In today’s world of global trade and interconnected supply chains, the effects of events such as a trade war ripple far and wide. With that said, the US-China trade war will have a deep impact on companies with stakes in China. We’re already seeing headlines surrounding substantial tariffs being imposed on Chinese goods by the US and vice versa.
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Before diving in, there are two things we’d like to disclose:
First, publishing this piece is tricky – what we know today could change (or even be reversed) with breaking news. Parts of what you see here could have been rendered obsolete by today's news headlines we haven’t read yet. Things are changing that fast.
China has seen rapid economic growth in recent decades and will only continue to soar. Known today as the ‘global factory’ in the supply chain, China's manufacturing sector continues to expand at enviable rates. From half a world away, companies looking to protect their brand reputation are naturally concerned about suppliers being aligned with their values.
In a global economy that penalizes inefficiency, businesses turn to outsourcing. Outsource manufacturing has been long established as a go-to solution for businesses worldwide for decades. In 2017, 53% of US businesses outsourced their production in some capacity. At its most basic, outsource manufacturing is the business practice of shifting manufacturing of parts or an entire product to an external contracted third party.
Outsourcing manufacturing in China has become common practice for many businesses worldwide. The business drivers range from reducing costs, to gaining access to expertise, to achieving faster time to market, and more.
Given the manufacturing powerhouse China has become over the last couple of decades, there may be dozens of factories there that have the capability to produce your product. The question then shifts from, ‘how to find A manufacturer’, to ‘how to find A REPUTABLE manufacturer’.
Working with a supplier in China to outsource production for a product may at first seem straightforward once you’ve chosen a manufacturer from a sea of options. However, souring and product development in China should be approached with caution as the confusion can be high and misunderstandings many. There are a number of steps you can take to reduce speed bumps in what can be a long and difficult process.
One decision... with intended and unintended consequences that will impact manufacturers in every sector globally.
The US imports more steel than any other country in the world. According to the BBC, “The US imports four times more steel than it exports, and is reliant on steel from more than 100 nations.” Canada, and not China, is the largest supplier of steel and aluminum to the US. China ranks 11th (or about 2.2% of total imports) out of 110 nations that sell these metals to US customers, as reported by the Financial Times.
Manufacturing in China in 2017 was a roller coaster of ups and downs. The systemic reforms from the government have presented challenges and opportunities for foreign companies with manufacturing and distribution interests in China. From handling competition to navigating environmental regulations, companies doing business in China have more to manage than ever. The 19th Party Congress in China pressed the gas on the progress made in recent years. Companies unable to pace with these changes risk falling behind...fast.
As of 31 December 2017, China officially banned 24 types of recyclable waste. The impact on manufacturing? Higher prices for certain plastics worldwide. Find out why and what to do about it.
The American Chamber of Congress (AMCHAM) recently held an update meeting in Shanghai, providing a unique opportunity to mix with like-minded entrepreneurs in Asia and hear their take on current events. Given colourful political landscapes in both countries, we had much to discuss. As US-China relations continue trending in a positive direction, companies seeking to expand business in China have much to look forward to in 2018.