Downside to ‘Made in China’

INFORMED: WHAT ARE YOU GETTING INTO

If you have a proprietary product then China might not be the best place for it to be manufactured.

Manufacturing in China has many advantages, such as low cost, timely turnaround, readily available manufacturers and a favourable operating environment that is rarely disrupted by government, regulatory or trade union issues.

But there are a few factors you must consider before deciding on manufacturing in China.

Intellectual property infringement

It is ironic that the Chinese counterfeit goods market was influenced by global companies that decided to manufacture in China.

Global companies like Nike did not anticipate how easy it would be for Chinese companies to steal propriety designs and create cheap imitations targeted at global low-income groups.

Today corporations around the world are crying foul, yet they essentially handed over their designs to China.

As such, if you have a proprietary product, then China might not be the best place for your manufacturing operation.

Lack of regulation

Ironically, the quest by businesses for less regulation allowed for a lack of intellectual property protection.

Additionally, certain democratic privileges, such as the ability of a business to sue or challenge the state in a court of law, is unheard of in China.

Language barrier

Few countries refuse to include English to interact with the rest of the world. China is one of them.

Due diligence cost

The advisable thing to do is to travel to China to do some groundwork to better understand what you are committing to.

Online risk

If you do not have the time nor the money to travel to China, then online research is the next best option.

There are thousands of Chinese manufacturing firms that advertise their services online on sites like alibaba.com.

I think it’s a massive risk. Thousands of foreign companies have been scammed into making payments to bogus Chinese manufacturing firms.

But even if the manufacturer is legitimate, there is a risk of the manufacturer shipping faulty products … it’s not a 5km drive to the manufacturer to get your products redone.

I would think hard before shifting my manufacturing to China, because as a small business you do not have the financial luxury of writing off a bad manufacturing operation as corporations do.

Additionally, many countries have introduced local manufacturing incentives through tax breaks or grants in a bid to keep manufacturing local.

South African companies can access information on manufacturing incentives at the department of trade and industry’s website at www.thedti.gov.za.

Munya Duvera is CEO at Duvera Elgroup