The topic of how to do business with Chinese has been written down by western media. I’ve read more than 100 articles on similar subjects, mostly telling you how bad the environment in China is, how bad the quality of products made in China is and how many cheaters there are. A westerner’s view of China mostly comes from their experience in dealing with the Chinese people and their subjective judgment, which is more or less biased. Unfortunately, there are only few Chinese people can write an objective interpretation of China’s market environment from the actual situation of China.

As a Chinese who has been doing business with western countries for more than 10 years, this article tells you objectively what is really made in China. What are the profound upgrading and transformation of China’s manufacturing industry in the process of globalization? How do Chinese do business? To do business with Chinese people, how can we avoid falling into various disputes and enjoy the cheap products and rich product supply chain in China?

What’s your impression of Made in China? Low price and poor quality?

It may be a true portrayal of China’s products 10 years ago, but today, China’s industry is advancing. The process has undergone tremendous changes.

Whether you admit it or not, the influence of Chinese products in the world is beyond your imagination. Chinese-made goods are everywhere in your life. Early in the morning, you get up from a bed made in China, run to the bathroom in slippers made in China, brush your teeth with a toothbrush made in China, change into a suit made in China, and go to work with a backpack made in China. This is the daily life of no matter westerners or Africans. Whether you like it or not, Chinese-made products have permeated every aspect of your life and every corner of the world.

Since the late 1970s, when China put forward the reform and opening-up policy, China’s modern industry has developed for more than 40 years. China’s economy has experienced rapid development in the past 40 years. The living standard and education level of the Chinese people have greatly improved, which has led to dramatic changes in China’s population structure. Chinese people tend to pursue a high quality of life instead of being keen on fertility. The demographic dividend of China will be exhausted as the birth rate decreases year by year. With the increase of labor costs, China is no longer competitive with the third world countries in low value-added products. In this case, Chinese enterprises must embark on the road of industrial upgrading in order to survive in the scarce labor force. From extensive economy to intensive economy, from labor-intensive to technology-intensive, this is the only way for Chinese economic development.

The changes brought by China’s industrial upgrading are mainly reflected in 3 aspects:

1. The quality change

The rise of China has played a very good role in drawing lessons from the Third World countries. With China’s rising labor costs, developed countries have gradually shifted the manufacturing sector to other underdeveloped third world countries. In order to break out of the international competition, China’s traditional industries can only increase their competitiveness by improving the added value and quality of products, otherwise they will face elimination.

Over the decades since China opened up to the outside world, many foreign-funded enterprises have been stationed in China. Accompanied by advanced production equipment and technology, perfect management and worker training, this gives Chinese people valuable learning opportunities. After nearly 40 years of iteration and improvement, from OEM to ODM, from single function to multi-function, from low-end technology to high-end, commodities made in China have been greatly improved. Especially in the past 10 years, China’s commodities have gradually had the independent design and R&D ability.

2. Price changes

 Prices are no longer cheap. The reasons are as follows:

1) Rising costs of raw materials and labor have led to price are no longer is an advantage.

2) The technology and quality of products has been improved both, which has directly raised the price of Chinese-made products.

Rising wages aren’t bad for buyer, you may pay more on your production run, but you also may see the quality of your products rise. You also get the advantage of stronger infrastructure, better managed factories, and advanced machinery that improves your overall production process and supply chain.

3. The optimization of industrial structure system change: from traditional industrialization to new industrialization.

The optimization of industrial structure system leads to the China industry from consumer goods manufacturing to high-tech products manufacturing. China’s industry is no longer characterized by low cost, mass production and simple manufacturing, but is committed to ranking among the world’s leading high-end manufacturing and product design. After getting rid of the low-cost-driven economic development model, China uses advanced industrial technology and management to promote the economic development of the whole country.

If you think that China can only produce clothes and slippers, that’s wrong. China has a large number of medium-sized enterprises in the production of UAV, high-tech electronic tags, smart home devices and wind power equipment. They may not receive as much attention as social media like Tencent, but the threats posed by these companies are not small. Take DJ-Innovations for example, an unmanned aerial vehicle manufacturer, you can see the strength of China’s exporters. Oppenheimer & Co, an investment bank reports that DJ-Innovations has captured 70% of the U.S. market in Shenzhen by taking advantage of smart phone components to build ecosystems.

China is the most important manufacturer as it sells more manufacturing goods than any other country in the world. China is also a world leader in many types of goods. Especially if you’re looking to build custom product, you will save so much time and money by working with a manufacturer who specializes in your product category.

If this is not convincing enough, look at the following data:

* In 2010, China’s crude steel output reached 627 million tons, accounting for 44.3% of the world’s total output, exceeding the total of the 2nd to 20th rankings.

* Cement output is 1.868 billion tons, accounting for 60% of the world’s total output.

*15.65 million tons of electrolytic aluminum, accounting for 65% of the world total.

* Coal output is 3.24 billion tons, accounting for 45% of the world’s total output.

* Fertilizer production accounts for 35% of the world’s total, and chemical fiber production accounts for 42.6% of the world’s total.

* Glass production accounts for 50% of the world’s total.

* The output of automobiles is 18.2647 million, which surpasses that of the United States, accounting for 25% of the world’s total output.

* Ship production accounts for 41.9% of the world’s total.

* Construction machinery accounts for 43% of the world’s total.

* China’s textile output exceeds 70% of the world’s total output and its international market share exceeds 40% of the world’s total output.

* China also produces 68% of the world’s computers, 50% of color TV sets, 65% of refrigerators, 80% of air conditioning, 70% of mobile phones, 44% of washing machines, 70% of microwave ovens and 65% of digital cameras…

I can say responsibly that in today’s world, no country except China has such a comprehensive and perfect industrial chain. That is to say, no country in Asia can replace China. Take textiles as an example: China is the largest textile and garment producer, consumer and exporter in the world. It owns the most complete textile industry chain. A T-shirt, many basic items may be made in Bangladesh or Cambodia, but what about more complicated clothes? Only made in China. Most accessories related to garments can only be imported from China.

The quality of what I say has nothing to do with the type of supplier. Many purchasers believe that if want to be reliable, they must cooperate with factories. Our company Topfairingkit.com is a factory, but I don’t agree with the overemphasis on working with factories. At present, the number of foreign trade companies in China is amazing. Why can they survive after so many years without being eliminated? Both foreign trade companies and factories have their advantages and disadvantages. The key is to choose a supplier that suits you. Maybe you would say that at least factories are not so easy to sweep away, but do you know how many factories close down in China every year? How many factories can hardly survive with the support of foreign trade companies? Powerful factories may not be suitable for you. Small foreign trade companies may be more helpful to your business. All should be considered from your actual situation. As for how to choose suppliers, you can refer to our previous article: https://www.topfairingkit.com/teach-you-how-to-hunt-for-a-good-motorcycle-fairing-supplier-in-China/ , which has a very detailed explanation.

In addition, many public opinions in western countries have overemphasized the number and terrible degree of China’s trade fraudsters. To this day, if you still retain such ignorant and backward ideas, then you really need to read this article carefully.

Do you know how much it costs to cheat an order on you? First the swindler has to have a professional website, and then he has to be proficient in Google to find you. He also need to investigate your company’s background through a variety of scientific research methods. The average response rate of development letters is 1/300, while the turnover rate is only 1/10. That is to say, the swindler has to send 3,000 development letters then there is a only one customer possibility place order. Accurate research plus background survey takes at least 1 hour for one potential customer. It means the swindler takes at least 3,000 hours (8 hours per day, or 375 days) to get a customer to place an order.

And those promotion methods that attract your inquiries through advertisements will cost more.

Most of the people with such qualifications are highly educated and highly intelligent. In China, even a low-educated person can earn $1000 – $1500 a month if work 10 hours per day, while highly educated people earn more. My conclusion is: in fact, there are not as many fraudsters in China as you think. Large orders of large companies often go through strict inspection procedures, and the way of settlement is extremely harsh, cheaters can not deceive you. If you place only a small order, the cheater may lose money to fool you.

So, don’t always think that the Chinese supplier who talks with you is a cheater. The pit you will encounter is not to deal with a cheater, but the problems caused by the limitations of supplier technology, production capacity and management ability. And these problems are common in factories that you think are reliable. So instead of trying to bypass the middleman, it’s better to take the time to find a reliable supplier to avoid falling into the trap.

So how to judge whether the supplier is reliable? There are 3 ways to do it:

1) Is the company a legitimate enterprise with good reputation, rather than a company on the verge of bankruptcy?

Some articles teach how to judge the reliability of suppliers through fixed-line phones or platforms like Alibaba, which is totally out of line with China’s current reality. With the development of mobile communication and the high coverage of WiFi, there is almost no fixed telephone in China, either at home or at office. At present, all mobile phone numbers in China must be registered with ID card, so it’s as reliable as fixed phones. While platform like Alibaba is gradually declining and is no longer the mainstream. Many large companies prefer to build websites and then promote it through Google.

According to the actual situation in China, you can judge the reputation of suppliers through the following two ways:

• Open Google or Bing and search “[company name] + scam,” “[company name] + dishonest,” and a few variations. Other distributors and retailers who had a bad experience with China wholesale suppliers often try to leave a trace about it on the web.
• Search through this database of the Chinese Supreme Court. Type in the Chinese name of your supplier and see if you find it there. You will be able to find out if they have been given a sentence and if they failed to pay damages. Unfortunately, this site is available only in Chinese. However, a Chinese contact or your Chinese sourcing agent should be able to help you with this translation step.

2) Does the supplier have the ability to produce the products you need?

Whether suppliers are able to produce the products you buy, we need to examine their production capacity and technology. The most basic channel is to study their website. You should examine the following aspects of suppliers through websites:

• Equipment (production equipment, testing equipment, experimental research and development equipment)
• Technology (certificates, patents and R&D projects, etc.)
• Management (Departments staffing, work flow, workshop and warehouse management, etc.)
• Policy (Return, Damage, Delay of Delivery)

A company must have complete equipment, advanced production technology and management level, in order to make the products you need very well. Besides, with a perfect after-sales policy can the transaction proceed smoothly. This identification method is most useful for high-tech or electronic products. If you need to further verify the actual factory situation, you can also entrust an agent or a professional third-party factory inspection agency.

3) Is the supplier professional enough?

To judge the professional level of suppliers, two ways:

• Is the production process professional?
• Is the working process professional?

Buyers encounter a variety of problems, such as commodity is not what you ordered, delay in delivery. All these caused by insufficient specialization of suppliers. A professional company can help you avoid many problems and work with them without worries.

Professional factory can foresee production problems before production, and solve unexpected problems in production in time. This can effectively prevent customers from being forced to accept the second-class solutions that the goods are not on the right board.

As for salesmen, they should have a set of standard workflow to carry out standardized operations. Order progress to each link should be planned and monitored in detail to ensure that each link will not be delayed.

Risk is unavoidable for all business man. Especially in the E-commerce mode, the import and export business has increased risks because of the distance. In dealing with Chinese businesses, you need to learn how to control risks.

1)  To control risks, first of all, you need to know what risks you will encounter.

* Safety of fund

* Bad quality  or Commodity is not what you ordered

* Delay delivered time

2) What should you do in the face of these risks?

• Choose a safe payment method

TT, Western Union and MoneyGram are the common payment methods in China, which are the most guaranteed for Chinese suppliers. But if the supplier stand on the buyer’s side they will be willing to accept PayPal and alipay, which are supervised by a third party. For purchasers, paypal, Alipay and credit cards, L/C are reliable ways of paying, try to get suppliers to adopt them. When making wire transfers to new suppliers, it’s better to remit them to public accounts rather than private accounts. Besides, consider paying the balance when you see reliable production samples. Payment of the balance should be considered in terms of PayPal or Alipay. These payment methods can greatly reduce the risk, although the handling fee is high.

• Strict control of product quality

There are two ways:

* Get a sample

Whether you’re buying motorcycle fairing in China or any other product, ask for a sample item – even if you have to pay for it. When you have a sample in your hands, you can check the quality to ensure the product is exactly what you are looking for.

Samples are divided into pre-production samples, production samples and sealed sample. Pre-production samples alone are not enough to ensure that the product is the same as what you want. At the same time, confirm the production sample to further verify whether the product is in accordance with your requirements. If you think this process is perfect, I can tell you that we can do it more safely. That is to ask the supplier for a sealed sample after the production is completed. In this way, the samples of each process are strictly inspected to ensure that there is no mistake.

* Visit the company or factory in person

This is the best way to verify your suppliers – you won’t know much about an organization unless you visit it. I’m not telling you to fly to China before you make a $5 purchase. But if you’re going to be spending tens of thousands of dollars with a business, it’s a good idea to go check things out. Why?

Because you get to see how their production line runs, including how they treat their employees, how efficient their processes are, and how many units they could produce if needed.

Factory audits are the right tool to verify a supplier’s claims about their production capability. Most quality control firms and some sourcing agents can audit a factory based on a checklist that corresponds to your needs. Prices range from 300 to 900 USD for a day of work in the main production areas.

• Control delivery time

Delivery on time is very important. If delivery is delayed, you will face huge compensation or overstock of goods, resulting in huge losses. To know how to control the delivery time, first of all, you need to understand the reasons for the delay in delivery. There are 4 reasons:

* Accept too many orders and exceed production capacity

* Fracture of capital chain leads to inadequate material supply.

* Outsourcing of orders

* Production technology and workflow are not professional

Now that we know the reasons for the delay in delivery, let’s teach you how to control the delivery date.

* Consult workshop workers whether they often work overtime and observe worker’s mental state. If there is no chance to inspect the factory, there is an effective way: ask production capacity with the factory, and then through customs data to verify. If the supplier exports much more than their capacity, they are overworking or outsourcing the order. So this supplier is difficult to guarantee the delivery date.

If you do not know how to query customs data, please contact us: lydia@topfairingkit.com. We will provide you with the complete data you need free of charge.

* Investigate the capital strength of factories

The insufficient financial of the factory will lead to insufficient supply of raw materials. If the fund is limited, the raw materials for your order can only be purchased with payment of the next order. In this case, your order will be constrained by the progress of other orders.

So before placing an order, we should learn to inspect the capital strength of the factory. It can be seen by 4 ways:

a) How about the investment of large advanced equipment

b) Is there a R&D department and what is the R&D investment?

c) Is there sufficient stock?

d) How are employees treated?

* Strictly prevent factories from outsourcing orders.

Once an order is outsourced, it will lose control from product quality to delivery time, which is very harmful to the purchaser. Outsourcing is usually caused by two situations:

a) Factory over production, must outsource orders to complete.

b) Insufficient funds, no related equipment and R&D capabilities.

The way to deal with this situation refers to the above chapter“investigate the capital strength of factories”: learn to inspect whether factories are overloaded and their financial strength.

* Select a professional supplier

An unprofessional supplier, from the production department to the sales department, may make all kinds of low-level mistakes.

For example, the production department makes mistakes in the production process, lead to products need to be re-produced. The sales department fails to control the time when applying for export documents, or the containers were not booked in advance. And even makes mistakes in customs declaration documents, which lead to the backlog of your goods in the factory warehouse or dock. About how to judge if the supplier is professional, please refer to the above section ” Is the supplier professional enough “.

Cultural differences are inevitable in international trading. But cultural differences must not become misunderstandings. Only when these differences are properly handled can your business go smoothly. General differences in the following 3 aspects:

1) Language differences

It isn’t easy to talk with someone who barely understands your language. Many suppliers do speak English to varying degrees of success.

But it is possible. Here are some tips:

• Use very plain, clear language when reaching out to them. When sending an email or long message, ask as few questions as possible. Make a very clear separation between questions.

Here’s an example of an email:

Dear [name],

My name is xx. I am the product manager of XYZ company.

I am interested in your XYZ fancy widget. I just have a few questions:

* How much would it cost to order 40 XYZ fancy widget?

* Do you have a minimum order quantity?

* How many could you produce in one week?

Thanks!

Notice how I keep it simple, straightforward, and professional.

• Use instant messenger when possible. The most popular messenger in China is wechat. Having an instant messenger gives you a direct point of contact should you need a fast response. Some Chinese salesmen do not follow up email after work, but they will definitely send Wechat.

• At the end of the conversation, recap everything you discussed. Don’t assume they understood everything you discussed. Even if you were clear and asked simple questions, repeat your expectations and have them agree to everything again.

2) Chinese Business Etiquette difference

If you’re thinking of doing business in China, then it’s important that you know what Chinese business etiquette is like. By understanding how Chinese business culture differs from your own, you can gain the trust of the Chinese, avoid offending them and grow your business to new heights. There are quite a few differences in Chinese business culture that should be touched on in detail.

In the spirit of the Chinese’s emphasis on letting professional and personal lives overlap, the way they entertain their business associates is also different from the way the western countries do it. Take America as sample, you might find it rather unethical to wine and dine your clients outside of the business setting. You should keep everything strictly professional and never meddle in their personal lives. That is the essence of the maxim that you should never mix business with pleasure, after all. In China, the situation is very different. Chinese business people expect to wine and dine their business associates. In fact, in China, such entertainment is a goal unto itself.

Chinese people like to talk about business at the dinner table because drinking make them excited. This is a good opportunity for the implicit Chinese to completely open themselves up and show their final cards. To participate in business dinner in China, you must pay attention to the following points:

* You must stay awake always. Your supplier will probably come to talk about the terms of cooperation when you are excited to drink and relax your vigilance.

* When drinking, all the supplier’s promises can not be believed. We must take care to confirm all order requirements and details with documents.

* Chinese bosses like to force women who are salesmen to drink with customers. And you as a buyer, have the right to stop this behavior. You’d better learn to protect them from the trouble. When I was young, I had suffered from such bad habits but luckily I met many gentle clients and escaped.

3) Business Style Differences

• Communication Styles

Americans are very direct in their communication styles. They tend to be blunt, persuasive, and highly aggressive when they are pursuing a business deal. They want to have the upper hand in every negotiation. This is a part of American work culture and it works well here. It doesn’t work as well in Chinese work culture. In fact, if you’re too direct with Chinese businessmen, you will likely cause them to shut down and withdraw from negotiations altogether.

The Chinese prefer to be polite and courteous, showing deference to their business contacts and respecting them. They choose the indirect path to negotiations. If you show them this respect and politeness, they will match it and you will find it easier to negotiate your way to a middle ground where everyone is satisfied.

• Different definitions of business partners

For western people, business is business, while for Chinese people, business is friendship. The Chinese believe that in doing business, we must first become friends. They think that caring for you in life, having a common hobby can promote your feelings, which is conducive to business. In America, you can do business with someone, even if you would never consider being friends with them outside of the business setting. In China, it is inconceivable to do business with someone you don’t like in the first place.

The Chinese will ask you highly personal questions; questions that would be frowned upon in the American business setting and considered irrelevant to the deal. They will ask you about your family, your personal life, and so on. This is because the Chinese let their professional and personal lives overlap. This is a central aspect of Chinese business customs. They want to consider you a friend and not just a business associate. They, therefore, need to build their trust in you or they won’t be able to do business with you.

• Different ways of dealing with different opinion.

The Americans hardly ever back down from an argument. They aren’t afraid of disagreeing and will readily point out things they don’t like about the other person. A Chinese professional will rarely do this. They will do anything to maintain courtesy and politeness in their dealings, even if it means lying to your face just to avoid disagreeing with you. Sometimes their ‘yes’ might actually mean ‘no’ because they prefer to offer white lies to save face and prevent conflict.