Country Report 2016 - FASM 430 Global Sourcing
Table of contents Country Overview + History
Socio- Economic + Political Stability Factors
China Apparel + Textile Industry - Exports
Trade Agreements + China & The United States
State of Transportation in China
China Apparel Manufacturers - Top three
Shipping in China + Lead Times
Business Etiquette
s
s in Production
e + China
country overview “ He established the first centralized, unified, multi-ethnic state in Chinese history, under the Qin Dynasty. He called himself Shi Huang Di,
the first Emperor, also known as Qin Shi Huang.”
China is known as the People’s Republic of China, and is a sovereign state. For centuries China stood as a leading civilization, outpacing the rest of the world in the arts and sciences. In the 19th century and early 20th centuries, the country was beset by civil unrest, major famines, military defeats, and foreign occupation, according to the CIA World factbook. After World War II, the communists under MAO Zedong established an autocratic socialist system that imposed strict controls over everyday life and cost the lives of tens of millions of people. China is located in Eastern Asia bordering the East China sea, Korea Bay, Yellow Sea, and South China Sea, between North Korea and Vietnam. Its geographic coordinates is 35 00 North, 105 00 East. China’s total area is 9,596,960 sq km, with lands of 9,326,410 sq km, and water of 270,550 sq km. The size of the country in comparison to the world is the
fourth largest country after Russia, Canada and the US. Bejing is considered the capital of China, and Shanghai is the largest city in China. Climate in China is extremely diverse being tropical in the South to subarctic in the North. China is the world’s largest single emitter of carbon dioxide from the burning of fossil fuels, water shortages, water pollution from untreated wastes, deforestation, estimated loss of onefifth of agricultural land to soil erosion and economic development. China contains some historically active volcanoes including Changbaishan, although some has been relatively inactive in recent centuries. China’s has a population of 1,373,541,278 as of July 2016. It is the most populous country in the world. There are several religions recognized in China, with the official religion being atheism. The language in China is standard Chinese or Mandarin.The median age is 37 years, with the average male
being 36 years, and the average female is 38 years. The Chinese Government announced that it would change its rules to allow all couples to have two children instead of just one, as mandated in 1979. The new policy was implemented January 1st 2016. China’s natural resources include coal, iron ore, petroleum, natural gas, mercury, uranium, hydropower potential, arable land. People the age of 15 and over can read and write. The literacy percentage out of the population is 96.4 percent, with the male gender having a higher percentage rate compared to females (98.2% - 94.5%).
Han Chinese Zhuang Other
92% 2% 6%
The Chinese Governement officially recognizes 56 ethnic groups.
The Renmibi is the official currency of the People’s Republic of China. The name in Chinese means “people’s currency”.
National Public Holidays - 2016 New Years Day Chinese New Years Ching Ming Festival National Day Dragon Boat Festival Chung Yeung Festival
+history
economic overview In 2010, China became the world’s largest exporter. It began with the agriculture industry, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, growth of the private sector, and opening foreign trade and investment. In recent years, China has renewed its support for state-owned enterprises in sectors considered important to “economic security”, explicitly looking to foster globally competitive industries. China’s restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978. China in 2015 stood as the largest economy in the world, surpassing the US in 2014. However, China’s per capita income is below the world average. During mid 2005 to late 2008, cumulative appreciation of the
renminbi against the US dollar was more than 20%, however the exchange rate remained virtually tied to the dollar from the onset of the global financial crisis until June 2010. The Government of China faces a number of economic challenges including reducing its high domestic savings rate and correspondingly low domestic consumption, facilitating higher wage job opportunities, reducing corruption and other economic crimes, and containing environmental damage and social strife related to the economy’s rapid transformation. china is considered one of the most rapidly aging countries in the world. Several factors are being used to slow down China’s growth such as, including debt overhang from its credit fueled program, industrial over capacity, inefficient allocation of capital, and the slow recovery of China’s trading partners.
Due to China’s exchange rate being determined by fiat rather than by market forces, the official exchange rate measure of GDP ($11.18 trillion) is not an accurate measure of China’s output. By the end of 2012, China’s working population, ages 15 - 64 years) was 1.004 billion. The unemployment rate is at 4%. This data is registered for an urban unemployment, excluding private enterprises. Budget - 2015 Revenues: $2.444 trillion
Inflation Rate - 2015 1.4%
Expenditures: $2.822 trillion Exports- 2015 $2.143 trillion Key Commodities: Electrical + other machinery, apparel, furniture, textiles, integrated circuits.
Imports - 2015 $1.576 trillion Key Commodities: Electrical + other machinery, oil and mineral fuels, nuclear reactor, boiler, and machinery components, optical and medical equipment, metal ores.
The Government ofchina The Government of the People’s Republic of China is divided into four different branches. The first being the legislative branch, the National People’s Congress, the Executive branch, the State Council and President of China, the judicial branch, the Supreme People’s Court, and the military branch, People’s Liberation Army via the Central Military Commission. The People’s Republic of China is a communist state and has the legal power of the Communist party as guaranteed by the PRC constitution. Under the Constitution of the people’s Republic of China, the NPC holds the most state power in China. The NPC decides on national economic strategy, elects or removes high officeholders, and can change China’s constitution. The People’s Republic of China gained its independence October 1st in 1949. Its constitution was last amended in 2004. The Executive branch consists of a chief of state, head of Government, cabinet, and appointments. The Chief of State is President XI Jinping, and Vice President Li Yuanchao.
socio-economi + poli China has came a long way since its production and development beginning years and socio economical factors. Since the rise of being the world’s largest export to the United States and the most populous country in the world, china has seen a few economic challenges. These challenges involve labour redundancies and social unrest, Massive rural-urban income inequality, providing for China’s migrant workforce, emerging shortage of cheap labour, providing for China’s aging population, and China’s trade surplus with the US. The social challenges faced by China involves the environmental degradation, rising crime rates, and endemic corruption. Labor unrest - There were 26 million workers laid off between 1998 and 2002, with three million workers in state owned sectors losing their jobs each year. Urban income inequality - rural urbn income disparities are artifically maintained by the “hukou” registration system. This restricts the flow of urban-rural migrants. China’s shortage of workers - it started in 2004 where chinese workers stopped going into work, leading to a widespread shortage of labour. China cause
is of
considered as the one child
the policy
fastest aging and increased
population belife expectancy.
ic itical factors p
China has been under the leadership of the Communist Party of China (CPC) for more than 60 years, and the leadership has been able to impose its decisions on the country without going through deliberations and negotiations. China has also been able to forge ties with most countries, and its sphere of influence is evident in Africa. However, China’s relationship with Vietnam, Japan and the Philippines remains a matter of concern owing to tensions in the East China Sea and South China Sea. Media censorship and intolerance by the government against criticism are areas of concern; however, the government is making efforts to strengthen the rule of law in the country through judicial reforms. China has a strong political system which can help boost its economy. Various regulations set in place are passed and formally and informally help the economy become stronger .
e
China’s economic fundamentals are very strong with the country registering strong economic growth over the past three decades. The economy’s strength lies in manufacturing competitiveness driven by its large pool of relatively cheap labor and economies of scale. However, services sector is becoming an important growth pillar to the Chinese economy. China’s strong external position is evident from its vast foreign exchange reserves, which amounted to $3.73 trillion by the end of first quarter of 2015. Large forex reserves help the Chinese economy in mitigating external shocks emanating from the global macroeconomic environment. In addition, China’s external debt was around 8.5% of GDP, amounted $895.5 billion, at the end of 2014. Overall, the economy has very strong economic fundamentals, which should mitigate any spillover from international crises.
s
China has seen a general decline in poverty and a drop in inequality. The 12th five-year plan seeks to extend this trend by increasing social welfare payments, raising wages and improving healthcare. However, one of China’s longstanding problems has been its rising population. While China’s adoption of the one-child policy resulted in a drop in population growth, it made China a country with an increasingly ageing population. This is due in part to the improvements in life expectancy over the years. Other major problem faced by the Chinese society is its highly skewed gender ratio in favor of males, which could lead to an increase in sexual violence, human trafficking and crime. Since economic reforms began in 1978, China has seen long-term growth, which has reduced poverty levels in the country by increasing per capita income. China’s average life expectancy rose from 32 years during the 1950s to 75.2 years in 2014.
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China has a large number of R&D institutions, indicating that the country is well equipped for advanced research. The country’s R&D pacts with more than 150 countries across the world have increased China’s international influence in the field of science and technology. However, policy fragmentation and brain drain of talented graduates could impede the country’s long-term innovation potential. China has international co-operation pacts for scientific R&D with more than 150 countries across the world. It has also signed intergovernmental science and technology pacts with around100 countries. China is a member of more than 1,000 international scientific organizations with a number of scientists from the China Academy of Science holding key positions in these organizations.
China’s decentralized court system allows the judiciary to solve various issues at the grassroots level. There are also many other legal bodies that resolve various disputes. Though the country has significantly deregulated its markets, entry barriers in China are the highest among the BRICS nations. The government announced a reform of the Hukou system in February 2012, which eliminates the differential treatment between rural and urban population, and gives migrant workers access to social security and other benefits. China has a very weak record of accomplishment in terms of intellectual property rights (IPR) protection, which is a cause for concern. In a major step towards establishing a balance between the principles of human rights and punishing the guilty, China amended its criminal procedure law in March 2012. The amendment means that families of arrested individuals must be informed within 24 hours and the detainee must receive access to lawyers within 48 hours China has a biologically diverse environment, with vast areas of land under forest cover. Although the country has acomprehensive environmental framework, the implementation of these policies is not very effective and pollution in all its forms has reached peak levels. China’s primary energy source, coal, is the biggest cause of its high levels of environmental pollution, which is a cause for concern. Another challenge facing China is soil contamination, mainly from arsenic and other heavy metals, due to excessive mining, industrial waste dumping and irrigation using polluted water. The country has also become the world’s largest manufacturer of wind turbines and solar modules and has overtaken the US in terms of installed renewable energy capacity.
Political Factors cont’d
china Apparel + textile industry States has been the top destination of Chinese textiles. 15% of textile exports were sent to the United States alone. The production price for cotton revealed an average annual percentage of 5.5 between 2007 and 2011. the price of cotton has been attributed to include weather conditions and rising labor costs.
China has one of the largest textile industries in the world. China accounted for a total of 32% of total textile exports traded in the world. China’s yarn production levels recorded an average annual growth rae of 14% between 2006 and 2011. Cloth production dropped from 68 billion to 63 billion within one year. The reduction can be noted due to the previous year’s overproduction, however factories include higher cotton prices and more expensive domestic labor costs. Though China relies on the United States and Japan for textile imports, Australia and India have notoriously gained a market share in the last few years. 10% of China’s textile imports came from Australia, a 3 point increase compared to the share record in 2007. The United
The Textile industry in China shows healthy financial trends for the past five years. The average industry profit margin went up from 4% to 6%; companies reduced their liabilities, from 60% to 56% of total assets; and the fraction of companies making losses dropped, from 13% to only 5%. For a few decades now China has played a central role in clothing the world as the destination of choice for production of global brands and as the primary source of clothing for the world. Rising labor cost, and a global economic slowdown have resulted in slower growth in this sector in China and in the economy as a whole. With neighboring countries taking over more and more of the low cost production, the importance of this sector in China is likely to wane.
34%
26% 9%
Cotton
Other
Non Knitted Apparel
Knitted Apparel
6%
Key apparel textiles that are produced and exported from China
trade agreements China + The United States
China’s Trade agreements describes bilateral and multilateral trade agreements that this country is party to, including with the United States. Includes websites and other resources where U.S. companies can get more information on how to take advantage of these agreements. China has bilateral investment agreements with over 100 countries and economies, including Austria, the Belgium-Luxembourg Economic Union, Canada, France, Germany, Italy, Japan, South Korea, Spain, Thailand, and the United Kingdom. China’s bilateral investment agreements cover expropriation, arbitration, most-favored-nation treatment, and repatriation of investment proceeds. China maintains 14 Free Trade Agreements (FTAs) with its trade and investment partners, and is negotiating or implementing an additional eight FTAs. China’s FTA partners are ASEAN, Singapore, Pakistan, New Zealand, Chile,
Peru, Costa Rica, Iceland, Switzerland, Hong Kong, Macao, and Taiwan. China has also recently signed FTAs with Korea and Australia, both of which include a chapter on investment. China has a bilateral relationship with the United States and has a trade agreement with the United States through the World Trade Organization Accession. The agreement signed with the United States preceding China’s accession remains a good general guide to the obligations China entered into with its WTO partners. The US and China in existence today has a Bilateral Investment Treaty set in place.
state of transportation China has a significantly higher travel opportunity. With many options of transportation China has access to over 500 airports, 47 heliports, 191,270km Railways, 4,106,387 Roadways, and 110,000km in waterways transportation. China has all the necessary transportational devices to exports products to anywhere in the world. Ocean freight showes to be the most sensible form of transportation for transferring products to the United States. According to the Freight Calculator, to ship a 40 foot container to the United states from China, it costss approximatley $1,854.14 - 2,049.32, and delivers within 15 to 18 days depending on the port. Air freight takes a significantly shorter amount of time but results in a higher cost than having it transported by a waterway. Its main ports that ship internationlly are found in Shanghai, Shenzhen, Qinhuangdao, and a few other locations. Shanghai International Port
Co. Ltd. is an ocean freight shipping company that ships to the united States. Shenzhen Port is another shipping company that transports products internationally a long with, the Qingdao Port. Since 2014 the number port shipping company in Shanghai has shipped 35.29 million in Volume. The Shanghai International Port Co. Ltd. is located 358 East Dongdaming Road Shanghai, and is approximately four hours from a key factory in shanghai.
Shipping Companies Shanghai Internation Port Co. Ltd
Qinhuangdao Port Affairs Bureau
Approximately four hours from major factory in Shanghai, China
Approximately seven hours from major factory in Qingdao, China
In Other News: China’s Belt and Road Initiative to boost global trade: http://english.gov.cn/news/top_ news/2016/11/03/content_281475481810968.htm Regular China South Asia freight train officially launched: http://english.gov.cn/news/top_ news/2016/11/01/content_281475480411032.htm
There are a total of 507 Airports in China Paved Runway
Unpaved Runway
Total:463 Over 3,047m: 71 2,438 to 3,047m: 158 1,524 to 2,437m: 123 914 to 1,523m: 25 Under 914m: 86
Total:44 Over 3,047m: 4 2,438 to 3,047m: 7 1,524 to 2,437m: 6 914 to 1,523m: 9 Under 914m: 18
There are a total of 47 Heliports in China
There are a total of 191,270km Railways in China Broad Gauge: 100km Standard Gauge: 190,000km Narrow Gauge: 670km There are a total of 4,106,387 Roadways in China Paved: 3,453,890km Unpaved: 652,497km
There are 110,000km Waterways in China
Major Seaports are located in Dalian, ningbo, Qingdao, Qinhuangdao, Shanghai, tianjin. Major River Ports are located in Guangzhou Container Ports are found in Dalian, Guangzhou, nINGBO, sHANGHAI, shenzhen and Tianjin.
China Factories Shanghai Shantex Garment Co. Ltd
Shanghai Textile Corporation
Located: No.638 Xiang Yu North Road, Huaiyin District, 223300, Huai’An , Jiangsu
Located: 88-116 Chang Jiang Road, Hai An, Nantong, Jiangsu
Qingdao Fintext Fashion & Garments Location: No.258 Binzhou Road, Jiaozhou, Qingdao, Shandong
TOP TEN TEXTILE SUPPLIERS IN CHINA 10. Shandong Jining Ruyi Woolen Textile Co. Ltd. - Shandong Jining Ruyi Woolen Textile Co., Ltd. is principally engaged in the manufacture and distribution of worsted fabric products. The Company distributes its products within the domestic market and to overseas markets. 9. Shandong Demian Inc. Company - A large scale and state owned enterprise group dealing with spinning, weaving, printing and dyeing, knitting garments as well as I.E operation. 8. Huafang Textile Co Ltd - specializes in the production of 100% cotton, blending (terylen, viscose, modal) medium and fine yarn.
7. Jiangsu Sunshine Co. Ltd - Jiangsu Sunshine Co., Ltd. manufactures and markets worsted wool fabrics, yarns, and apparel. The Company also provides textile products processing services, operates in retail trading, and retails electrical appliances. 6. Shijiazhuang Changshan Textile Co. Ltd. Shijiazhuang Changshan Textile Co., Ltd. manufactures and markets textile products. The Company’s products include gray fabrics, cotton fabrics, blended fabrics, yarns, and apparel. 5. Weiqiao Textile Co. Ltd. - Weiqiao Textile is one of China’s top cotton textile producers
and a force in the global cotton textile market. The company makes cotton yarn, grey fabric, and denim from four production bases located in the Shandong Province (China’s second largest cotton producing province). The company manufactures more than 488,000 tons of cotton yarn, and uses its own yarn to produce more than 2,000 types of grey fabric -- including twill, silk, jacquard, and khaki -- and 400 varieties of denim. Weiqiao Textile sells to both domestic and international customers located in 20 countries. Clients include Itochu, Fountain Set, Texwinca Holdings, and Marubeni. Weiqiao Textile in not state owned 4. Huafu Top Dyed Melanged Yarn Co. Ltd. - The company is specialized in offering color yarn with stylish environmental technology for the customer’s needs, also it offers new top-grade billet yarn, dyed yarn, semi-worsted, spinning color yarn. Relying on the chain supply management capabilities of variety, small batch, fast delivery, the company provides rapid delivery. 3. Lu Thai Textile Co. Ltd. - a joint stock enter-
prise, issued A&B shares, engaged in spinning, dyeing, weaving, finishing and garment production. It is one of the prominent textile groups which of the comprehensive vertical and integrated production ability, and has become one of the factories are of largest production capacity. 2. Shangtex holding Co. Ltd. - manufactures and distributes textile products. The Company produces automotive textiles, new type fibers, and knitting apparels. Shangtex Holding also operates textile export, fashion design, technology services, and other related businesses. 1. Jiangsu Hengli Group - The Company Belongs To The Medium And Light Industry Specialized In Cotton And Chemical Fiber Spinning And Weaving Processing. Main Products Include: Denim; Corduroy; Yarn Dyed Clothcloth; Cotton Knit.
shipping resources China Ocean Shipping Company (COSCO)
Orient Overseas Container Line (OOCL)
TEU: 1,539,618 HQ: Bejing, China Founded: 1961 Revenue: $10.2 billion USD Employees 130,000
TEU: 565,113 HQ: Hong Kong Founded: 1969
Following its takeover of China Shipping Container Lines (CSCL), COSCO is now the world’s 4th largest shipping company, the largest shipping company outside of Europe and one of only 4 companies that has a total capacity above 1 million TEU. COSCO now owns 5 of the top 10 biggest container ships, each of which is able to handle 19,000 twenty foot containers. In total the group has 1114 vessels of which 285 are container ships. Address: Ocean Plaza, 158 Fuxingmennei Street Beijing 100031, China Telephone: 0086-10-66493388 Fax: 0086-10-66492288 Website: http://www.cosco.com Email: internet@cosco.com
OOCL has 320 offices in over 70 countries and operates over 300 ships. In addition to shipping the company also operates 2 important Container Terminals: Long Beach Container Terminal, LLC. (LBCT LLC) and Kaohsiung Container Terminal (KAOCT). Beyond its core business the company is working to reduce its environmental impact through the use of IT and helping support the children of employees via a university scholarship program. Address: 31/F, Harbour Centre 25 Harbour Road Wanchai Hong Kong Telephone: (852) 2833 3888
According to MoverDB.com overseas Cargo & freight costs from the United States are as follows: China - (Shanghai) $1,693 for 20ft, and $2,527 for 40ft. In Hong Kong location it is $1,841 for 20ft, and $2,747 for 40ft.
business etiquette During initial meeting in the Chinese culture it is most common to nod or bow instead of shaking hands. Greet the oldest most senior person before others. Dressing appropriately is most important in China. Rules involve you should never wear shorts, even during the summer, avoid wearing bright fabrics, as colours have specific meanings in China and bright colours are considered inappropriate in the Chinese workplace. Dark colours are considered appropriate. Inthe chinese culture they regard a lot of hand gestures as excessive, eye contact tends to be indirect, and both thumbs up and the tugging of the earlobe are signs of success. One should not point or use their middle finger to summon someone. Gift giving is a common Chinese custom that business visitors to China should prepare for and use to their advantage. Gifts should be given from the ceo of the foreign company
to the lead of the chinese delegation. In the Chinese culture people value their personal space. They dislike being toughed, for instance hugging and the locking of arms. They are not keen on physical contact, especially during business. Punctuality is a key thing in the chinese culture and they value being on time or slightly early for a meeting or other occasions. dinner meetings however is different, you should not arrive early as doing so will cause the host to think you are hungry. Before anyone gets down to business it is a custom for the chinese culture to get to know one another first before they get down to business. Chinese believe in getting to know each other and having a conversation before sealing the deal. Allowing them to get to know the person they may be doing business with a little better.
It is acceptable to refuse food if you have dietary restrictions
Do not wear bright colours, dark colours are more uitable for the business environment
Bring gifts when attending business meetings, occasionally.
Laugh and get to know each other first before jumping down to business
Do not hug, lock arms, pat on the back, or physically touch during a business meeting
Always be on time or slightly early, except when it comes to dinner meetings
http://www.officeholidays.com/countries/china/
http://www.chaos.umd.edu/history/toc.html
http://www.infoplease.com/encyclopedia/world/china-government.html
http://globaledge.msu.edu/countries/china/usresources
https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html
http://www.worldshipping.org/about-the-industry/global-trade/top-50-world-container-ports
http://www.zim.com/countrysites/asia/china/en-us/pages/aboutzim.aspx
Tenielle Adderley - Country Report SCAD