Doing Business in China - Making the most of the free trade agreement

Tips that can save you time and money if you have plans for production in China.

In this section:

› Options for manufacturing
› The challenges of manufacturing in China
› Finding a manufacturer and location

Options for manufacturing

Employ a quality control manager in China
Kiwi sheetmetal, rollforming and folding equipment manufacturer Hayes International says quality control can be a real problem in China. In the past the company tried to manage the problem from New Zealand, but has now put in place a full-time quality control manager in China.

Expand your focus beyond labour costs
"Being competitive with your labour costs is important to being successful in any business, but there are other important factors. I think being close to your customer base and producing a quality product probably even outweighs the cheaper cost of labour. You must put an effort in here in China. You must ensure you have good quality systems and you have excellent training systems in place." - Keith Stevens, General Manager of Richina Pacific Ltd's Ovine Garment Leather Division in Shanghai

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The challenges of manufacturing in China

Be prepared to hunt high and low for suppliers
"Until we began setting up our factory we did not truly understand the difficulties we would face in finding suppliers of products and services, for example just where do you find that bolt you require?" says Donald Stewart, Managing Director and Chief Executive of Skellerup. "There are no Yellow Pages for our region, and even our local staff members were of little use as they tend to work within family structures. This was a most frustrating time, as until you have built your supplier network everything goes so slowly."

Skellerup's factory is in a relatively remote area (albeit beside a village of 60,000, and less than 30 minutes from a city of 300,000 and less than an hour from a city of three million).

Don't ignore the potentials of JVs
"In terms of business structure, we've decided on a JV. One of the reasons is that we can benefit greatly from government support here at a number of levels - whether it's financial support or whether it's actually getting involved into the highest level with the JV. My feeling is that a JV works very well for us. It won't work for everybody, but for us it has been a very successful business structure because it opens all sorts of doors for us that don't exist if you come in simply as a foreign company. For example, we get very good tax concessions, we also get access to government funding for research which would not be available for a foreign company coming in and setting up here in Guilin." - Dr Garth Smith, Managing Director, BioVittoria

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Finding a manufacturer and location

Use knowledgeable Kiwis
When Skellerup Industries was establishing a manufacturing plant in China, it turned for initial advice to a Kiwi with more than 10 years' experience living, trading, establishing and running factories in China. It then used two more Kiwis — one born in China who was fluent in Mandarin and with a deep understanding of the Chinese culture — to help finalise due diligence and find a suitable factory site.

Ask the right questions
"How we went about finding a location was taking quite a lot of time researching what style of company we wanted and most specifically where it was going to be located. That proved to be the decision that took us the longest amount of time and was the most difficult to get information about. In the end we realised it was about us asking the right questions." - Don Johnson, Marketing Manger Lumber, Pan Pac Forest Products.

Pan Pac has a warehouse and distribution centre in the Tianjin Free Trade Zone. It took the company two years to decide to locate there. "Our own way of achieving that was to seek consultation with people that were already operating in China in all the various forms; that included government agencies as well as other expatriate based company associations that we had."

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