China Works blog: China manufacturing news, analysis and insights

With economic development now at a fairly advanced stage along the east coast and in southern China, and with central China receiving a welter of grants and subsidies to attract commercial and industrial investment, the government’s next stated economic objective has seen a geography shift.

The economic development of the former ‘rust belt’ of northeastern China is an area that the government has long sought to boost, but it has now accelerated its approach to stimulate both long-term growth and a diversified economic base.

Northeastern China has traditionally been a key centre of heavy manufacturing, shipbuilding and automotive production, particularly during the command economy days of the 1960s and 70s. It has, however, been struggling to adapt to the demands of China’s 21st century economy. Now, Premier Wen Jiabao is pinpointing the region as “a new engine for China’s economic growth,” according to state media.

The Premier’s statement represents a governmental push to ramp up industrial diversification, attract new commercial investment and improve economic efficiency in the northeast – a region encompassing Liaoning, Jilin and Heilongjiang provinces and the Inner Mongolia Autonomous Region. The northeast has received significant foreign investment in recent years, with cities like Dalian, Shenyang and Harbin attracting most interest from both Chinese and foreign companies investing in the region.

For the first time in 60 years production of black cabs will cease in the UK and move to China. Look behind the headlines though and you’ll see that taxis will still be assembled in the UK, which shows the benefits of sourcing parts and components from the Far East and completing production locally.

London’s Evening Standard writes:

“Manufacture of London’s black cabs is to cease in this country for the first time since it began more than 60 years ago, with production shifting to China.

Bodies and chassis for the latest TX4 model will merely be assembled at manufacturer Manganese Bronze’s London Taxis International plant, in the latest blow for Britain’s car industry.

Manganese is also considering a deal to give its Chinese partner a majority stake in the company. It said it had no choice but to cease manufacturing after “the only viable UK supplier” of the primer coating (effectively the first undercoat sprayed on to the vehicle) said it would stop production from August.”

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!

Ningbo-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.

We’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

A 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.

Outsourcing to the Far East is often demonised – but there are many good reasons for sourcing from China. In specific circumstances outsourcing production can offer real benefits to Western companies - improving the international competitiveness of UK manufacturers, and enabling new product development projects to get off the ground.

In our experience there are two main drivers:

1. Reduce tooling costs

Without the option of low cost tooling from the Far East many new projects simply wouldn’t get off the ground. In our experience many inventors will already have approached local factories and found Western tooling costs to be too high for their budgets.

This said, this not is a black and white situation and for some projects it will be cheaper and easier to source locally.

2.  Increase international competitiveness

We live in a global economy whereby many Western companies would love to export to other markets – to retain international competitiveness this may mean sourcing some parts locally and others from low cost countries. Many of the larger manufacturers we deal with have a global sourcing strategy that may involve buying locally or abroad over time in line with changing exchange rates etc…

China Works there advise our customers to maintain a global sourcing strategy – keeping the option to manufacture in the UK if economic conditions are more favourable for a given product (as they were recently with the declining pound). Retaining the option to manufacture in the UK also provides a fallback option if outsourcing projects do not provide the desired outcome.

A new directory has been launched to promote Chinese OEMs and contract manufacturers – China Quotes

The site is a brand new online directory focused on contract manufacturers in China. This new Internet-based resource enables buyers / sourcing managers from around the world to make direct contact with Chinese manufacturers of customised products and components.

China Quotes has been specially created to stand apart from other sourcing directories that typically focus on a wide range of factories and suppliers of off-the-shelf goods, such as MP3 players, toys, clothing or lightbulbs.

Instead, China Quotes is a specialist online directory that only features contract manufacturers in 10 key production categories, including: Moulding and Casting; Forming; Joining and Fabrication; Machining; Coating; Electronic Components; Industrial Components; Rapid Prototyping; Packaging; and Support Services. Within each category users can find Chinese factories specialising in specific Production Processes, such as Injection Moulding or Die Casting.

The growing demand for diversified food products in China is leading food manufacturers, processors and distributors to demand enhanced cold chain logistics and transportation infrastructure nationwide, according to a new report by Jones Lang LaSalle.

“As the most populous nation in the world, China has a large and fast-growing consumer food market. Chinese eating habits are changing as incomes rise leading to higher consumption of perishables like animal protein and dairy products, as well as frozen foods,” says the report. It adds, however, that “China’s cold chain market is seriously underdeveloped” with only 15 per cent of products that should be temperature controlled currently being “handled properly” in China.

These factors, along with rising demand for the safe transportation of pharmaceutical and healthcare products across China, mean that the cold chain logistics market offers “significant opportunities” for foreign investors, according to Jones Lang LaSalle.

“The refrigerated warehouse market in particular will need massive development in order to meet the growing consumer market and an increasingly dynamic food exports sector,” the report says. In particular, the major cities of Shanghai, Beijing, Guangzhou and Shenzhen are likely to develop as key cold chain logistics centres, along with major port cities, such as Dalian and Qingdao, which are integral to China’s fast-growing food export and import sectors.