Greeting from China.
I’m Mike Bellamy from the CSIC and I’m back with a review of the headlines in the Chinese papers which are relevant for foreign buyers like us.
Chinese exporters seek new markets for growth
Headlines read “mainland China manufacturers look to developing countries for orders as US and EU falter”.
Can you blame them? The US government is on the verge of default as I write this article. That doesn’t give the impression that Westerners are serious about paying debts. If I were a Chinese supplier and a new buyer from the USA was asking for credit on an order, I’d be nervous too.
Keep in mind that many Chinese suppliers, being heavily dependent on EU and N. American order, were burnt by the slowdown of the global financial crisis.
But there are other reasons why Chinese factories are looking new places for orders.
How many fortune 500 companies are there in the USA, I don’t know, maybe 500 by my estimate (that’s my attempt at humor). And in the past 15 years, if there was a China sourcing play to be made by the fortune 500 company, the move was done long ago. All of the big American companies and most of the medium sized companies have found their suppliers in China and have settled into a stable relationship. But the big and medium sized companies in developing countries in places like S. America, Latin America and former Soviet states are just now getting around to jumping on the China sourcing bandwagon.
Granted Mexico’s fortune 500 don’t have the same spend as US fortune 500, but a big Mexican buyer purchases more than a small US buyer. Sellers love big stable orders.
To give you some proof of the change, for each of the past 10 years, I have taken informal survey of the buyers that walk past our booth at the China sourcing fairs in Hong Kong held by Global Sources.com. These shows are an excellent slice of the global buying community.
10 years ago, if you showed me a pie chart of show attendees, I bet 70% of the buyers were from Developed Western Nations (N. America, Europe, Aus/NZ). These days I bring Spanish and Russian speaking co-workers with me to handle the growing number of buyers from those areas of the world. I bet the number of attendees from Developed Western Nations is under 40%. That doesn’t mean orders are slowing down for the sellers, it just means the factories are adapting to the new buyers.
What does this mean if you are a small or medium sized buyer from the USA for example?
Well in the past, before the global financial crisis, you simply had to show up to a trade show or meet a supplier online, flash your Western face and the supplier would assume you were a serious buyer. You may even have had a decent chance to get preferential payment terms and pricing because the suppliers really wanted to tap into the massive N. American market.
Those days are gone. You can’t rely just on your passport or skin color to open doors. These days, if you are a small to medium sized US buyer, you have to present a convincing case to the suppliers why they should do business with you.