Written by With the Chinese Yuan strengthening down to 6.48 to the US Dollar, it’s surprising that plastic prices have remained steady during the last three months in China.
With the exception of General Purpose Polystyrene (GPPS), which increased fractionally, most other commodity resins stayed firm or even eased a little, including High Density Polyethylene (HDPE), Low Density Polyethylene (LDPE), Linear Low Density Polyethylene (LLDPE), High Impact Polystyrene (HIPS), ABS, Nylon, Polypropylene (PP) and PET.
Take a look at prices and trends in our daily record.
Despite strengthening Yuan, plastic prices show no gains
Is there life after the US$ drops below the 6.5 Yuan mark?
With the Chinese Yuan (RMB) now firmly at 6.48 against the US$ the doomsday protaganists are already forecasting the demise of China as the world’s mega exporter of inexpensive goods.
For sure the sneaker and T-shirt manufacturers will be scurrying off the Bangladesh, Vietnam or Ethiopia where labor rates are still close to near slave money. Just as they have done over the last 30 years skipping from one country to another – wherever offers the lowest rates.
But China has moved on. While everyone has been marvelling at the amazing growth in China over the last decade, fewer have noticed the amazing industrial and commercial infrastructure that China has been furiously building. And all of this is designed to compete head-on with Western industrial countries when the Yuan reaches its real value.
The obvious indicators are the thousands of miles/kilometres of roads, high-spead rail, airports, communication networks, etc. Behind the scenes are the new vocational colleges and schools turning out apprentices by the hundreds of thousands.
Can Bangladesh or Vietnam or Ethiopia produce amazing engineering, consumer goods or IT technogies like China? The answer is of course no. Not by a long shot.
China will remain a relatively low cost manufacturing base for many, many years to come and, all the while, increasing its quality base. Chinasavvy, for one, will be there.
Yes, there’s a lot of life in the export manufacturing base of China even when the Yuan strengthens even further.
Guangdong government plans even greater growth and foreign investment
The Guangdong Government has got plans to push forward foreign investement of the year 2011 around the Pearl River Delta areas. 34% of all China exports come from this region.
According to sina.com, the biggest Chinese online news and media resource, on Tuesday April 26 2011 the Guangdong provincial government announced its planned goals of the year 2011 to boost up foreign investment in the Pearl River Delta.
Details are as follows:
• The net increase in foreign investment within the Guangdong province in 2010 will reach to at least 8%
• The growth of contracted foreign capital will reach to at least 35%
• More Fortune 500 and world-class foreign-invested enterprises will be brought into the Pearl River Delta
• Significant investment growth within existing foreign enterprises is desired
• At least 40% of the exported items are expected to be self-branded products with western commissioned designs
• At least 8% targeted growth in domestic sales of manufacturing trade
It’s that time again!
It’s Canton Fair time again
Mid-April Guangzhou sees all kinds of hotels, inns and guest houses triple their daily rates, more policemen walking around major public areas in the city center, more picky taxi drivers dashing around for foreign businessmen, more dressed-up university students (mostly girls) squeezing into the cramped city subway lines, and more problems for local citizens to get a taxi. If you happen to come across any of these lately, you might realize that it is that time – Canton Fair again!
Canton Fair 2011, with its official name as the 109th China Import and Export Fair, has already entered its 54th year. With a history of over a half century, the biannual international trade fair has been and still is the biggest commodity fair across the country. The question is: Will it still be the center of Sino-international trade in the coming 5 to 10 years?
Quality is the new name of the game
Traditionally, the mission of the Canton Fair is to provide a platform for foreign buyers to directly negotiate with Chinese manufacturers and get the lowest price possible. In the past 50 years, this trading model has successfully turned China into a primary low-cost world-class workshop worldwide. However, global manufacturing businesses in the 21st century put quality as their number one goal. Cheap price is no longer the only concern for global buyers who are doing business with China.
Even before the 2006 Mattel China-made Barbie toys disaster, international manufacturing industry has raised increasing concerns on the quality and safety of Chinese products. Global buyers in Canton Fair can find the best quality samples ever, but that doesn’t always guarantee the same high quality in the mass production. Regularly there are stories of bad quality products reaching their destination with little resemblance to the approved samples, or the first shipment arriving close to the original samples followed by the next two boxes of junk. Nowadays many experienced global buyers would rather pay a site trip to the local Chinese factories for a closer look at the in-house production lines and quality control systems.
Brokers masquerading as manufacturers
For the global buyers who are keen on cheap prices, Canton Fair may not be their ideal arena either. Many Chinese participants in the Canton Fair claim to be local manufacturers, but they are in fact outsourcing agents who charge commissions on every single unit. Meanwhile, the current significant inflation of China has also posed a big threat for the country to maintain its competitive product prices. In fact, many Chinese toy manufacturers participating in the Canton Fair 2011 are anxious about their international trades because it has become a great challenge for them to maintain their competitive pricing edge. They have to pay higher wages for their frontline workers and invest more on their quality control systems so as to meet the stringent North American and European product quality and safety standards.
Increasingly, many global industrial giants in the engineering sector prefer to directly subcontract their manufacturing to some foreign own but China based companies such as Chinasavvy, instead of wandering around the Canton Fair conference halls. Driven by quality and excellence, Chinasavvy works to OEM designs provided by North American and European buyers, employs local bilingual engineers and QC specialists with up-to-date computer simulations to closely monitor mass production in local Chinese factories. With its capability to guarantee consistently high quality control and consistent product delivery, Chinasavvy welcomes North American and European buyers to its head-quarter office.
Is there a future for the Canton Fair?
In the 21st century when international manufacturing industry is quality oriented, how far can the broker dominated Canton Fair continue? When international industrial buyers require high quality assurance, the sub-contract manufacturing mode run by Chinasavvy is likely to be the major trend in global manufacturing industry in the next decade. Can the Canton Fair be equally innovative and move forward to catch up with such market trend? Let’s wait and see.
Triads: Episode 2
Well we are still here – after several more visits from our Triad “friends”.
After being substantially scared after our first encounters our fears changed to anger. Why should we be subject to extortion when we are the ones who have suffered substantial losses already. We replaced, at our cost, all the faulty products that the supplier (the paymasters of the Triads) had delivered to us.
So we decided to fight. There was no way we could fight the Triads ourselves but we could hit back hard at their paymasters.
Following the meeting with our lawyers, the Triads (masquerading as “shareholders”) and their paymasters in which they openly confirmed that they had no intention of spending money on court fees and lawyers, they said they would do things “their way”. That night they admitted in a phone call to our lawyers that our visitors were not shareholders but hired to extort the money out of us.
I immediately travelled down to Hong Kong for meetings with our Hong Kong lawyers. As the parent company of the supplier was a HK corporation we filed a criminal complaint with the HK police and then issued a writ for all the monies we had lost because of the faulty products.
Back in Guangzhou, China I finally managed to file another complaint with the police through friends and contacts I had there. Eventually the British Consulate contacted the Chinese police to express their concerns and the pressure started to mount on the paymasters.
This seemed to have little effect on the Triads who regularly arrive at the office to make sure we know they are still there. But we know that if we give an inch they will sense weakness. For now we are waiting for the outcome of the HK case.
Episode 3 to follow
Triads: We never thought we would start our blog this way
We never thought that our first blog would be about our brush up against the Chinese Triads – all in the name of quality!
It all started in late 2008 when we produced a small order for a customer for metal containers. The product spec required a painted lid. Our sub-contractor produced the lids and these were rigorously checked by both ourselves and our customer.
As a result our customer placed a larger order, then even two larger order and the product was a runaway hit in the alternative-to-plastic market.
Then everything went pear-shaped and customers started to return product because the paint started to peel off. Not from the original first order but from the subsequent orders. We realized that our supplier had changed the spec or process. Our supplier repainted more lids to replace some of the faulty ones but Chinasavvy lost thousands of dollars airfreighting replacement lids. Of course, we refused to pay the supplier for the faulty goods.
That started our education into how business works in China…
For months we heard nothing. Then we received a lawyers’ letter to which we responded with a counter claim for our losses many times the value of the outstanding unpaid invoices. Silence again….
Two weeks later we received an unannounced visit by a nervous manager accompanied by a so-called angry shareholder – in turn accompanied by some “heavies”. They explained that they were not going to go through legal channels but made it clear that if we didn’t pay up they were going to trash myself, as Managing Director, and our offices.
Naturally we called in the Chinese police but they explained that until someone was attacked they would do nothing.
Eventually they agreed to meet with our lawyers the next week but not before they reminded us what they planned to do with us in a thoroughly violent way.
Episode 2 to follow.
