Doing Business in China For Dummies®

Looking at Manufacturing Challenges for the Chinese Market

You can break manufacturing for the local market into two categories:

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Manufacturing inputs for goods that’ll be exported: If you’re an original equipment manufacturer (OEM) for goods for export, your customers are just as likely to be FIEs as Chinese. You may even be dealing with the Chinese operations of some of your current customers. In any event, this strategy is the less tricky of the two because you ordinarily have less price pressure and may find it easier to differentiate your products based on quality.

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Manufacturing items that’ll stay within China (the pure domestic strategy): Assuming that you have Chinese competition for the domestic markets (whether producing as an OEM or making finished products), you’re likely going to be subjected to more price pressure while finding that your potential customers aren’t that interested in paying more for quality. The Chinese are beginning to pay more for quality, but this can be a difficult strategy.

Many successful manufacturers ultimately do a combination. They first manufacture exclusively for export. Then they gradually begin testing the domestic market’s waters.

This section discusses some of the challenges of manufacturing for the Chinese market — whether for sale directly to consumers or to other manufacturers — and why you can overcome them.

Struggles to cut costs enough to compete in domestic markets

In most products and segments, the Chinese consumer market is ...