Why import from China when it is often easier to source products from local suppliers and distributors?
For Australian and other Western businesses, local sourcing can certainly be simpler. There is no international freight, customs clearance or overseas supplier management to deal with.
So why does China remain one of the world's leading sourcing destinations?
The answer is not simply low labour costs.
Price
For many products, sourcing directly from Chinese manufacturers can provide significant cost advantages compared with manufacturing locally or purchasing through distributors.
Even after factoring in shipping, import duties, quality control and other costs, direct sourcing from China can still offer attractive total landed costs.
Flexibility
Chinese manufacturers are generally experienced in serving international markets and can offer a high degree of flexibility.
Depending on the product, buyers can access OEM and ODM production, private labelling, custom tooling, different materials and specifications, as well as a wide range of production volumes.
China's Competitive Advantage
China's labour costs are higher than those of many lower-cost manufacturing countries in Southeast Asia. Yet China remains highly competitive because of its developed infrastructure, skilled workforce and deeply integrated supply chains.
Apple CEO Tim Cook explained this particularly well:
“There’s a confusion about China. The popular conception is that companies come to China because of low labor cost.
I’m not sure what part of China they go to, but the truth is China stopped being the low labor cost country many years ago. And that is not the reason to come to China from a supply point of view.
The reason is because of the skill, and the quantity of skill in one location and the type of skill it is.”
For international buyers, this is an important distinction.
China's advantage is not simply low cost. It is the combination of cost, manufacturing expertise, supply-chain depth, flexibility and scale.
The challenge is finding the right manufacturer and managing the sourcing process effectively.