When someone asks me what should I learn first about sourcing from China, I always say you should get to know China’s industrial clusters, one of the typical advantages of manufacturing in China.
WHAT IS INDUSTRIAL CLUSTERS?
Industrial clustering is the phenomenon where firms from the same industry gather together in close proximity. Here, the clusters we are talking about are not official industrial zones that have tax incentives but industrial clusters. They have certain product categories they produce in one geographic location that provides specific resources. Another requirement for the clusters is a suitable labor pool. Additionally, most of the clusters are located near large shipping ports, and that makes exporting products more efficient. Here’s a manufacturing distribution map of China for your better understanding.
As you can see, most Chinese manufacturing are located in Zhejiang , Jiangsu , Guangdong , and Shandong provinces, these 4 provinces account for 60% of the top 100 clusters in 2010. Take some popular exporting niche as examples, electronic industry are mainly in Shenzhen with a percentage of 33. Textile industry is mainly in Zhejiang with 18% and Jiangsu with 20%. Motor and bicycle industry is mainly in Taizhou city in Zhejiang province with a percentage as high as 40.
WHY DO YOU NEED TO KNOW ABOUT INDUSTRIAL CLUSTERS IN CHINA?
“YOU NEED TO ALWAYS STAY ON TOP OF YOUR GAME!” To know about Chinese industrial clusters is not just about knowing their distribution, but to dig deeper into it and understand your average product cost structure through raw material prices , wage of the region your product is made and even government incentives. So you can be in a good position for your price negotiation and other strategic moves. Further on, choose wisely a right supplier in its related industrial cluster. As the clusters in China have expertise and advantages like access to raw materials, access to component parts, cheap and specialized labor, convenient logistics and most of all government incentives. These give them more competitive price and promising quality comparing to those manufacturing outside the clusters. What’s more, there’s also another trivial advantage of having a supplier in a set-up cluster. There’s one thing that’s very important in Chinese culture that “GUAN XI”,(meaning personalized relationship network) is how you pull things done. Those factories that are located nearby will help each other out when necessary. For example, they are more likely to share molds and other equipment. And even when some accidents happen during production, there’s a big chance that they will share resources, workers or materials, so that your order won’t be delayed too much or canceled.
Nevertheless, it might be difficult to remember all the industrial clusters in China. But you should always know the important of it when you sourcing from China. An easy way to go may be hiring a sourcing agent to ease your burden and give you the best sourcing suggestions.