Intrepid Sourcing And Services: November 2016

Thursday, 24 November 2016

Will A China-US Rivalry Destroy Free Trade?

Current US China Trade Relationship

Throughout President Obama's reign the president did try and make forward steps to improving the US China trade relationship. During his campaign run, Obama spoke positively in terms of cooperation between the two countries. He cited both economies were strongly interlinked, and a combined effort could ensure both nations prosper. However, he did raise concerns, including insinuating China purposely valued their currency low to benefit their exporters.
President Obama also met with President Xi Jinping in 2013, hoping to build a “new model” of relations between the countries. A combined agreement was reached about combatting climate change, as well as an uneasiness about North Koreas nuclear program. Unfortunately, the leaders didn’t see eye to eye on all issues. Disagreements arose about cyber spying, and China rose concerns about certain countries the US sold arms too.

The US China Trade Relationship Post Election

The next President of the United States is all but confirmed to be one of two possible candidates. Republican Donald Trump initially was seen as a joke candidate, but has fought hard to become a front runner. Democrat Hilary Clinton is seen as the bookies favourite, and has been considered a serious contender since the start.

The US China trade relationship will likely to suffer regardless of whoever actually moves into the White House. The United States is seeing an increased income gap divide, and the country is expected to focus on domestic interests over global concerns.

However, economists are more concerned if Donald Trump is confirmed as President Obama’s successor. The accomplished businessman has already confirmed he will impose a 45 percent tariff on Chinese imports. For the first 3 quarters of this year, China was the United States largest trading partner. Over 15% of the total trade of goods was between the two countries. Economists agree implementing barriers to trade such as tariffs will be detrimental to both countries’ economies.

The outlook appears brighter, but still bleak under a Hilary Clinton leadership. China may feel more familiar with a Clinton administration due to previous dealings. Trump on the other hand, would constitute unknown territory. Certain key issues have appeared which suggest the US China trade relationship will suffer under Clinton. She has been vocal with criticising the Chinese in the past. Issues such as human rights and the situation in the South and East China seas have made Clinton speak out. It is unlikely for Clinton to move towards open conflict between the two nations, but relations may remain heated.

Lesser of Two Evils

In terms of the US China trade relationship, it is unlikely either candidate will make progress. Economists would prefer a Clinton administration, considering her leadership the lesser of two evils. A leaders level of influence also needs considering. Generally, their powers are overestimated, with congress able to veto and approve the most bills. With both candidates opposing the Trans-Pacific Partnership (TPP) deal, this could open a door for the two nations to work together. The future is uncertain, and no one truly knows what lies ahead. Right now, it appears that the US China trade relationship may not improve in the near future. Only time will tell.

If you want to read about other possible barriers to trade that could be implemented. Either by Trump or Clinton, you may enjoy our Trade Wiki entry here.

from
http://intrepidsourcing.com/will-china-us-rivalry-destroy-free-trade/

Wednesday, 23 November 2016

What Happened to Low Quality Chinese Factories?

Many people around the world are cautious when they hear of products being manufactured in China. Some even suggest the manufacturing quality is so low there is no point in even considering sourcing from this location, as the product will break soon enough. While there has been some truth to this train of thought in recent years. In this present era, China's reputation certainly precedes itself.

Over the last several years the country has come leaps and bounds. Currently the level of manufacturing quality within China is relatively high. The main problem is usually as a result of companies purely looking for the cheapest option. Many factories have very similar sets of costs when it comes to producing your goods. Therefore, when you decide to force the price lower, quality of materials is one of the few options a factory may take.

However, low manufacturing quality is not always due to low prices. You should be aware by now that China has been moving away from lost cost manufacturing. The county has evolved into a more specialized manufacturing industry. This has resulted in an increased level of capabilities which should translate to higher quality goods. However, an increase in complexity, may also means a higher chance of faults. Manufacturers will also find it easier to hide below par materials in specialized goods. Hidden away faults may take a longer time to surface. If you expect your product to last 10 years, finding out the build quality lasted 2 years takes too long.

Ensuring your Suppliers Manufacturing Quality is Sufficient

It cannot be stressed enough how important the constant and consistent monitoring of your suppliers manufacturing quality is. This may include inspecting every shipment once they arrive. Using 3^rd party services who can carry out factory visits and only using suppliers who have adequate quality control and assurance procedures in place. The problems many companies encounter is committing to one supplier immediately after receiving a high quality sample. However, factories have been known to impress initially with the hopes of pulling a bait and switch on the following large order.

Although you would like to think your supplier values your business relationship, do not assume this means they will keep up the good work. The majority of suppliers run on razor thin margins, and if they believe they can get away with it, compromising on the manufacturing quality they provide could be an easy way to boost profits. It is advised to always be on high alert, otherwise you may notice a problem way too late to do anything about it.

The best way to receive the manufacturing quality you desire is to approach the process slowly. This should include conducting proper due diligence, as well as taking the time to receive legal advice. This, in turn should result in you drafting an enforceable contract. Both of these should save time in the event that things don’t quite go as planned. Then you should be able to enforce your rights and enable your company to be in a position of control.

Conclusion

Manufacturing quality in China is a much debated topic and one that should not be ignored. In recent years the country has come a long way and is starting to move away from problems of the past. Unfortunately, there is still a distance to go. Hopefully we haven’t scared you off from looking to China to source your products, as the majority of firms do not come across any issues at all. Despite this, some companies do occasionally run into problems. It is always recommended to conduct prior research before committing to any agreements. Remember, China has many advantages when it comes to sourcing products which usually results in advantages for your own company. Although a few firms do receive lacklustre manufacturing quality, if you take the right pre-emptive measures, you are unlikely to be at risk.

from
http://intrepidsourcing.com/happened-low-quality-chinese-factories/