Outsourcing from China

Writ­ing clip

By Vik­toriya von Berg

Out­sourc­ing from China

The People’s Repub­lic of China (PRC) is the largest coun­try in East­ern Asia. The Com­mu­nist regime that assumes a sin­gle party sys­tem is dic­ta­to­r­ial and dom­i­nat­ing, and people’s rights are often nonex­is­tent or sig­nif­i­cantly reduced.  How­ever, Chi­nese gov­ern­ment rec­og­nized the poten­tial of its coun­try on inter­na­tional busi­ness arena and intro­duced com­pre­hen­sive eco­nomic reforms in 1978 that notice­ably pulled out China from poverty. The avail­abil­ity of labor that is pro­por­tional to the large pop­u­la­tion of China, approx­i­mately 1.3 bil­lion, is the major fac­tor that influ­enced growth of the apparel man­u­fac­tur­ers serv­ing Euro­pean and North Amer­i­can clients. The low cost of labor con­sti­tutes the major com­pet­i­tive advan­tage of Chi­nese sup­pli­ers along with improved tech­nol­ogy, attrac­tive lead times, qual­ity con­trol, high pro­duc­tion vol­ume and effi­cient communication.

China– is a per­ma­nent mem­ber of the UN Secu­rity Coun­cil and enjoys its mem­ber­ship within sev­eral mul­ti­lat­eral agree­ments such as WTO (World Trade Orga­ni­za­tion), APEC (Asia Pacific Eco­nomic Coop­er­a­tion), EAS (East Asia Sum­mit), G-20, and SCO (Shang­hai Coop­er­a­tion Organization.)

World Trade Organization

Tex­tiles and Apparel

The safe­guard on tex­tiles and appar­els com­ing from China to the USA that allowed the USA work­ers and com­pa­nies to respond to increased imports from China has expired in 2008. Quo­tas on tex­tiles and apparel have expired in 2005 (2) Even before these changes took place, roughly by 2000, ‘’Amer­ica became China’s sec­ond largest trade part­ner, sup­ply­ing vari­ety of goods.’’  How­ever, there is a trade imbal­ance between two coun­tries with China enjoy­ing a hefty sur­plus by using high tar­iffs and restric­tions on the USA exports. (3)

Per­ma­nent Nor­mal Trade Relations

PNTR is the acronym used to describe free trade of the USA with any for­eign nation. PNTR replaced the MFN ( the most favored nation) in 1998.  Since China is the mem­ber of the WTO it enjoys Free Trade Agree­ment with the USA.

Asia Pacific Eco­nomic Coop­er­a­tion (APEC) is com­prised of 21 Pacific Rim coun­tries with an ulti­mate goal of regional trade and invest­ment coop­er­a­tion in order to enhance ‘’eco­nomic growth and pros­per­ity’’ (1) Its mem­bers con­sti­tute approx­i­mately 40% of the pop­u­la­tion around the world, more than half of the world GDP (54%) and lightly less than half of the world trade (44%) (1)

China is also a mem­ber of the G-20 –a forum of the world’s largest economies that play a cru­cial role in today’s global market.

Timely and effi­cient com­mu­ni­ca­tion of Chi­nese sup­pli­ers was the major rea­son that affected my deci­sion to work with one of the fac­to­ries in that part of Asia.

After con­tact­ing dozens of dif­fer­ent man­u­fac­tur­ers in China, there was one par­tic­u­lar com­pany that responded in a timely and pro­fes­sional man­ner. Dongyang Mohang Imp & Exp Co., Ltd, is a man­u­fac­turer and trad­ing com­pany located at the city of Dongyang Province/State of Zhe­jiang. It oper­ates as a full ser­vice fac­tory with capac­ity of 50,000 per month. There is no min­i­mum order require­ment; how­ever they do charge higher costs for lim­ited orders.  The Dongyang Mohang Imp & Exp Co accepts LC (let­ter of credit) as a pay­ment option. In addi­tion, com­pany has an estab­lished 5 year rela­tion­ship with Tar­get and K-mart. The com­pany spe­cial­izes in baby cloth­ing –dresses, rompers, skirt, baby sleep­ing bags, baby suits, hats chil­dren. Accord­ing to Susan Bao, man­ager, the num­ber of employ­ees totals to about 101. The fac­tory size in sq. meters is 5,000–10,000. The com­pany focuses South­east Asia and West­ern Euro­pean mar­kets. They export approx­i­mately 81%-90%.

There are 5–10 peo­ple in qual­ity con­trol depart­ment. In addi­tion, com­pany works with third par­ties that per­form QA/QC. The deliv­ery time is about 25–30 days from the time of order.

Total Costs

The fac­tory quoted the FOB Shang­hai of 40$ and fac­tory charges $4.05 per item. The ship­ment will be deliv­ered to the Port of New York. There is 9.4 % tar­iff for children’s and adult cot­ton dresses accord­ing to HTS (please refer to the attached excel calculations.)