Why Understanding China Industrial Clusters will lead you to a better sourcing performance?

Most of the professional buyers that I know have one thing in common is the fact that they understand very well the China Industrial clusters.Every region in china has one expertise and advantage like access to raw materials, access to component parts, cheap labour, specialised labour or logistics

 

Clustering Industrial

Clustering is the phenomenon where firms from the same industry gather together in close proximity. If 99% of factories making a particular product are concentrated in one region, you can be sure there is a competitive advantage to them being there .This article will lay out the differences in China’s regional development and how that may play into your sourcing decisions.

In the past 30 years, China has achieved phenomenal economic growth, an unprecedented development “miracle” in human history. Since the institution of its reforms and Open Door policy in 1978, China’s gross domestic product (GDP) has been growing at an average annual rate of more than 7-9 percent . In 2010, it has surpassed that of Japan and become the world’s second-largest economy.

The industrial clusters have been a driving force for making Chinese products very competitive in the global market . The Chinese government has been aggressively promoting the establishment of his cluster hubs all around China by building first class infrastructure , providing incentives, training and financing , encouraging entrepreneurs to invest , attracting Foreign direct investment ..etc. These policies have created millions of job and made china a wealthy nation.

 

Top 100 industrial clusters

Among the top 100 industrial clusters , around 80% are located in the coastal provinces. Most of them are located in Zhejiang , Jiangsu , Guangdong , and Shandong provinces, these 4 provinces account for 60% of the top 100 clusters in 2010.

Click here to get a map of China Clusters.

 

My Sourcing Experience

Myself , I source PPE products (Personal protective equipment in china ), so i deal with all kind of factories for products like Safety Helmet , Safety shoes , Work wear , safety Glasses , Safety vest ,Gloves , Mask …etc . So , I know exactly all regions that are specialized for my products , I source from over 11 industrial clusters. Another thing is the fact that you can find 2-3 industrial cluster for your product , but the difference is the quality level. For example , for my Safety shoes products , China has 3 industrial clusters .Guangdong ( highest quality ), Wenzhou (medium Quality) and Shandong ( low quality).

The Chinese government will continue promoting the industrial clusters . China will have 19 new clusters by 2020 as illustrated in the map above. The object is to push manufacturing to central/west china and the coast provinces is shift to high end manufacturing .

 

TIP for Better Sourcing

Finally , Here are some tips to better source your product in China :

  1. You need to identify the industrial hubs related to your products and their raw materials.
  2. China costs are increasing , some clusters are moving to central , west china, so it is important to follow the trends so you can get the cost advantage.
  3. Understand your average product cost structure , raw material prices , wage of the region your product is made so you can be in a good position for price negotiation.