Top Manufacturing Powerhouses In Asia

There are several reasons why a company should consider doing business with other Asian countries rather than just China. Many places across the Asia region are starting to fill the gap China has created as the country looks to move away from low cost manufacturing and textiles. Therefore, for items such as clothing, you may find India, Thailand or Bangladesh are able to meet your needs and can produce goods at a lower price.

Other locations also cater to companies looking to source more niche products. Malaysia is one of Asia’s largest exporters when it comes to home furniture, and Thailand accounts for a third of the supply for natural rubber. The vast amount of countries across Asia means plenty of choice and you can find the supplier which most suits your needs.


Sourcing Issues

A common misconception appears to be that sourcing from Asia can be difficult. This concept is not necessarily true while it can’t be denied the vast number of Chinese suppliers usually means there are plenty of choices but the saying “quality of quantity” often rings true.

Sourcing a supplier for your product is always a difficult task. You need to ensure many different aspects like the quality and lead times meet your expectations. Often it can be hard to even find a factory with the ability to meet your needs. In pre-internet days, this challenge was even greater, as there was no easy way to connect with suppliers globally.

If you have already looked into sourcing products from overseas, you are probably familiar with the site Alibaba. This platform aims to connect Chinese manufacturers with international buyers. However, over the years this directory has started to include other locations, and now serves the majority of the Asia region. While many more factories are opening every day, and more are continuously being added to Alibaba’s directory, there is still a way to go.

Other ways to get connected to suppliers is through trade shows and traditional networking. This option gives you a better idea of whether or not the supplier will suit your needs as you can meet a representative and get reassurance about any concerns raised. However, this may not be an ideal way and is not feasible for everyone.


Asian Countries you should Consider for Manufacturing aside from China

For some people, they no longer need to look further than China. For others, casting a wider net may be a very shrewd decision. China is able to serve the majority of companies looking for overseas manufacturing. However, with many thriving economies occurring throughout the Asian region, a recurring trend of companies using suppliers from other countries will occur. Low cost manufacturing and textiles are two particular areas that China itself is trying to move away from, so if you are looking into these areas, you may want to look further afield. Here are a few countries you may want to consider based on economic development of these countries.

1. Vietnam

Vietnam is a member of ASEAN and is a member of the Trans-Pacific Partnership instead of China (both America friendly trade blocks). In addition, Vietnam wants foreign investment, the government has made clear that the country values foreigners and wants their businesses to stay. Vietnam provides low wages and high-quality manufacturing — two factors which China is currently lacking.

Vietnam is often tagged with the hot money issue wherein investors put money in a country only to withdraw it after a short time because of jitters. Actually, Vietnam is not having a hot money issue, but its strategic position to China and Southeast Asia (and generally foreign friendly government and people) have made Vietnam the next big thing. Here are some statistics on trade which support this fact.

The US is the seventh largest investor in Vietnam. U.S. businesses have significant roles in 17 of 21 Vietnamese industries. Most US firms are wholly foreign, but others are joint ventures. Vietnam’s Ministry of Planning and Investment has said US firms accounted 400+ projects in manufacturing and processing industries worth US$2.24 billion in 2017. Top investment destinations include Ba Ria-Vung Tau, Hai Phon, and Binh Duong.

Vietnam loves America and is considered pro-American by most accounts. The result, a strong relationship with the United States which is tied into the Trans-Pacific Partnership (TPP). The TPP will eliminate tariffs on goods and services which means Vietnam gets access to new markets. This is beneficial for Vietnam as many companies pivot away from China. Other countries which large investments are Singapore (3rd), South Korea (1) and Japan (2) remain Vietnam’s largest foreign investors. Over 100 countries and territories have investments in Vietnam.

You may not be aware Vietnam is home to a thriving economy and a booming manufacturing industry. With an ever-increasing globalized world there is more choice than ever in which country you source your products from. While China may be the most thought of location when it comes to manufacturing exports, Vietnam is a great option with its thriving manufacturing industry.

2. Taiwan

Taiwan performs best in the technology sector. The country has a surprisingly amount of technological knowledge and expertise which ensures they are able to produce high-quality, innovative products.

Taiwan is home to the Hsinchu Science Park, which is often referred to as the “Silicon Valley of the Orient”. Here you can find a world leading hub consisting of over 400 technology companies, consisting of pioneers of many different technology industries. The most-high profile companies include Logitech, Acer Inc., D-Link, Philips and many others.

Owing to the small size of the island, the majority of factories and suppliers are set up close to a major shipping port. Most of the major shipping ports are either to the North or South of the island. Many major logistics companies are set up within the country, making Taiwanese manufacturing imports relatively simple to process.

China’s prices make it attractive which makes Taiwan unable to compete: manufactured Taiwanese goods generally come in around 30% more expensive. However, this means Taiwanese manufacturing products have much better quality. Other requirements are also generally more relaxed, and you should find lower minimum order quantities and receive a more reliable service.

The Taiwanese manufacturing sector is continuing to see growth, outpacing many other Asian countries. The Financial Times recently reported manufacturing growth was the strongest in the last 2 years: production has increased, more workers have been hired, and demand for Taiwanese manufacturing products are increasing.

It appears clear that Taiwan is a suitable location from which to source products. With a rich technological sector and a reputation for quality, the country provides plenty of potential. When compared to China, it does suffer from higher costs, as well as less choice, but these factors are not necessarily deal breakers for every business’ context. Many companies feel uneasy at the risk of having their intellectual property infringed upon when dealing with Chinese companies, whereas this issue is much less common within Taiwan.

3. Japan

Japan’s exports continue to grow year after year but slowed down this year wherein the 4.9% rise is lower compared to the 9.6% the past year. This number represents a slowing demand in Asia and Europe dampened trade even as the yen has fallen. Even as Japanese exports to Asia and Europe have remained weak, shipments to America remain firm as the U.S. economy continues to help spur output in Asia and Japan.

Japan’s government recently approved a stimulus bill worth $29 billion aimed at helping the country’s lagging regions and households through steps like subsidies and merchandise vouchers. Analysts are skeptical about how much growth the government can spur.

The government said it expected the stimulus plan to increase Japan’s gross domestic product 0.7 percent, ¥1.8 trillion will be spent on poor families and small companies as well as ¥1.7 trillion will be used for disaster prevention and rebuilding disaster-hit areas; however, Masaki Kuwahara, a senior economist at Nomura Securities, said that it could push up G.D.P. about 0.2 percent.

4. South Korea

The International Trade Research Institute has found the scale of Chinese general machinery imports from South Korea was $ 8.8 billion, a decrease of 4.5% and decline for a third consecutive year. The export scale of South Korean general machinery has been greatly reduced due to the downturn in China’s domestic economy. The growth inventory in Chinese factory’s and other internal factors also influence on the imports.

South Korea’s export decline is also due to its falling competitive advantage. South Korea’s improvement should promote SMEs to help develop a stronger competitive advantage and use the South Korean Free Trade Agreement to further explore not only the Chinese market, but other foreign markets as well.

5. North Korea

For the past 20 years, North Korea shows up on the annual list of “potential” issues for business in China. Although China officially stopped offering oil and gas to North Korea, unofficially it still continues to supply them via aid or ‘unofficial’ channels.

As the Changjitu Regional Border Zone received state approval, Many Chinese factories in Jilin and Liaoning Provinces send clothing items to North Korea to be finished, then have them sent back to China with a “Made in China” label. In addition, North Korea’s Supreme Leader Kim Jong-Un already met with Russian President Vladimir Putin in Moscow for slowing down Russian trade.

6. Russia

In order to stabilize the ruble, the Russian government asked five companies to cut the size of its foreign currency assets: Gazprom, Rosneft, Zarubezhneft, Alrosa and Kristall. As a result, the ruble exchange rate raised by nearly 1 percent, appreciating the ruble to USD1 to 68 rubles.

The Central Bank of Russia on December 18th and 19th sold 500 million USD and 420 million USD respectively based on the requirement from the Russian Ministry of Finance under the Federal Treasury; the sovereign credit rating of Russia is BBB- level, changing from “negative” to “negative watch” a precursor to a downgrade.


Summary

The following economic development news and statistics should help you in choosing other countries where you can invest on a manufacturing business aside from China. Obviously, there are pros and cons to each choice, but it would be up to you to weigh your options. Also, this goes to show China is not the lone country which could cater to your supply and manufacturing business.

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