Notes from around China

Had a couple of really interesting discussions about working with Chinese factories today. One was with a Purchasing Manager from the States that buys for his company in China. He says that almost as difficult as dealing with all the unknowns and changes in China is convincing Americans that have not been to China in his company that China really is that irrational and difficult to deal with.

For example, the sales team was told that it takes two weeks to produce item XYZ. But in reality over the past year every shipment is at least a week late, if not two. This PM says it's obviously taking 3 weeks to make the products. So, logically, they need to extend their lead times accordingly. But where's the other week going then? Domestic port transfers. Closing dates are on Wednesday or Thursday for Yantian port in Shenzhen. So if you don't get product IN the port by noon on Wednesday you miss the boat and have to wait A WEEK for the next one. And the boats don't leave on Wednesday, that's just the closing date. So even if you make the closing date your stuff won't leave China for another 4 more days. There's your second week.

But for some reason, sales people think 1) "Hey?! We can load and clear out a container in one day, why can't they?! and 2) "Can't we just tell them to do it faster?" This is the secret to working in China. Logical and logistical inefficiencies abound and make every transaction take longer (even if there are more workers and production is actually shorter than in the US). You have to realize that banking, logistics, communications, physical confirmations of product and container loading can take you much longer than what you're used to in the US.

Get your head around this reality and adjust your expectations accordingly or be very frustrated for the last two weeks of every order. PM's can help the process by placing orders on Fridays and start counting days on the following Monday. You can also account for closing dates and shipping lead times; add in at least 4-5 days for every shipment or coordinate orders to finish and go to port on Monday or Tuesdays so you know you'll catch the Sunday boat. Understand that there are cultural issues on both sides that are hard for the other party to understand. (For example, why can US companies only cut PO's/checks one day a week? This drives Chinese business people nuts.)

The second conversation was about attitudes and perceptions in China with the US economy is still weakening and China (according to official reports) still getting stronger and pulling out of the recession (first). I'm still hearing that this is changing some of the ways that factories are looking at clients/buyers. It's not bad, actually it's good. But for those foreign buyers (especially US) that were used to being treated special, those days are coming to an end. There are other fish (with money) in the pond now. And there are enough stories about foreign companies stiffing Chinese factories that everyone here knows someone who was "unfairly" imposed upon because of the financial irresponsibility in the West.

Both this blog and China Law Blog have detailed how Chinese factories are more and more sophisticated in their research of potential foreign buyers and their participation in foreign markets. This is all good, unless China was where you came to stroke your ego and feel appreciated.

You can also add to this the fact that factories are calling and telling us that if we have clients from the US they don't even want them to visit right now because of the fear of H1N1 (pig flu). They don't want to take the chance that they'll have to quarantine everyone for a week to ten days just because some guy from LA showed up with a cough. Like Rodney says, no respect.

Other tidbits.

GM to make autos and ship them to the US. Good, bad or ugly?

Good, for the domestic market here for sure. Bad for Detroit - but what isn't other than the Red Wings? And ugly for quality. Everyone's heard of Beijing Jeep. But it's not just fake autos but parts out of China that are really scary.

80% of fake parts come from China. It's so bad India (yes, India) is scared of being lumped in with China. Most know that counterfeits are endemic to the China auto industry. And that Professionals can't tell the difference. What's scary is that poor quality fakes in your car can kill you and the number of products sourced for autos in China is going to rise (especially if the entire car is built here!).

This is a good source for Black Market auto parts and other counterfeit news (news about counterfeits, not fake news).

Other Econ news.

You've heard of the bell curve, right? Well, meet the "W" curve. No it has nothing to do with George but everything to do with the end of this year. Be afraid.

And finally, Missing China stimulus money is feared to be in individual bank accounts and stock portfolios. 50% of govt infrastructure programs are not completely funded either. This is how you spell "slower-than-expected" second 1/2 of 2009 annual growth.

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One person has commented on this article.

 1. China vs India
Vivian Phillips, Unregistered

I was thinking of buying some metal toys this spring through Alibaba.com. The perfect item was found and I contacted the manufacturer. The response was that if I wanted that particular item, I would have to agree to an amount 3 times more than I was wanting to pay because it was "out of production". If I find a comparable item in India, is the time for shipping and ease for learning curves with international trade better with India than China?
I haven't gotten clear signals that China is an upfront and consistent trading field- perhaps because of my unfamiliarity with the culture. And by the way, it sounds exciting to live in China because it is such a large beautiful country and has a strong history of character and innovation.

 Posted 2009-06-28 03:14:15

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