According to the WTO (World Trade Organisation), which China became a member of in 2001, China is now not only-
- The largest manufacturing economy in the world
- The largest exporter of goods in the world
- The largest economy by GDP (PPP) in the world
- From 1978 up until 2013 China was the world’s fastest growing economy at an average rate of almost 10%.
They now also have the capability to not only produce high volumes of all types of goods but they also have the expertise to produce them to very high standards of quality. This was not always the case:
If you have seen as many Christmases as I have, you will be aware of the words ‘Made in China’. In the early 1970’s these words were often the butt of many jokes in relation to mass produced rubbish, especially at Christmas time, when you pulled the cracker what came out was something like this:
So, China became known as the place to buy junk especially if you wanted lots of it.
In December 1978 economic reforms were started, led by Deng Xiaoping, this was a two-stage process, the first stage included:
- Relaxing the hold that the state had on farms and farmers to give them more independence.
- Opening up the country to foreign investment
- Giving entrepreneurs permission to start businesses
The second stage began in the late 1980’s and included:
- Privatisation of many state owned industries – Petroleum and banking still remain in the control of the state.
- Lifting of price controls
As a result of these reforms China’s GDP has increased 10 fold.
The growth of manufacturing products has increased greatly, in 1990 China was responsible for 3% of the Global manufacturing output compared to 22% now ie:
The following data is from 2011
- 90% of the world’s personal computers – 320 million of them!
- 80% of the world’s air conditioning units – 110 million of them!
- 80% of the world’s energy saving lamps – 320 million of them!
- 74% of the world’s solar energy cells
- 70% of the world’s mobile phones – 1.1 billion of them!
- 63% of the world’s shoes – 12.5 billion pairs, enough for every man, woman and child on the planet to have 2 pairs!
- 60% of the world’s cement – 1.8 billion tons of it!
- 49% of the world’s pork products – 51.5 million tons of it!
- 48% of the world’s coal production
- 44% of the world’s clothing
Many more high quality companies are having their products manufactured in China to take advantage of both the cheaper labour force and the technical expertise, companies such as:
- All of the top 20 pharmaceutical companies
- Rolls-Royce series 4000 engine
If China has the capability and the expertise to produce top quality, highly technical goods, why do we still have many products made in China that are ‘junk’?
Having dealt with many Chinese manufacturers across a very diverse range of products, there are many reasons for this, here are a couple in simplistic terms:
Problem – The manufacturer you are dealing with just doesn’t have the ability to produce to your quality standard.
Solution – Look for a manufacturer who is able to build to your specifications. There are thousands of factories in China, many build to a ‘just good enough’ standard and others build to a ‘quality’ standard. To ensure that you have high quality it is essential that you spend time researching into the manufacturers that have the ability to meet your standards. It is most likely that this may mean having to visit on a few occasions prior to agreeing on a factory; you will find that this will save you a considerable amount of time and effort in the long run.
Problem – The manufacturer you are dealing with started with the first shipment of good quality goods now they have reduced in quality.
Solution – Sadly this is a story that is all too common and the solution is very similar to the previous scenario: The Chinese people are a very relational race and to get the best out of any business relationship it is very important that visits are made to establish trust from both parties.
We have already established that the Chinese have the capability and expertise to manufacture world class, quality products so why is it that many of the products that are ‘made in China’ are still of low quality?
My personal view is that the reason for this lies squarely in the hands of the purchaser: Like all companies these manufacturers have to make a profit so the price that you have negotiated for your goods reflects this, and what tends to happen is the purchaser then re negotiates the extra $1 off, this extra $1 may be the manufacturers profit so to enable him to produce your goods he then skimps on the quality –
Simply put, if you want consistent quality:
- Search out the manufacturer who can meet your quality needs
- Visit them to create a relationship and develop trust
- Negotiate the price
- Get samples made to your specification
- Monitor the consistency of the quality, if it means a visit, do it.
- Build on the relationship
- The above creates a win/win situation