1	Purchasing in China
2	Fact No. 1: An ever increasing number of labour-intensive products made in the West or, increasingly, even Eastern Europe cannot compete with China, where wages are USD 0.50 an hour -and often less:
3	These chaps could be lucky…
4	But don’t bet on these…
5	…neither them….
6	USD 0.50? The supervisor perhaps!
7	The Dakota Indians have a saying: When the horse under you dies, dismount.
8	Businesses, however, often try other strategies bordering on the absurd:
9	... we buy a stronger whip.
10	... we change the rider.
11	... we say things like: “This is the way we have always ridden this horse.“
12	... we hire consultants specializing in dead horses.
13	... we harness several dead horses together for increased speed.
14	... we huff and puff when our “stupid bank“ will not bet more money on that dead horse.
15	"…we identify our government..." …we identify our government as the true killers of that horse by not stopping “all those cheap China imports“.
16	"Fact No" Fact No. 2: Globalization is here to stay, and so is China‘s role as the World‘s workbench. Where Western manufacturers cannot compete they have to look to China to keep their competitive edge – or risk being left behind.
17	"So how can this be..." So how can this be done?
18	"Our reply to all those..." Our reply to all those pilgrims from the West: Wherever possible, focus on procurement and leave handling of China’s omnipresent bureaucracy, corruption, cronyism, nepotism, etc. to those born and bred there.
19	"At least in China‘s booming..." At least in China‘s booming coastal regions (Guangdong, Greater Shanghai, Xiamen, etc.) there is no shortage of local manufacturers, equipped to pale many a Western plant.
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23	"What most Chinese companies often..." What most Chinese companies often lack, however, are loyal customers and –in some cases- production know-how! Also, do not expect them to have sufficient understanding for overseas buyers’ uncompromising demand that goods ordered must be of high and always uniform quality. Some friendly “guidance” from the buyer’s side is then always time and money well spent. Patience pays off – especially in China!
24	Keeping an eye on production.
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26	"Buying agents usually “pay..." Buying agents usually “pay for themselves”, as they know the country –and local price level!- and are not easily fooled by some mealy mouthed salesman. However, if you do insist in making your own mistakes, the next question is: How to find suitable and reliable suppliers?
27	"Price alone is not everything" Price alone is not everything; equally important: Good infrastructure (transportation links as well as energy supply); Reliable communication links (this includes language as well!); ISO Certification by reliable agencies.
28	"Factories owned by Hong Kong..." Factories owned by Hong Kong or Taiwan Chinese are often more “westernized”. And above all: Go and see the place! The following photos too were taken in China, but may not exactly reflect the manufacturing standard YOU had in mind.
29	Welcome to my factory….
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35	"Which contract" Which contract, delivery and payment terms are acceptable? English language contracts, even drafted by large Chinese companies can often be quite confusing. Chinese suppliers are happy to sign almost any contract… Negotiation, however, starts always after signing them! So better bear that in mind!
36	"Delivery is often FOB" Delivery is often FOB. CIF and C&F are also widely accepted. New customers are often requested to make a down-payment to finance purchase of components. Do not purchase through state owned import-export corporations. This will increase your purchase price by about 5% and, if your preferred Chinese partner does NOT already have an export license, then you may well be their first foreign customer....
37	"The most important hurdle may..." The most important hurdle may also be an insurmountable one: Who will inspect my goods before shipping? Just one inspection may not be enough, even with reliable suppliers. Sending inspectors from Europe is generally not an option.
38	"Large quality control or inspection..." Large quality control or inspection service providers will not always send the same personnel to inspect the same product. Consequently, using buying agents is a smarter way to spend your money!
39	Still there?
40	Then let’s discuss some aspects in more detail.
41	As mentioned earlier: Visit your potential supplier or future partner. Show your interest in their operation and give the other side a chance to get to know you and your company, too. Build up trust and mutual respect.
42	Be aware of cultural differences and do not hold back with your own culture. Chinese seem to think that all foreigners are the same. Good opportunities are lunches or dinners.
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46	Price Negotiation: Never push too hard for lower prices. You may get ALMOST any price you want, but the product may not resemble what you ACTUALLY HAD in mind. As a new customer, expect a demand for down-payment.
47	Chinese suppliers will argue that they need these down-payments to pay for components. This is their form of insurance, in case the customer later changes his mind.
48	Most Chinese companies will initially not keep any stock of components for products for new buyers. However, we found that this can be negotiated AFTER a shipping delay, etc. HAS occurred.
49	Most Chinese companies located in the coastal provinces will sign your Code of Conduct and also abide by it.
50	Audits should be possible as well, if the volume is there.
51	The only way to ensure quality is by inspecting each shipment in the factory BEFORE delivery. We have found that just one inspection is often not enough.
52	Get to know your partner’s QC personnel. They need to understand your product and requirements. This is most important as factory workers will not have the faintest idea about your product’s use. Needless to say, they will also never be able to afford one themselves.
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54	Should you bring a gift? A small gift from your country will always be appreciated, but is not necessary for the first visits. However, after you know your supplier better, you may bring a gift for Christmas or Chinese New Year.
55	"Global Reach Products Ltd" Global Reach Products Ltd. 16A, Hillier Commercial Building 89 Wing Lok Street Sheung Wan, Hong Kong Tel.: (+852) 2851 9854 Fax: (+852) 2851 9374 management@global-reach.com.hk http://www.global-reach.com.hk With you all the way!