Manufacturing News around China You Need to Know

Manufacturing News around China You Need to Know

Aside from lean manufacturing processes you need to focus on, you also have to be aware with current events and trends to have a full circle in the industry you are in. Here are some notable events as of late within the industry you need to know of particularly here in China.


Light Manufacturing in a Tightening Labor Market

Manufacturing companies and factories in coastal areas will struggle to sustain their workforce as recent factory data shows a willingness to increase wages from 5% to 10% to retain existing workers and recruit new ones. Many factories will face higher labor costs which include annual bonuses and transport home. From a recent decision to reduce employee contributions to 2%, factories will pay less, but these will be in percentage terms not real ones as rising labor offsets this reduction. These pension payments are eroding margins as employers aim to keep low prices.

However, cities such as Shenzhen are increasing wages as high as 19% to attract more workers. Guangdong province will have a 92% retention rate post Chinese New Year which will result in a deficit of upwards of 800,000 workers. Other cities, such as Quanzhou are launching hukou programs to entice inland workers to stay. Under the program, migrant workers will be allowed to register their families as local residents, granting them local benefits.

In Zhejiang, factories are automating at increasingly fast rates to reduce dependence on low-skilled workers as custom manufacturing companies have failed to move up the value chain. Unlike Guangdong, factories surrounding Yiwu, Hangzhou and Wenzhou produce labor intensive goods with little brand value. Compared to factories in the Pearl River Delta, factories in Zhejiang will face less shortages.


Understanding the PMI (Purchasing Manger’s Index)

For China, the custom manufacturing purchasing managers index (PMI), sometimes have contradicting results from Caixin and the National Bureau of Statistics wherein Caixin suggests a below 50 mark while NBS shows an above 50 mark or vice versa. In case you did not know, 50.0 is seen as the breakeven point, with anything below showing a contraction, whereas anything above seeing growth.

Due to both of these indexes appearing to show two different trends the differences between them should be highlighted. The index produced by the National Bureau of Statistics is more accurate when it comes to tracking the larger state owned manufacturing companies, whereas Caixin’s better reflects the performance of smaller private manufacturing companies. Where heavy industrial manufacturing such as steel and coal are rather covered by the former and electronics manufacturing, garment manufacturing and plastics manufacturing are rather covered by the latter due to the ownership structure in these industries.

However, with knowing this information, it presents a confusing picture from the results. State owned enterprises should be thriving due to the government’s investment into maintaining growth. It should also be expected that private manufacturing companies would find it more difficult to produce growth, due to the competitiveness of the industry and disadvantage the firms have when compared to state owned enterprises.

Both indexes should not always be considered to be completely reliable. Partly due to the discrepancies mentioned, but also due to the reliability of the government. Since the Chinese government wants to make the country appear to be performing strongly, many believe there may be slight alterations when it comes to the statistics presented.

What is still slightly unclear though is why the private sector appeared to thrive and beat out analysts’ predictions. It appears to conflict the current environment where state enterprises should be thriving more. The answer may be due to the increase investment in infrastructure, enabling these manufacturing companies to expand at a faster rate.

The Future Based on PMI Results

Even when the PMI statistics shows disappointing results for the month or year. There should be pleasure found in private manufacturing companies seeing a rise in orders and level of output. Slowdowns seen by the government backed state enterprises is one that has been predicted for quite some time, so these results should by no means come as a shock, even though economists did not expect the results to occur. Undoubtedly, the difficulty in the traditional custom manufacturing sector is expected to continue, and the results are an early indication that the second half of this year will be difficult to achieve GDP growth.


What Happened to Low Quality Chinese Factories?

Many people around the world are cautious when they hear of products being manufactured in China. Some even suggested that the manufacturing quality is so low there is no point in even considering sourcing from this location, as the product will break soon enough. While there has been some truth to this train of thought in earlier years and local quality assurance specialist might still be necessary. In this present era, China’s reputation certainly precedes itself.

Over the last several years the country has come leaps and bounds. Currently the level of manufacturing design quality within China is relatively high. The main problem is usually as a result of manufacturing companies purely looking for the cheapest option. Many factories have very similar sets of manufacturing costs when it comes to producing your goods. Therefore, when you decide to force the price lower, quality of materials is one of the few options a factory may take.

However, low custom manufacturing quality is not always due to low prices. You should be aware by now that China has been moving away from lost cost manufacturing. The county has evolved into a more specialized manufacturing industry. This has resulted in an increased level of capabilities which should translate to higher quality goods. However, an increase in complexity may also means a higher chance of faults. Manufacturers will also find it easier to hide below par materials in specialized goods. Hidden away faults may take a longer time to surface. If you expect your product to last 10 years, finding out the build quality lasted 2 years takes too long.

Ensuring your Suppliers Manufacturing Quality is Sufficient

It cannot be stressed enough how important the constant and consistent monitoring of your suppliers manufacturing quality is. This may include inspecting every shipment once they arrive. Using 3rd party inspection companies who can carry out factory visits and only using suppliers who have adequate quality control and assurance procedures in place. The problems many companies encounter is committing to one supplier immediately after receiving a high quality product prototype. However, factories have been known to impress initially with the hopes of pulling a bait and switch on the following large order.

Although you would like to think your supplier values your business relationship, do not assume this means they will keep up the good work. The majority of suppliers run on razor thin margins, and if they believe they can get away with it, compromising on the manufacturing quality they provide could be an easy way to boost profits. It is advised to always be on high alert, otherwise you may notice a problem way too late to do anything about it.

The best way to receive the custom manufacturing quality you desire is to approach the process slowly. This should include conducting proper due diligence, as well as taking the time to receive legal advice. This, in turn should result in you drafting an enforceable contract. Both of these should save time in the event that things don’t quite go as planned.  Then you should be able to enforce your rights and enable your company to be in a position of control.

Manufacturing quality in China is a much debated topic and one that should not be ignored. In recent years the country has come a long way and is starting to move away from problems of the past. Unfortunately, there is still a distance to go. Hopefully we haven’t scared you off from looking to China to source your products, as the majority of firms do not come across any issues at all. Despite this, some companies do occasionally run into problems.

It is always recommended to conduct prior research before committing to any agreements. Remember, China has many advantages when it comes to sourcing products to sell online which usually results in advantages for your own manufacturing company. Although a few firms do receive lackluster lean manufacturing quality, if you take the right pre-emptive measures, you are unlikely to be at risk.


Safety Testing Regulation Standards on Industrial Chemicals

Today, the chemical trade has dramatically increased due to demands of the different chemicals. It is one of the largest and most diverse markets, with different corporations producing chemicals to consumers and other industries. Companies such as BASF, Dow Chemical, Sinopec, and many more are just one of the chemical traders in the business. But, this business requires extra precaution due to the potential risk posed by hazardous chemicals. The lack of adequate infrastructure, guidelines, and safety can make them vulnerable.

The OCED Guidelines is an international standard used for safety testing and assessment of chemicals from industrial chemicals to personal body care products. They are regularly updated with the help of experts of OECD members from all over the world. These Guidelines are divided to 5 sections.

  1. Section 1, would include the physical and chemical properties where different tests are conducted.
  • Determination of pH, acidity, and alkalinity
  • Density of liquids and solids
  • Viscosity of Liquids
  • Partition coefficient (slow-stirring method)
  • Vapor pressure
  • Hydrolysis as function of pH
  • HPLC method
  • Estimation of Adsorption coefficient
  • Adsorption – desorption using Batch equilibrium method
  1. Section 2, would include the effects on Biotic Systems and some the tests that are conducted
  • Potamopyrgus antipodarum Reproduction Test
  • Lymnaea stagnalis Reproduction Test
  • Enchytraeid Reproduction Test
  • Earthworm Reproduction Test (Eisenia fetida/Eisenia andrei)
  • Avian Acute Oral Toxicity Test
  • Predatory mite (Hypoaspis (Geolaelaps) aculeifer) reproduction test in soil
  • Determination of Developmental Toxicity to Dipteran Dung Flies(Scathophaga stercoraria L. (Scathophagidae), Musca autumnalis De Geer (Muscidae))
  • Collembolan Reproduction Test in Soil
  • Medaka Extended One Generation Reproduction Test (MEOGRT)
  • The Larval Amphibian Growth and Development Assay (LAGDA)
  • Predatory mite (Hypoaspis (Geolaelaps) aculeifer) reproduction test in soil
  1. Section 3, would include the degradation and Accumulation and some of the tests conducted
  • Ready Biodegradability – CO2 in sealed vessels (Headspace Test)
  • Bioaccumulation in Fish: Aqueous and Dietary Exposure
  • Bioaccumulation in Terrestrial Oligochaetes
  • Inherent Biodegradability: Modified MITI Test (II)
  • Simulation Tests to Assess the Biodegradability of Chemicals Discharged in Wastewater
  • Bioaccumulation in Sediment-dwelling Benthic Oligochaetes
  • Phototransformation of Chemicals in Water – Direct Photolysis
  • Estimation of Emissions from Preservative – Treated Wood to the Environment
  • Ready Biodegradability – CO2 in sealed vessels (Headspace Test)
  • Anaerobic Biodegradability of Organic Compounds in Digested Sludge: by Measurement of Gas Production
  1. Section 4, includes the Health effects and some of the tests conducted
  • Performance-Based Test Guideline for Stably Transfected Transactivation In Vitro Assays to Detect Estrogen Receptor Agonists and Antagonists
  • In Vitro Skin Sensitisation
  • Stably Transfected Human Androgen Receptor Transcriptional Activation Assay for Detection of Androgenic Agonist and Antagonist Activity of Chemicals
  • Reproduction/Developmental Toxicity Screening Test
  • Combined Repeated Dose Toxicity Study with the Reproduction/Developmental Toxicity Screening Test
  • In vitro skin corrosion: reconstructed human epidermis (RHE) test method
  • In Vitro Mammalian Chromosomal Aberration Test
  • Mammalian Erythrocyte Micronucleus Test
  • Mammalian Bone Marrow Chromosomal Aberration Test
  • In Vitro Mammalian Cell Gene Mutation Tests using the Hprt and xprt genes
  1. Section 5 would include, other tests conducted
  • Introduction to OECD Test Guidelines on Pesticide Residues Chemistry – Section 5 Part A
  • Crop Field Trial
  • Magnitude of the Pesticide Residues in Processed Commodities
  • Stability of Pesticide Residues in Stored Commodities
  • Nature of the Pesticide Residues in Processed Commodities – High Temperature Hydrolysis
  • Residues in Rotational Crops (Limited Field Studies)
  • Introduction to Other Test Guidelines
  • Metabolism in Crops
  • Metabolism in Rotational Crops
  • Metabolism in Livestock

OECD Test Guidelines are required for different types of chemicals depending on the legislation and whether they provide relevant results for the intended regulatory purpose. These guidelines are important in handling different chemicals and can prevent hazardous events, also by prototype manufacturing. Also, it can enhance the validity and international acceptance of test data; make the best use of available resources in both governments and industry; avoid the unnecessary use of laboratory animals and minimize non-tariff trade barriers.

The information on chemicals mentioned above are seldom discussed and are mostly overlooked by most people in the manufacturing industry. If you are serious with your custom manufacturing business and your products involve the use of chemicals, this pieces of information should come in handy despite their complexities. These info can serve as your upper hand against your competitors moving forward.


Conclusion

All of these events and developments are proven to be useful to your business plan most especially if you are operating here in China. These news and changes all have lessons to be learnt from and help you quick to adapt to situations whatever it may be. Even if you are a small-scale manufacturer, these major news will have an impact on your business whatsoever.

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