare pre-production samples before an order is started – ensure the samples conform to your drawings, and samples are kept by both you and the factory. If there is a problem with your order these samples are vital to illustrate what was promised versus what was delivered
14. Specify everything to the factory, and ensure they understand the end use of a product – for example if the parts you’re ordering need to fit with another set of parts, send these to the factory so they can test at their end. Respond to your factory’s questions in a timely fashion, and expect your factory to do the same
15. Factor Chinese holidays into your lead times – Chinese factories take two significant holidays each year – the Chinese New Year in February, and China Week in October. Over Chinese New Year many factories can take up to 6 weeks off, while it is normal to take 2 weeks off in China Week. The good news is most factories work over Xmas and the Western New Year.
16. Authorise production to start when you’re satisfied with the above – production will typically start when the factory has received your downpayment.
17. Stick to your lead times - Never put pressure on factories to shorten lead times – in our experience this is the number one cause of project failure
18. Plan for the unexpected and prepare for a learning curve – we have never seen a new project that hasn’t had some sort of learning curve to start with. Plan these into your delivery timeframes, and work closely with your factory to get past any issues
D) When your order is ready
19. Arrange for your order to be quality checked before it is sent – ensure you have no surprises when your order arrives. Either send someone to sign-off the order yourself or arrange for a 3rd quality inspection company (such as China Works!) to inspect the order
20. Specify clearly how you want your goods to be packaged – packaging is an extremely important, but often overlooked part of the process. Poor packaging can result in your products being damaged on the way to your warehouse making your careful efforts around production a waste of time – 1 month at sea is long enough for metal goods to start rusting!
21. Arrange for shipping to your warehouse – a freight forwarder will be able to organise for shipping, duty and VAT to be paid. You can find many large and small freight forwarders who specialise in dealing with China through the web and at sites such as www.fiata.com
E) Receiving your order
22. Inspect the goods as soon as they arrive – many factory terms and conditions stipulate that the customer must report any issues within a given time period so be sure to check your goods quickly
23. Give the factory comprehensive feedback and continue to grow the relationship – tell the factory what was good and bad about the end to end process so the relationship develops between you and the process improves for the next shipment. If everything was to your satisfaction be sure to thank the factory.
We hope the above advice is useful to those reading, and that your China outsourcing project is a success! If anyone has any other thoughts or comments please feel free to share them below in the comments
Happy Xmas from the team at China Works!
December 22nd, 2009We’d like to wish all our readers and China Works customers a very happy Xmas and New Year! We hope you’ve enjoyed reading our blog in 2009, and hope you’ll continue to follow us in 2010!
Kind regards,
The China Works team
Adam, PO, Alex, Xiaoxi, Laoli, Yanhanbin, Rachel, Vincent, Fred, Gary and Steve
China Launches Manufacturing Charm Offensive
December 15th, 2009A television ad produced by a New York agency and being broadcast globally on CNN is aiming to refashion the global image of products manufactured in China. The “Made in China. Made with the world” ad campaign promotes the involvement of international companies and technologies in China’s manufacturing industries.
Among the goods promoted in the ad are an MP3 player, which is tag-lined: “Made in China with software from Silicon Valley,” a sexy dress that is branded: “Made in China with French designers,” while a refrigerator is marked ”Made in China with European styling”.
According to official government figures, more than half of China’s manufacturing exports “were made by foreign funded enterprises, and for high-tech products and electronic products the proportions were 83 per cent and 75 per cent respectively.” Chinese manufacturing output currently accounts for around 15 per cent of total global output.
The 30-second ad, which features only non-Chinese actors, was financed by four Chinese trade associations and China’s Ministry of Commerce.
Green Tech Gets Government Boost
December 7th, 2009Sceptics may argue that this was carefully timed ahead of the upcoming Copenhagen Climate Change Summit, others may argue that it shows the way forward for state-sponsored investment in green technologies – but clean-tech seems to be the buzz industry at present, not least because China’s sovereign wealth fund, China Investment Corp (CIC), is splashing out HKD5.5 billion to buy a 20 per cent stake in GCL-Poly Energy Holdings Ltd, a Hong Kong-based power plant company.
Under the deal, CIC and GCL-Poly will set up a new joint venture company to “invest and develop photovoltaic or other solar energy projects with an initial capital of USD500 million,” according to Chinese state media. Founded in 2006 and listed on the Hong Kong stock exchange in 2007, GCL-Poly, is described as the country’s largest polysilicon producer.
The move follows US President Barack Obama’s November visit to China, during which the US and China signed a joint statement to enhance cooperation on climate change, energy and the environment. Among the green manufacturing initiatives announced was the launch of the China-U.S. Electric Vehicles project, which has targeted putting “millions of electric vehicles on the roads of both countries in the years ahead.”
Is The Chinese RMB Set For Revaluation?
December 2nd, 2009Importers and exporters should keep a close eye on the value of the Chinese currency, the RMB, in the coming weeks. Having being effectively pegged at around RMB6.8285 to the US dollar for the duration of the global recession – in order to assist its export economy – China appears to be preparing the ground for a reassessment of the RMB’s exchange value.
State media this week reported comments from Zhang Zhijun, China’s Vice-Foreign Minister, that “the RMB rate’s flexibility may widen.” This follows a similar hint from the People’s Bank of China earlier in the month, and the publication of figures that showed October’s fall in China’s export growth occurred at its slowest year-on-year pace this year, dropping 13.8 per cent – following a 15.2 per cent decline in September.
Although it has faced down strong global pressure to revalue its currency, which many analysts believe is considerably undervalued, China seems likely to make some minor exchange rate tinkering. Adding intrigue to the equation is the fact that the 12th China-European Union Summit in Nanjing at the end of November will feature discussions between top officials from both the European and Chinese Central Banks.
GM In Hummer Hole After Failed Chinese Bid
February 27th, 2010Is the military-inspired Hummer going for good? Following the collapse of a protracted deal between General Motors and Chinese truck and military vehicles maker Sichuan Tengzhong Heavy Machinery regarding the sale of the Hummer brand, the US carmaker seems likely to wind down the ailing Hummer SUV business.
The move is a far cry from last October’s joint statement that Sichuan Tengzhong – despite considerable scepticism from the Chinese government, which has the power of veto on Chinese company acquisitions overseas – had agreed to buy the Hummer brand, trademark, trade names and intellectual property license rights, and would assume existing dealer agreements. The Chinese company had ruled out, however, the possibility of moving Hummer manufacturing operations to China.
In a statement released this week, Sichuan Tengzhong said it had not been able to obtain Chinese regulatory approval for the Hummer purchase. The Chinese government had voiced concerns that as a domestically-focused manufacturing company, Sichuan Tengzhong did not possess the capacity or managerial know-how to control an international vehicle brand, particularly one whose sales have plummeted in recent years.
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