Considerations for Manufacturing in China
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Welcome to ChinaInvest.biz Magazine - July 2011 Issue

Klako Group presents ChinaInvest.biz - a monthly magazine providing insight into investment, tax and operational issues for foreign companies entering and expanding throughout China.

Is manufacturing in China still viable? Accordingto the third annual China Manufacturing Competitiveness survey, multinational manufacturers are increasingly focused on accessing the growing China market while the number of companies viewing China purely as an export base continues to decline. While the interest in producing in China for Chinese consumers has increased, it seems that many foreign investors do not view China as a base to supply other Asian countries and hence export has declined. With rising costs in China and labor availability issues, many companies are also looking to relocate from the eastern coastal cities to more affordable inland cities. In addition foreign investors are looking at lower cost locations, such as India, Vietnam, Indonesia and Thailand as new market entry locations for manufacturing.

We would like to provide foreign investors with an insight into what considerations should be taken when investing in manufacturing facilities in China - whether one wants to produce or expand on their manufacturing base.

Labor Law is a relatively new phenomenon in China, with the first comprehensive law passed
in 1994. The new law, adopted by the National People’s Congress (NPC) on 29th June 2007,
looked to redress some of the poor working conditions found in China, particularly for the
average worker. Prior to the passage of this law, most Chinese employee’s in small-medium sized
firms lacked employment contracts. Morever, they were short-term, giving employers the flexibility to
frequently bring in a new, often cheaper hires whenever they saw fit.


Considerations for Manufacturing in China

One of the most important considerations when establishing a manufacturing facility is selecting the best site in the shortest possible time. One of the most time consuming elements of the site selection process, particularly if you are looking for a facility that is far away from your corporate offices is making site visits. By making some basic preparations, however, investors can help to limit the number of site visits needed to find their ideal location and help to make each site visit more effective.

Managing the risks involved in selecting a business location in China, whether it be for a corporate headquarters, an R&D centre, or a manufacturing facility is one of the most critical factors in determining the ultimate success or failure of a business unit. Although making the right site selection decision can be more challenging in China than it is in more developed markets, the risks inherent in the process are all manageable with the proper pre-planning and analysis. To keep risks at a minimum, investors should first be familiar with the stages of the site selection process and what are the key risks that need to be considered and managed during each of these stages.

Most investors recognize that moving their business from one site to another or expanding into a new location is a potentially risky proposition, and these risks become more difficult to manage as decision-makers move farther from their home markets. However, given the potential advantages of expanding into China or moving into lower cost locations in the nation's interior, relocation becomes a quest for achieving cost savings or better access to consumers and suppliers without endangering profitability or operating stability.

To read the full article, please click here to view the magazine (PDF file)


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All information in this report is verified to the best of our ability and is assumed to be correct at time of release; however, Klako Group does not accept responsibility for any losses arising from reliance on the information provided within.


Free Consultation with China and Hong Kong Legal & Tax Advisors


The directors of Klako Group will be travelling throughout the year to meet with partners and clients and to participate in trade and tax-related events. Should readers or clients of the firm wish to meet our directors face to face during their trips to discuss matters concerning China, Hong Kong and/or Singapore business investments, please contact us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Appointments will be made on a first come, first serve basis. The visits of our directors provides an excellent opportunity to all our readers to discuss first hand their own investment potential, opportunities and legal/tax updated for China, Hong Kong and Singapore in detail.

 

Below is the tentative scheduling for 2011.

September 13th-17th 2011: London, England

September 26th-30th 2011: Germany

October 12th-31st 2011: India, France, Turkey

To view the full schedule, please click here (PDF file)