China has become a leading exporter of all sorts manufactured products, ranging from textiles and shoes, to electronics and furniture. On the opposite site it has also become a major importer of raw materials such as minerals, oil and wood. Its trading activities are having a significant impact on both developed and developing countries. In fact, China now has some of the largest market shares in manufacturing televisions, and other electronics. Furthermore, it accounts for over 30 percent of the world’s furniture trade.
There are several reasons why China is so successful. China is the fourth largest country in terms of size and the largest in terms of population. It has a vast stock of natural resources, which drive down the cost of raw materials and the fact that demand for consumer goods is rocketing.
Although China has a massive reservoir of cheap labor, certain areas now have labor shortages, especially in the South. This however doesn’t change the fact that the average factory workers still only earns anywhere between 60 and 80 cents per hour. Overhead is another very important factor- low construction costs in China permit manufactures to rapidly expand while keeping the low cost advantage.
Due to the high demand, China will continue to dominate mass manufacturing, providing a low-cost manufacturing base for U.S. and other foreign companies. The furniture industry also has the advantage of government subsidies and a fixed exchange rate to the dollar.
Initially, focused on lower-price products but, in the last few years, the quality and design of furniture from China has improved dramatically by acquiring technical and managerial skills and focusing on quality control. Today, it is rare to find poor quality from major furniture manufacturers. As such, already very capable and competitive Chinese furniture manufacturers are continuing to grow the consumer marketplace. As the Europeans now have confidence in China as well, new sales and distribution channels are being developed in those countries, all at accelerating rates.
Today, the majority of multinational companies are invested in China, entering into joint ventures or setting up wholly owned enterprises to produce products for the Chinese market or export to other markets. Many small and medium-sized companies are entering the market as well.
However, if one goes to China assuming they know how to do business better than the Chinese, dire consequences will be paid. No matter what preparation you do beforehand, it’s not until you are actually over there doing business that you can fully understand how markets work, how financing works and how relationships work. This is why it is so important for small to medium size business to utilize China sourcing companies, to assist in initial negotiations, trade, exports, quality control, and timely shipments. |
