It has not been long before China was seen as a nation specializing in low cost replicas with absolutely no focus on quality and value. China however had no intention of remaining just a low-cost source of third class imitated products. With steps taken by their Government like revolutionizing their educational system and giving benefits to the companies that bring technology to the country, China has successfully managed to break the notion. According to PRC General Administration of Customs, the top exports of china in the year 2007 were electrical machinery & equipment and power generation equipment respectively. That’s a significant shift from agriculture sector to industrial. China is now world’s largest exporter of technology goods. Even the country like Japan is among the top 5 countries, importing from China.

Although, importing from China with such positives may look like a source of easy money, it has its fair share of negatives. So before you embark upon the idea of starting imports from china with dreams of huge profits in your mind, you must not overlook these problems which might occur once you get into this trade.

1. Finding Suppliers:

While finding a supplier from China seems like a walk in the park (there are so many on internet and yellow-pages), it isn’t that easy. Reason, you cannot just trust any supplier which comes your way while searching on the internet. Check for credibility; find some well known company rather then just choosing the one with lowest price quotes.

2. Payment Issues:

Most important thing when striking out a deal with some Chinese exporter is to finalize the payment method with him. Issues like payment method, currency in which payment will be made, how much will you pay in advance? Should be discussed and settled as soon as possible, to avoid complications in future.

3. Communication:

Another hurdle which has been there for long is communication problem. Although more and more Chinese now seems interested in learning English to expand their opportunities, it will take some time before they start getting familiar with English language norms. Till then you have to rely on your communication skills and ability to convey your message clearly. Know the terms used in this part of the world. When making an order, be very clear in your product specifications. Re-check by inquiring, what they understand of your instructions. Clearly state what should be produced and how it should be produced. Give crystal clear instructions on what material should be used, or you will end up having “lead painted toys”.

4. Quality Control Problems:

Very recently issues like kid’s toys having lead paint, or livestock and pet food having chemicals, injurious to animal’s health have raise eyebrows over quality of China’s exports. Problem lies partially at Chinese manufacturer’s side and partially in drastic efforts to cut cost to its minimum. While your prime reason for importing from China is “low-cost”, make sure you are getting products which don’t fall below standards of your market. Arrange for some agent or third party in China which will ensure quality check on your part before your order is shipped to you.

The “Chinese economic miracle” seems to have captured the whole world’s attention, especially when it comes to production, manufacturing, sourcing, FDI inflow to China etc’. But do we know about the biggest sector in the Chinese labour market – the agricultural sector?

The PRC inherited a ruined country, exhausted from both man made disasters such as warlords, civil wars, occupation, and natural disasters, droughts, famine, and floods.

During the Mao era, the Chinese government carried out a wide ranging land reform in the rural areas. Farmers with little or no land were given land of their own, significantly arousing their enthusiasm for production. Overall in Mao’s period, China’s agriculture developed slowly, with some golden times such as 1953-57 when the yearly gross output increased by 4.5% on average.

Under Mao, the conceptual role of agriculture was imperative. The Chinese farmer was basically the equivalent to the Soviet blue collar proletarian, thus the importance of the farmers in the class struggle was fundamental.

After 1978 and under the reforms, China introduced the household contract responsibility system, linking remuneration to output, and started to dismantle the people’s commune system, eliminating the links between organizations of state power and economic organizations. Contracting land out to farmers altered the distribution form of land and mobilized the farmers’ enthusiasm for production. As a result, for six years following 1978, agricultural output grew more than twice as fast as the average growth rate over the previous twenty five years.

The reforms made the market play a basic role in adjusting supply and demand situation for agricultural products and allocating resources, and aroused the farmers’ creativeness and enthusiasm for production.

On the whole, the reformist thrust of China’s economic policy since 1978 has benefited agriculture, as it has benefited the economy in general. Nevertheless, after 30 years of reforms, the sector is still behind most of the other sectors in the Chinese economy.

The economic and political role of agriculture in contemporary China -

1. Food security. In an extremely large and populated country like China, the concept of food security is fundamentally important. The task of feeding its people has been perhaps the first priority of its rulers throughout history.

2. Political and social stability. The farmers of China are known to have a “rebellious spirit”, which is well documented in the history books. When famine, war, or other extreme conditions took place, the farmers of China, whom use to be the majority of the population, and remain to be the largest group of China’s people, chose to strike. Thus, there is a consensus that there is no stability without the farmers / agriculture, and in order to avoid “da luan” – big chaos, the farmers must be kept quiet and content. At present still, the farmers of China are the largest, yet under-represented group, which holds the keys to stability in China.

3. Employment tool. The concept of agriculture as an employment tool in China is a bit of a paradox. On the one hand there is a massive scale of labour surplus in the agricultural sector, resulting in underemployment or even unemployment. On the other hand, agriculture remains to be the biggest sector responsible for the employing feeding, and consequently keeping social and political order of around 60% of China’s population.

4. GDP share. The reforms in the early 1980s initially increased the relatively share of the agricultural sector. The share of agricultural output in the total GDP rose from 30% in 1980 to 33% in 1983. Since then, however, the share of agriculture in the total GDP has fallen fairly steadily, and by 2003 it was only 14%. These figures indicate a relatively small share of the agricultural sector, nevertheless a noteworthy one in the overall performance of the Chinese economy.

What are the main obstacles to the agricultural sector in China than?

1. Natural resources and disasters. At the beginning of the 21st century, China has still to face and deal with a number of severe ecological / environmental problems, some are the consequences of human mistakes, and some are simply a result of “mother nature’s” course. The main problems are water supply, i.e. shortage, wastage and quality. In the agricultural context, irrigation is likely to be the most important factor.

2. Education. Chinese policy documents state that national modernization depends on accelerating quantity-quality transition in the countryside, because a large “low quality” rural populace hinders progression from tradition, poverty and agrarianism to modernity and prosperity.

3. Technology. The standard of a country’s agriculture is appraised, first and foremost, by the competence of its farmers. Poorly trained farmers are not capable of applying advanced methods and new technologies. Deng Xiaoping always stressed the prominent of science and technology in the development of agriculture. He said – “The development of agriculture depends first on policy, and second on science. There is no limit to developments in science and technology, nor to the role that they can play….in the end it may be that science will provide a solution to our agricultural problems”.

Accordingly, China is seeking technology transfer in the agricultural sector, formed by joint ventures with international collaborators.

4. Limited investment from government. Between the Second and Fifth five-year plan periods (1958-1962 and 1976-1980), agriculture’s share of capital construction and other relevant forms of investment made available by the state remained a little over 10%. In 1998 agriculture and irrigation accounted, respectively, for less thsn 2% and 3.5% of all state construction investment.

5. Limited inflow of FDI – foreign direct investment. Most sectors in China enjoy an enormous inflow of FDI, which particularly helped in 2 dimensions – technology transfer and capital availability. The lack of an outside funding, accompanied with a reduced local funding contributed to the deterioration of the agricultural sector.

In conclusion, the agricultural sector in China, unlike other sectors in the Chinese economy, is still rather under developed, and requires a substantial boost from both the local and the international community. It is my prediction than, that more and more foreign investors will discover its enormous potential and act accordingly.

After making your decision about which supplier to contract with, order your product samples but plan to evaluate them after you return home.

Sample Preparation

Sample preparation, depending which kind of products you want to import, can take considerable time. Contrary to what many people think, factories usually do not keep samples in their warehouse that can be sent right away. The more complicated a product is (for instance home appliances or consumer electronics products) the longer it will take and the more diligence needed from the factory to prepare the samples according to your specific requirements.

You have reached a turning point in your own quality control. The first step was your scrutiny of each supplier visited during the trip. You should have a good idea how each supplier will perform and how talented their management is.

Providing them with detailed information about your sample requirements could become the key to your success. Why is this so important?

When the Sample is Wrong

Imagine that you did not pay adequate attention to instructing the supplier about your sample requirements and they prepare the sample according their own factory standards. Timing however is important and you need the samples checked for compliance with your requirements in your home country. It needs to be right the first time.

If the first sample is incorrect, you could take a risk and place your order in hopes that the supplier will get it right the second time. It is not a good idea to take this risk because there cannot be a guarantee that the supplier will actually follow your new instructions.

It is best asking the supplier to manufacture new samples. Time starts to become an issue as you wait for new samples to be made and it will take 3-7 days delivery time to ship them to your home country. Add everything up and you have possibly lost a month. This could be crucial if your goal is to be among the first to promote the new products in your home market.

Never place any order with new suppliers before you receive acceptable samples with the proper quality and your QC people or an authorized lab has approved them. Anything else is a gamble and you do not want to begin production with that level of risk. Only after establishing a sound business relationship with your suppliers, can you be confident that factory will closely follow your instructions. It is important to set things right from the very beginning.

Have Samples Properly Packaged

When asking for samples, be sure to request they be packaged according to your specifications. This should be the same packaging the end consumer receives. At this point, they should workout the details to determine how many pieces fit into one 20′ or 40′ ocean-going container. Along with this, comes the details of how many fit into one export carton and if any inner packing needs to go into the export carton.

With this information, you can calculate the freight cost. It may be necessary to change the sales packaging size in order to fit more pieces into one container and save substantial freight charges. It makes a big difference if you can pack 1,400 coffeemakers in a 40′ container instead of only 1,200 pieces and it will certainly affect your selling price.

Samples are seldom free which is understandable because they are handmade and very labor intensive. Even if they are simple plastic products, the supplier has to follow your instructions and injection mold them in a certain color which is very time consuming because the plastic injection machines are usually running at full capacity and the injection is limited to one color at a time. If you ask for several different color samples, they can only make them when they have production in the requested color. Naturally, this increases the time it takes to receive the samples.

An alternative is painting the samples but the surface of a spray painted object looks different from an injected one and may mislead you into approving something that later proves to be less than perfect.

Order Plenty of Samples

Do not make the error of ordering a single sample per product/color because you need reference samples for several purposes. Common samples needs include:

Samples for your showroom Samples for lab testing Samples for photo shooting and gift box preparation Samples for your inspection company Samples for your sales managers to show to customers

That is only the beginning of a long list and believe me, large buying offices like hypermarkets, department stores, and other large volume importers ask for even more samples because they are aware of the extensive need when introducing a new product.

The worst-case scenario is if you give the only color reference sample to a key customer and after they place an order with you, you cannot determine which specific color to instruct the factory to begin with. It is a good idea to always keep one or more samples per color locked up in a safe place to avoid embarrassing errors. Due to the limited storage space, suppliers may not keep their reference samples at all after completing production.

You now have the information to better understand why suppliers are reluctant to provide free samples to new customers. In many cases, you can convince the supplier to refund the sample costs after you reach a certain order volume. It is good business to negotiate this in the beginning.

Besides the sample charges, you will be asked to pay the freight charges for the sample delivery. This can get expensive because samples are usually sent by air courier in order to make up lost time and stay on schedule. Suppliers do not want to pay these charges and it is often difficult to convince them to do so. If they do so, it is usually only after a successful business relationship has been established.

If you need the samples urgently, and that is usually the case, you are better advised to look for a compromise, otherwise you may lose the competitive timing edge in your home market.

I assume that you and/or your staff did a very good job by giving the full information regarding the sample preparation to you factory and that the factory also closely followed your requirements. Therefore, it is the right time to provide at least one sample together with all your specifications and requirements to the inspection company of your choice.

Since the inspection company will act on your behalf as your savior in case of a non-compliant production, it is very obvious that you must feed them all the information you have to let them do the job. This is even more important when your product is more complex like home appliances and consumer electronic products.

Please consider that they can only follow the general inspection procedures and your specific requirements. If you do not inform the inspection agent about certain details, they will not take the necessary action and can’t be blamed.

Beginning the Inspection Process

What happens after they receive your sample(s) and your clear detailed instructions?

The inspection company prepares a checklist which you have to verify and at this stage you can still make corrections.

The inspection company will also take your sample(s) as reference sample(s) for their inspector and you will again realize how important it was to give clear instructions to the factory for their sample preparation process.

If you insist the inspection be conducted without a sample, do not be surprised later on, if the inspector’s finding do not match your expectations. The factory will always try to confuse the inspector because they have only one thing in mind, which is “ship out and receive your money as soon as possible”.

I would like to point out the extent importers have changed the inspection requirements in the last few years.

Home appliances make a good example. Some years ago, toasters were operated without bread during the inspection. Nobody cared to test whether bread was toasted consistently from top to bottom and side to side. That has completely changed because end consumers have also become more demanding and don’t accept slices of toast bread where the top completely burned and the bottom is still white.

Some years ago coffee makers were operated without ground coffee and it was sufficient when the boiled water dripped into the glass jar proving the coffee maker was functioning properly. Today inspections are conducted with ground coffee along with paper or permanent filters in order to simulate a normal operation. Only then, can the inspector discover whether the coffee will run fast enough through the filter and coffee without overflowing.

You should get the point about how much effort is necessary to inspect products to make sure that they meet the consumer’s expectations for day-to-day use. Therefore, you will understand that only an experienced inspection company can cope with ever-changing requirements and directives. It makes no sense to employ someone without this experience but who may charge less.

After you have selected your inspection company and they have received your sample(s) you must provide them with a copy of your P/O (Purchase Order). It is advisable to blank out the Fob prices because inspectors could be tempted to pass such information to competitors.

In general, you should know there are not many secrets in China. Inspectors frequently run into counterparts from other companies when performing their job at several different factories. It may well be that they have lunch together (usually provided by the factory) and talk shop. And talk they will. Important information spreads faster then you can imagine.

Fob prices are not necessarily something you want discussed among inspectors. Don’t give them a chance by showing it on your P/O copies.

More About the Inspection Process

The inspection company will include vital information from your P/O in the checklist along with other specifications received from you. Usually the checklist includes various digital photos of specific details the inspector needs to be familiar with. In general, the more detailed information you provide to the inspection company, including digital photos, the better the inspector can perform his duties.

After everything is clear, you will book your inspection(s) with your inspection company. This is usually done by filling out an online application form.

Booking the inspection must be arranged at least 5-7 working days prior to the estimated date of production completion or at least the date when 80% of your products will have been completed. It is very important to know, that the inspector will refuse to perform an inspection if the total completed production quantity is less than 80% and if the products have not been packed in their sales packaging and export cartons. The factory will be charged for the inspector’s expense for the failed inspection.

After having received your inspection booking, the inspection company contacts the factory and verifies the inspection date because they have to coordinate the manpower and will try to allocate their inspectors to several factory locations in the same area.

After returning from your business trip to China, you will be very busy evaluating the huge amount of information collected during the trip.

Monitoring Sample Preparation Progress

As you have learned already, timing is important. Therefore, your company must track progress of the samples to make sure they ship on time. According to my experience, most samples will be delayed in one way or another. There are several reasons for it but one of the main reasons is that nobody really likes to handle samples because it is not productive and therefore this job is often passed to someone at the lower end of the factory hierarchy.

The factory managers may have promised you to deliver the samples at a certain date but they are not making them and have to wait until their sample production staff completes them. You are well advised to monitor progress closely otherwise, you may not be able to recover from the delay. The one who cries the loudest will be heard first.

Without approved samples, you cannot place orders, confirm orders with customers, or begin a sales promotion. In other words, you will lose turnover and the chance to sell products at maximum profit margin. Unfortunately, this step in the product creation chain is frequently underestimated. Now that you are aware of it, get your sample act together.

Beginning the Evaluation

Since you still have not made final decision about placing your orders, the way your samples are handled by the factory should give you another indication how your production orders would be executed later.

Only after all the samples arrive can you start the evaluation. Check whether the samples meet every specific requirement, e.g. are the colors correct, is the size as requested, and did you receive the correct number of products and samples. Depending how complex the products being imported are, you may elect having the samples evaluated by your own QC department or a special authorized lab.

The numerous recent cases of lead tainted toys gives you an idea of what you are in for if you neglect your responsibility for thorough sample evaluation. Household items are easier to check than more sophisticated electrical home appliances or consumer electronics products. Always bear in mind that the submitted samples represent the standard that will be used during mass production.

After the Evaluation

With the sample evaluations in hand, you are ready to decide which factory gets your orders. Evaluating each sample by exactly the same criteria makes this decision easier than if the criteria is changed during the evaluation. If you must change the criteria during mid evaluation, be sure to go back and reevaluate earlier samples.

At this stage, you have several key data points to make your decisions easier:

Price quote Sample performance Factory performance Your impression of factory management during your visit Result from your factory evaluation tour

If a price discrepancy remains between your target prices and the quoted prices it will be relatively easy to convince the selected factories to improve their quote. This should become your standard practice because some factories do not quote the very best price at the first meeting. After visiting China, it is probably fine calling the factory manager to negotiate a better price by phone because it is faster and you have met him in person. Given a good reason why you need a better price, he will seldom refuse to negotiate.

Remember to be fair and inform the other factories that you will not be placing any orders with them. Keep in mind that you may decide to place a future order with them and want to be on good business terms.

Factory performance can change very quickly for the better or for the worse. A change of management can sometimes do wonders. Never take for granted that a factory will maintain the same level of performance as you experienced during a previous visit. That means you must not say: “Been there, have seen it all” and take no further action.

Doing business with China is a constant evaluation process and only the one that understands the game stays on top.

After the inspection is performed, you will receive an inspection report by e-mail. Usually no more than one working day after the inspection date.

This inspection report is nearly identical with the inspector’s checklist along with his findings and additional photos taken by the inspector as evidence and for your decision making. The inspection company is employed by you as a third party. They do not have decision-making authority to release of the inspected goods for shipment. They have an advisory function and you must make the decision.

Most inspection companies have expended effort simplifying inspection reports to make them easier to understand. Importers are seldom technically trained or engineers. Importers need clear and concise information. Therefore, most inspection reports show only two conclusions:

a) Rejected
b) Passed

That is easy to understand and usually you do not need to take further action when the result is “Passed”. I can however tell you, that unfortunately you will have more “Rejected” results than “Passed”.

Rejected Goods

Be very careful about making a decision releasing rejected goods for shipment. Once the shipment is on its way, there is not much what you can do to protect your own interests. Manufacturers will always try to convince you that the cause for the rejection was a minor one and you should not worry. The factory may also offer you a compensation payment (minor price reduction) to convince you. It is up to you to accept it but please be aware that the labor cost in your home country is much higher than in China and if you are faced with a claim from your customers, the small compensation will not even cover your own cost.

Since rejected inspections do occur, you have to take them into consideration when planning the shipment date and of course when planning and confirming promotions to your customers at home. Anything else would be asking for trouble. The problem always becomes serious if you have placed yourself under too much pressure, with a too tight of shipment schedule, leaving no room for any unexpected events.

The normal procedure is for the factory to rework the rejected goods within a couple of days and a re-inspection will be called for. The re-inspection is always on the manufacturer’s account because they created the problem by lack of performance.

There could be many disputes about the reasons for the rejection if you did not provide clear information about your requested specifications, standards, and specific requirements. Be aware that you immediately change the rules when you release goods with a lower than requested quality standard. The factory will take note, that an on-time delivery is more important to you than the quality and act accordingly during the next production run. A strict position towards quality issues is your best protection against inferior products. A properly planned shipment schedule will give the factory enough time for the rework and you more negotiating power.

Other Advantages Working With an Inspection Company

When working with an inspection company you gain one very important advantage. In you P/O (Proforma Invoice) and your L/C you can specify that a shipment will be only released after you have received an Inspection Certificate from your inspection company. The Inspection Certificate is of course only issued when the order has a “Passed” result, which could mean after a successful re-work.

The good thing is that the factory has to comply because if they ship goods without having received the Inspection Certificate (this happens sometimes) they will not be paid from your bank if you included such clause in your L/C. You would be then in a much stronger negotiation position because it would be up to you when the factory would receive their payment.

Many pharmaceutical companies in China are hoping to pass major international certifications, such as certifications from the WHO, EU and Australia. “It is likely that 20 pharmaceutical companies can obtain international certifications this year,” said Mr Yu Mingde, a vice-director of China Pharmaceutical Enterprises Management Association.

Temptation from the outside

2007 was another record year for China’s western medicine export value, up 56% to US$784 million. However, most medicines that went to big markets such as Japan, Korea and Australia were products from foreign companies in China, mainly in the form of export processing trades. Products made by domestic Chinese companies were exported to low end markets such as Nigeria and Pakistan. As Chinese pharmaceutical companies are still weak at proprietary R&D, most of their products are generic copycat drugs.

Yu revealed that “the big three markets of EU, US and Japan have different market systems to ours. For the same generic drug, profits from selling to the big three markets are 5-8 times of those in China.” A more pressing issue is that almost half pharmaceutical companies in China currently have idle capacities.

On one hand it is the high profit from international markets, on the other are the capacity surplus and vicious competition in the domestic market. It is not hard to see why the Chinese government has been emphasising medicine exports in its healthcare industry planning, and “going out” has also become a consensus in the Chinese pharmaceutical industry.

Access to the markets

The EU mandates that medicine access permits will only be granted to companies inside the EU jurisdiction. So if foreign companies want to sell medicines to the EU market, they have to establish local branches or find local partners. FDA in the US also has similar requirements.

Yu suggested that for Chinese medicine products to enter EU and US markets, Chinese companies may try arrangements such as local mergers and acquisitions, registration of local offices or seeking local partners, and local partnerships would probably be the easiest. It is understood that those companies whose products have passed the EU certification, such as Hisun Pharmaceutical, Wuxi Kaifu Pharmaceutical and Shanghai Tianping Pharmaceutical, have all chosen the partnership path.

Yu, who has 30 years’ pharmaceutical management experience, pointed out that regulations, processes and even social cultures in foreign markets are “very different” from China. He suggested that for Chinese companies that are “testing water”, in light of the reality of few foreign distribution channels, they can temporarily choose the OEM (original equipment manufacturing) or commissioned processing paths. Only when they become more sophisticated in this area, they may then go for mergers and acquisitions, local entity registration and brand building.

Zhejiang Reachall Pharmaceutical’s fast-track FDA approval in the US was a good example of smart leverage. In early 2007, a big American pharmaceutical distribution company approached Reachall, requiring it to produce ointment products for the North American market. After a series of inspection, research and negotiation, a long term cooperation agreement was signed between the parties. In the same year, an existing Reachall ointment product successfully obtained the FDA certification in US, and the first batch worth US$300,000 was shipped to the US in November.

Breaking the barriers

Since China’s entry into WTO in 2001, many European, American and Japanese pharmaceutical companies have been shifting their raw ingredient and intermediate product production processes to China. “Production outsourcing has taught Chinese companies a valuable lesson in terms of international practices, environmental awareness, quality control and patent protection, and this has greatly improved our competitiveness and international status.” Yu thought that behind the OEM orders and profits, medicine exports from China have to overcome the barriers of international standard integration and product quality breakthrough.

General Manager of Shenzhen Lijian Pharmaceutical, Mr Ouyang Qing, said that in terms of macro aspects, market access rules for medicines between the Chinese market and major overseas markets are similar. The differentiation lies in detailed administrative aspects, such as certification, risk assessment and variable products. Yu also stressed that apart from finished product certification, some overseas markets would require related certification of ingredients, in order to maintain the stability of product qualities.

As for how to find the sweet spots, there may be some examples to follow. According to Mr Ouyang, Shenzhen Lijian was previously in the business of exporting ingredient drugs, whose good quality had won a long term order for a German company. When Lijian decided to expand its valued-adding medicine production business, that German firm was at the same time thinking about shifting their OEM preparation production from France and Italy to lower-cost markets. “So our German partner had played a key role in Lijian’s winning of EU certification,” Mr Ouyang revealed.

And the key to Reachall’s quick FDA approval in US was the choice of products. Compound polymyxin B ointment is an OTC (over-the-counter) product in the US, and the FDA already had detailed requirements on the ointment’s quality, instruction and labelling. This ointment was popular in the US and had gained acceptance in terms of effectiveness and safety. On the other hand, Reachall was the first company in China to produce the generic version of the ointment, and the company had adopted FDA standards even when it was applying for certification in China. This no doubt helped its international entry.

To participate in global competition, the Chinese pharmaceutical industry has to make efforts in certification system integration, English communication skills, product selection and R&D. Company managers should also have long term planning, instead of being opportunistic.

“Don’t underestimate the demand for Chinese generic drugs from international markets, which have already shown great interests and tolerance to their Chinese counterparts,” Mr Ouyang suggested. Mr Yu also thought that there will be more and more Chinese pharmaceutical companies entering major overseas markets. But Yu reminded that there will be a new level of price and variety competition for winning multinational commissioned processing contracts in China. The biggest advantages for Chinese companies are their low costs and acceptable quality, but the profitability will gradually decline as more and more followers trying to take a piece of the cake.

Anyone follows the global economic trend closely could vividly recall the robustness and ecstasy on South East Asian’s 1990s economic boom. During that short interval, if we track the economic growth from 1980s to current, the countries, Malaysia, Thailand, Singapore, Taiwan, South Korea, Indonesia are believed to be main players in the world economy, as these countries were magnet of foreign investments from across the world, mostly technology, engineering and electrical. They were called “Asian Tigers”.

This pour in of foreign investments were mainly due to the protection given by the local governments to attract investments, low labor cost, and other local factors. They were combined with technology euphoria at that time, particularly fueled by digital technology. The belief was that every company should leverage on technology which could digitize information, because the demand and future are so unlimited. That was premised under the assumption that every piece of information, movie, news, and any other information can be digitized. So the scramble by world manufacturers to set up plants to be part of the production chain was deemed to be profitable. As Asian countries has the lowest cost of production, companies who wanted to remain competitive would throng here. This sets up the foundation of the linkages of industry in the host countries.

The presence of the foreign manufacturers coincide with the export orientation policy advocated by the host governments, as it was believed the foreigners could help to seed and upgrade the local players. Thus, many of the local companies were set up and be part of this production chain. And to further increase the competitiveness, government concessions were given out to the local companies, but with strong collaboration with the more capable foreign partners. Many of these concessions were farmed out to foreign firms, and local players who were blamed to be less capable were simply secondary producers, or merely low cost supporters to the flagship companies. Thus, subsequently created the worry of “technologyless industrialization” which the problem became very obvious and enhanced in the recent world economic downturn. As what investor Warren Buffet said, “when the water tide is receded, those without pants are caught revealed”.

Another worry faced by the local manufacturers now are the hedging of the foreign manufacturers. China, since 2003, has become the world magnet in parallel with India, as two most attractive low cost destination to the world economy. The set up of industrial estates in Dalian, Shenzen, Kuantong, Shanghai and others, were crowded with foreign investors, due to the accessibility to the mass market, low cost, and most importantly linkages. However, the instability and trade surplus due to the exchange rate Yuan Vs USD, caused concern; US might constrain trade with China. Low quality control, which caused the recent call backs of toys, pet foods and etc, also make foreigners distanced, or at best reluctant to put all investment in China. Through these reasons, many manufacturers are still remain in other Asian countries, or partly set up their plants in China but still maintain the technology and development or high end chain in South East Asia. The last reason is the main concern to the inventors and the flagship companies as the lack of intellectual property rights in China have caused much preservations.

So the question is now will the current trend of manufacturing growth sustainable? This becomes very worrying in the recent development; the slow down of demand from US and developed countries in Europe, the emergence of other competitive countries such as Russia, Brazil, Vietnam, and Cambodia. As these countries could offer low cost production, high quality labor, agglomeration benefits (the presence of big players such as Intel, Motorola and Samsung in these countries), the challenge faced by the Asian Tigers (or Kittens, as the robustness of growth is not that magnificent compare to decades ago) are tremendous.

From: The Serious Speculator

Twenty five years ago, I can remember discussing the markets with a very astute and successful investor. He possessed a wisdom that only comes from years of experience. I was telling him about a speculative company that I thought was the hottest thing ever and how everyone was getting involved and were going to be rich.

He listened patiently while I went through my pitch then calmly asked me, “During the gold rush, thousands flocked to the gold fields to strike it rich but, aside from a very few miners who got lucky, do you know who made a fortune yet avoided the limelight?” I thought about it and came up blank so he smiled and told me, “It was the guy that was selling picks and shovels.”

Using that analogy, Chang-On International (OTCBB: CAON) is the proverbial pick and shovel company in the midst of the construction gold rush in China. Construction is booming in China big time. US government statistics reveal that “Construction spending in China increased 165% in the last four years, according to the National Bureau of Statistics of China, and is still expanding at 25% annually.” Source: BuyUSA.gov. At the same time, the Chinese government is putting an emphasis on the greening of the construction industry, both in the quality of construction and construction methods.

A key component in construction projects are the tools used to manufacture components from pipes to concrete walls and water tanks. Most of these components share one thing in common. They all need a mold or “formwork” to be made. In China traditionally these molds have been made out of bamboo or some other wood or steel. The problem with these materials are that steel is too expensive and needed elsewhere and wood molds don’t last very long. Enter Chang-On International.

Chang-On International has developed its own proprietary technology which allows them to build these molds out of a special resin composed primarily out of recycled plastic and fly ash, a byproduct of burning coal. The result of this amazing development is a mold that is less expensive than its counterparts, lasts longer than wood, is lighter than steel and seals better making for a higher quality finished product. What’s more, being made entirely out of recycled materials, Chang-On’s products satisfy the Chinese Government’s mandate for green construction.

Led by an experienced management team headed by Guomin Li, 47, a pioneer in the field of manufacturing building materials from waste products, Mr Li has been the Chairman of Harbin Hongbo Environment Protection Material Ltd since 2004, now the operating subsidiary of Chang-On International. Over the last 4 years, Mr. Li and his staff of researchers have developed and perfected the proprietary technology that is the basis of their newly implemented marketing strategy.

Imagine, not just a usable product, but a superior one, one that capitalizes on the convergence of need, government mandate and demand, made from ground up soda bottles, an inexpensive and plentiful resource and fly ash, an abundant product that, until now, has offered little utility other than as a filler in concrete. Just as often its nothing more than a disposal problem for coal fired plants.

Focusing initially on Northeastern China, Chang-On already has orders and revenues flowing in and they have already begun to draw plans for expansion of their production facilities and for international expansion through organic growth or licensing.

Consider that China currently uses 43% of all the concrete consumed in the world. It’s a primary material for buliding construction and, that concrete needs a mold to harden in. The right product, the right time and in the right place. Add to that, the diligence and fierce commitment to accomplishment Chinese achievers are globally respected for along with an amazing frugality (less than $100,000 in salaries since 2004) and you have a winning combination that is worth more than a passing glance.

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