Payment Terms

Beyond language and legal barriers, such as the requirement of GOST R certification, businessmen have to consider another important issue: payment terms. This is especially true given that Russia’s economy is still suffering from the financial crisis, recovering more slowly than other countries. Establishing acceptable payment terms can cause substantial delays to the progress of a deal.

There are three aspects of the payment process which tend to produce problems when setting the terms of trade between Chinese and Russian companies.

1. Russian buyers traditionally prefer to settle trades through cash.

2. The Russian banking system has yet to mature. By the end of 2008 there were approximately 1,300 banks in Russia. Over 800 of these were extremely small, with a capital base equivalent to less than USD 1 million. An extra element of disorder exists in Russia’s banking environment, in that many banks have a reputation for not honoring issued letters of credit. Furthermore, one-third of Russia’s banks may face bankruptcy as a result of the crisis; solvency is an important consideration when choosing a Russian bank’s services.

3. The level of cooperation between Chinese and Russian banks has yet to fully develop. Communication between both sides is inefficient. Chinese banks lack enough representative offices and agents in Russia, and vice versa.

Hence the situation suggests that extreme care must be taken when making payment arrangements for a Chinese supplier exporting to Russia. Some important steps to take include requiring the buyer to use a top, recognisable international bank when issuing the letter of credit, and asking for a risk-adjusted down payment when establishing the terms of trade. Additionally, the supplier may consider using the services of a company such as Sinosure which insures letters of credit against business and political risks. This type of service incurs extra charges but may be worth the cost for large traded values.

Just like any other prospective new market, Russia presents its own unique challenges. By overcoming the language barrier, by obtaining certifications to reduce the perception of poor quality and by taking extra precautions regarding the terms of payment, Chinese suppliers can prosper from increasing bilateral cooperation with Russia.

This blog posting was inspired by the cold Beijing winter and a recent conversation with my roommate. After having lunch together, my roommate, a native of Shenyang in China’s northeast, described what she and her family ate during the winters of her childhood. Fresh fruit and vegetables were scarce to nonexistent; large quantities of Chinese cabbage and pears were bought in late autumn and had to last all winter. The pears were frozen, which caused them to turn black. The cabbage was either dried or put in jars to make “sour cabbage”. Meat was a luxury.

Having only two food choices available for one-fourth of the year sounded terrible to me. “So what did you eat in winter?” she asked. Well, I ate the same things as in the summertime – except maybe more cups of hot chocolate. Although winter likewise halted regional agricultural production, bananas, broccoli, seafood – you name it – managed to find their way to grocery stores in the American Midwest – where I grew up.

How could our childhood experiences in the 80s and early 90s have been so different? At least part of the disparity may be due to differences in the availability of transportation within China and the US.

As anyone involved in sourcing knows, although goods may be available in one location, the challenge remains of connecting them with their prospective end users, often many kilometres away. The greater the ease of connecting point A to point B, the cheaper the cost, hence, the more feasible trade becomes. This process requires infrastructure.

China has done a lot to improve its infrastructure since the 1980s. When imports arrive from overseas, they usually do so by boat. Not only does China now host some of the world’s busiest ports, but it has also has increased the length of its navigable inland waterways from 101,000 kilometres in 1985 to over 110,000 in 2008. From these inlets, the goods must then traverse land to reach their destinations. To this end, China has upped its railway length to 80,000 kilometres, as of 2008, from 55,000 in 1985. Even more substantial is the increase in highway availability, now at around four million kilometres, an increase of almost 300% from only 20 years prior.

The result of these advances in infrastructure: more goods are able to make it across the Chinese mainland to the people that need them. The amount of freight traffic within China, measured in ton-kilometres, has increased more than three times its 1987 value. Just as the wintertime shelves of the grocery stores in my hometown are filled with goods from the warmer southern US states, Mexico, and South America, similarly those in Shenyang can now be more readily stocked with products from southern China, the Philippines, or elsewhere.

Source: China Statistical Yearbook; US Bureau of Transportation Statistics: US Census Bureau; Beijing Axis Analysis

The increase in transportation channels has reduced the contribution of shipping costs to goods’ retail prices, lessened the impact of food expenditures on one’s budget, and has enhanced the well being of Chinese consumers. This is evident when comparing the Engel’s coefficients – the percent of the typical household’s income spent on food, used as a general measure of a country’s standard of living – between China and the US. This statistic suggests that my roommate’s family may have spent about 55% of their household income on food in the 80s. The affect of both rising incomes and greater transportation availability since then have reduced this to less than 40%.

Source: China Statistical Yearbook; US Census Bureau; Beijing Axis Analysis

It is interesting to consider how much more this is likely to improve in the future. I think for the Chinese New Year I will indulge in a little variety and buy my roommate both oranges and pears – fresh green ones– to celebrate the holiday and the progress made by China.

Trade sanctions have clearly strained China’s steel industry. Seamless steel tubes, Oil Country Tubular Goods (OCTG), drill pipes, steel mesh panels, wire shelves... the list of newly sanctioned Chinese steel products goes on. Among the numerous made-in-China products impacted by international trade frictions, China’s steel industry has been hit the hardest, and given the severity of these trade disputes, the consequences for China’s steel enterprises are substantial.

Price and quantity decreases

Proposed last April, the oil well pipe anti-dumping and anti-subsidies action undertaken by the US International Trade Commission will adversely affect Chinese exports of as much as USD 2.8 billion. These exports are supplied by around 200 steel mills, and these provided oil well pipes to the US during early 2008 and Q1 2009. The monetary value at stake makes this the largest steel trade dispute in US history.

The oil well pipe anti-dumping and anti-subsidies case is only a sample of the international trade sanctions that have targeted Chinese steel makers in recent years. Since 2008, the EU, the US, Russia, India and other countries have successively launched anti-dumping and anti-subsidy surveys on China’s seamless steel pipes, oil pipes, drill pipes, steel mesh panels and other steel products. As a result of the financial crisis, global market demand has rapidly declined, exacerbating ongoing trade frictions – particularly within the steel industry. According to China Customs, in December 2009 China exported 3.34 million tons of steel, which contributed to a total of 24.6 million tons for the whole year 2009. This annual figure represented a 58.5% y-o-y decline.

Of all steel goods, pipe products were the most severely affected. In 2009, China's seamless pipe exports dropped by almost 50% compared to 2008. In 2009, China's export price for oil well pipes to the US was only USD 1,600/MT, well below highs of USD 3,600/MT in 2008.

Entering new markets

Some Chinese producers have adjusted their strategies in response to the sanctions. As an example, take one of China’s major seamless steel manufacturers, whose exports accounted for 48% of total sales volume before the financial crisis. In 2009 its shipments to major regions such as North America and Europe fell by more than 70% compared to the previous year, yet its total 2009 export volume dropped by only 10%. Its secret weapon: new markets – the company’s sales in Asia increased by 30% and African sales by 100%.

Other steel mills have followed suit, successfully exploring new markets such as Southeast Asia, the Middle East and Africa, thereby weathering the decline in demand from mature markets.

Along with the shift from mature to developing markets, export product structures are also changing. Many manufacturers are shifting their focus from high value-added products such as oil well pipes to a number of oil and gas transmission pipeline products, primarily in demand in countries in Southeast Asia and Africa. These regions are without well-established steel industries, ensuring less risk of new trade frictions arising from local competition.

Expanding domestic demand

Many Chinese steel mills capitalised on the national stimulus package which enlarged the domestic market in 2009. One of China’s largest stainless steel mills stated that although their exports declined by more than 50%, domestic sales increased by 58%, causing profits to remain consistent with those of 2008.

As of November 2009, China's net exports of steel have been largely restored to earlier levels. Nevertheless, China’s steel exports are facing more difficulties as overcapacity problems mount and international protectionism becomes more severe. As a consequence, China’s steel industry may yet have to adjust again in the near future.

A new shade of green is gradually sweeping across China's export manufacturing industry, one that took a while to take root, and companies are riding the environment-friendly wave.

Pressure from the national government and tightening regulations in overseas markets are compelling a growing number of suppliers to modify their business strategies and incorporate ecologically safe processes. The transition is neither extreme nor desperate, but the impact could be widespread as many midsize and small companies are also taking "green" initiatives. Due to the sheer number of these suppliers, they account for a large portion of the pollution and wasteful practices in the country.

Irrespective of size, companies are introducing long-term strategies anchored on recycling, waste reduction and sustainable energy adoption.

Recycling is the most common practice among factories, one that is carried out internally or through third parties. This, however, goes beyond reusing offcuts and scrap materials. Highly polluting industries such as leather tanning have always been required to invest in wastewater cleaning systems, but very few actually do. Now, many are investing large sums in such facilities not only to comply with local ordinances but also as a marketing tool. This comes as an increasing number of buyers are including social responsibility as a criterion in supplier selection.

Fujian Guanxing Leather Co. Ltd in Shishi, a city under the municipality of Quanzhou in Fujian province, has invested USD 3 million in a 6,000-ton capacity wastewater processing station. Once operational, the facility is expected to save the company USD 1.4 million annually.

In fact, waste recycling is becoming the norm in the city, one of the major garment and textile hubs in the province. More than 20 manufacturers have now installed treatment systems such as those from Carrousel. The majority of Fujian factories that dye fabrics in-house have similar facilities for their sewerage as well. Moreover, several local governments have set up complementary wastewater recycling services to help ensure a continuous supply of fresh water.

When it comes to material refuse, many large enterprises contract professional disposal services. Small and midsize businesses often transact with recyclers and junkyard operators.

Guangdong Weiermei Underwear Co. Ltd, for instance, sells fabric cutoffs to waste collectors. Watch exporter Shenzhen Full Success Gift Mfg Ltd and lock specialist Make Locks Manufacturer Ltd vend metal scraps to recyclers.

Some companies involve customers in their green efforts. On request, Shenzhen FJY Electronic Co. Ltd uses recycled materials during production. Doing so has the additional benefit of lowering unit costs.

Adopting degradable materials, however, does not always bring a similar effect. In the beauty and cosmetics industry, bottles made from such substances are about 20% more expensive than conventional plastic.

While recycling and reusing are gaining more adherents, only a handful of operations are tapping sustainable energy sources such as wind or solar power. Cynthia Garments Making (Dalian) Co. Ltd has taken steps to do so by using solar water heating at its workers' dormitories.

This posting was contributed by Global Sources, a leading business-to-business media company and a primary facilitator of trade with greater China.

I recently attended the ‘Global Purchasing and Supply Chain Forum 2009’, in Tianjin on 21-22 November, a forum was organised by the China Federation of Logistic and Purchasing (CFLP) and the Institute of Supply Management. The conference drew in around 200 people, including purchasing managers from MNCs, representatives of companies both state and privately owned, logistics company managers, government officials, as well as scholars in the field of supply chain management.

Besides a discussion on the macro economy, the two main topics from the forum were:

• Supply chain management in the environment of economic recession; and

• Supply chain management contributions to company value

Since the value enhancing role of supply chain management is a common topic discussed at a majority of procurement forums, I was more interested in the first topic. While exchanging ideas about supply management under economic recession with other purchasing managers, I received many useful tips—including those from the speakers. One speaker was Mr. Dai Dingyi, Vice Chairman of CFLP, who introduced the status and trends of purchasing and supply management in China. He indicated that supply management in the state-owned companies remains weak and that government purchasing is marred with problems.

Mr. Johnson Xiao, Global Sourcing Director of TRW Automotive Inc, was another speaker. Mr. Xiao shared his personal experiences in service sourcing. Attendees also learned a lot from Mr. Zhang Jiamin, Director of Li & Fung Group, who gave an insightful speech on how China’s manufacturers have survived the global financial crisis and advised ways for companies to adjust their sourcing strategies.

These speeches were very insightful about the current state of supply chain management in China and about its future outlook. Although most procurement managers remained stressed by the cost reduction target now, we were encouraged and inspired by this get-together; as long as a business can survive the crisis and remain innovative, there is a bright future ahead.

Putin’s visit to China in October has brought numerous promising projects for bilateral cooperation between China and Russia. More and more Chinese companies are becoming involved in deals with Russian companies, both in exports and imports.

However, when doing business with Russian clients it is important to understand their way of thinking, especially when you are looking to sell your products on the Russian market.

From my personal experience in sourcing for Russian clients from Chinese producers, the following issues—standard with any sourcing project—must be managed: price, quality, supplier reliability, delivery time, payment terms, availability, product certification, and transportation time, etc. What are the most critical issues specific to Russian companies? The top three would have to be payment terms, product certification, and language barriers.

Language

Effective Communication is a crucial aspect of any business deal. The existence of a language barrier is a particularly formidable challenge faced by Chinese companies aiming to enter the CIS market. Effective communication will allow certainty in the decision-making process; misunderstanding, however slight, may lead to unexpected troubles or worse—failure. The simplest way to avoid these unnecessary pitfalls is to have an effective conduit between your company and the client. A few of the best ways to do this are:

1. To establish a local representative office
2. To find a solid partner in Russia
3. To hire a long-term translator in your domestic office
4. To hire a short-term translator during your client’s visit to your factories or during your trip to Russia

The listings above are ordered according to the level of importance of the prospective deal. The first option is most acceptable for a Russian client, while the third and forth options are the easiest options to use when visiting a Chinese company. Any aggressive, long term, business expansion into Russia would require a representative office in Russia or even a joint venture with a local Russian company.

To be continued

During the past 3 months, I traveled with a few clients to visit some Chinese suppliers of motors, pumps, valves and other industry supplies. As usual, we recommended the best local Chinese producers – their pricing levels were normally between Chinese-foreign joint ventures and local middle-sized and smaller producers, but their quality was acceptable for our clients.

Although the manufacturing technology for some of the products was not on the international level, the quality of most products exceeded my clients’ expectations. From manufacturing machinery, i.e. widely-used CNCs, to every step of the manufacturing process, casting, machining, welding, surface treatment and packaging - all of these met my clients’ criteria for qualified suppliers. The previous biggest problem affecting my clients' China sourcing strategy, QUALITY, seems now to have been effectively solved. Chinese suppliers' price and delivery, moreover, is usually comparatively better than competitors from other countries.

So what else is the problem then? The biggest problem arose afterwards. Most of the suppliers we visited did not have any agencies in any of my clients' countries, which, incidentally, made it easy to talk to the supplier directly and get lower prices. But for those products frequently requiring maintenance, it is simply not possible to rely only on the suppliers.

Let’s take the procurement of pumps for mining industries as an example. The pumps are usually used in tough (i.e. high pressure and corrosive) conditions. The lifespan of the key parts will be short, sometimes 20 days to 1 month. The buyer can save 1/3 of the total purchase value by sourcing pumps from China. But for maintenance, the buyer will have to keep enough stock for the key parts. If there is not enough stock and the buyer has to order parts from the Chinese supplier, it requires lead time of at least 1 month, plus shipping time. To set up a solid agency overseas is a large investment for many Chinese suppliers, so after-sales service is not an obstacle that can easily be overcome. Yet as long as they are fully aware of the problem, with thorough communication, Chinese suppliers and overseas buyers can come up with solutions, such as

• Sourcing some general-use parts (i.e. seal parts) locally with the assistance of other Chinese suppliers
• Negotiating with Chinese suppliers to have a ‘green channel’ to shorten lead times
  
• Setting up a stock level system with supply chain management knowledge
  

As another example of problematic after-sales service, I can relate the following example. A South African client recently bought an engineering machine from a Chinese producer. The drive, which carried an international well-known brand produced in Germany, turned out to be faulty. The German brand, however, has an agency in South Africa, and so the client was expecting the agency would easily be able to solve the problem. Yet the client was told that it could take 3 months to get a new drive and that this was the normal lead time. The client then came back to the Chinese supplier directly and finally got a new one within 15 days.

From this perspective, the fact that Chinese companies do not have agencies overseas is not reason enough to dismiss their after-sales service completely. Indeed, for international companies who have agencies anywhere else, rigid systems and other factors can sometimes form stumbling blocks of their own. Sourcing managers will still need to invest a lot of time to conduct thorough research before they can decide where to source most profitably.

The new edition of The China Analyst has been released, and the cover story of this issue focuses on China's short yet vigorous history of outbound foreign direct investment, and the impact of the financial crisis on the fortunes of Chinese companies Going Global.

The other leading features of this edition is firstly an assessment of the global mining industry in the downturn and the impact on China, and secondly a review of China's stimulus spending on green technology with a perspective on China's rapidly evolving role in renewable energy production.

In addition to the leading features, this edition has all the usual sections such as Macroeconomic Monitor, China Trade Roundup, China Facts & Figures, and China Business News Highlights, along with our regular extended coverage of China sourcing and investment. Then there is also the four regional focus sections assessing China's trade and investment relations with Africa, Australia, Latin America and Russia. Each of these contains a range of statistics and analysis, and the Latin America section notably contains a dialogue with Mario Artaza, the Chilean Commercial Director in Beijing.

To view this free quarterly publication by THE BEIJING AXIS, please click on the link below, or go to the Knowledge section of THE BEIJING AXIS website to see the full range of our publications.

The China Analyst - September 2009.pdf     

China Customs recently published a report on the Top 200 Exporters and Importers in China in 2008. According to the report, the total export value of China's 200 leading exporters was USD 367.53 billion, an increase of 21.3% on 2007. The leading 200 exporters accounted for 25.7% of the total export value. The total import value of China's 200 leading importers was USD 448.98 billion in 2008, an increase of 30.1% compared to 2007. These 200 importers accounted for 39.6% of total import value in 2008.

The minimum export value of the leading 200 exporters increased by USD 0.1 billion, from USD 0.51 billion in 2007 to USD 0.61 billion in 2008. And the minimum import value of the top 200 reached USD 0.7 billion. This shows that, in 2008, the average trade value of the top 200 exporters increased to USD 1.84 billion, USD 0.2 billion higher than in 2007.

The top 10 exporters on the list were unchanged from 2007. They are the following (Rank, Enterprise, Export Value in USD million):
1 Shenzhen Hongfujin Precision Industry Co., Ltd., 26218
2 Dongguan External Processing & Assembling Service Co., 15514
3 Dagong (Shanghai) Electric Appliance Co., Ltd., 15040
4 Nokia Corporation, 8576
5 Helian Yongshuo Computer (Suzhou) Co., Ltd., 7849
6 Shenzhen Baoan Foreign Economic Development Co., Ltd., 7371
7 Tech-Front (Shanghai) Computer Co., Ltd., 6668
8 Huawei Technologies Co., Ltd., 6531
9 Inventec Science & Technology Co., Ltd., 5989
10 Renbao Information Industry (Kunshan) Co., Ltd., 5232

The minimum import scale of the top 10 was USD 5.23 billion, while that of 2007 was USD 4.66 billion.

The top 10 importers are the following (Rank, Enterprise, Export Value in USD million):

1 China International United Petroleum & Chemical Co., Ltd., 76463
2 PetroChina International Co Ltd., 24840
3 Shenzhen Hongfujin Precision Industry Co., Ltd., 21072
4 Sinochem Group, 12576
5 Dongguan External Processing & Assembling Service Co., 11633
6 Zhuhai Zhen Rong Company, 7755
7 BAX Global Shanghai 6471
8 Baosteel Group Corporation, 5613
9 West Pacific Petrochemical Company Co., Ltd. Dalian, 5453
10 AU Optronics Corporation, 4742

More interesting facts that came out of the report:

• All the enterprises ranked in the list of exporters distributed in 19 provinces in China
  
• 185 exporters of the top 200 are located in eastern coastal regions
  
• The total trade value of 2008 was USD 2561.6 billion, an increase of 17.8% compared to 2007
  
• The total value of exports was USD 1428.55 billion, an increase of 17.2% compared to 2007, and the value of imports reached USD 1133.08 billion, an increase of 18.5%

THE BEIJING AXIS has just published a new publication entitled The China Compass - July 2009, A Country in Figures.

The product of an extended period of research and refinement, The China Compass offers a concise yet reasonably comprehensive high-level picture of China's position and direction in the context of the world's economic landscape. While in essence intended for international executives with a China agenda, The China Compass is available for anyone interested in China and its ongoing integration with the world economy.

The China Compass sets out the elements of China's most basic country data and history, before moving on to a broad assessment of China's macroeconomic, trade, investment, financial and social indicators, followed by a comparative section assessing China's economic outlook in an international context.

I invite all our readers to download this free publication as we are content to have The China Compass make its full contribution in enhancing our understanding of (as is written in the foreword of the publication) the past development and future prospects of an engrossing, ongoing and unique Chinese story of human development.

To download this free publication, please go to the Knowledge section of the new TBA website, where a range of other THE BEIJING AXIS publications have also been collected together in one place.

As always, we welcome your feedback, and trust that The China Compass will add value of knowledge and insight to our readers.  

I recently accompanied clients to visit a few Chinese mining machinery suppliers. Conversing with these suppliers face to face helped me form a picture of the current work status of these companies, and afforded me a glance at the Chinese mining machinery industry generally. The following are some observations that made an distinct impression on me:

• Less busy

The worldwide financial crisis has inhibited cash flow on expansions and new projects in the mining industry. Almost all the companies I visited experienced order cancellations. Yet Chinese companies have learned to deal with cancelled orders with more a more logical strategy. They are working together with buyers to follow up and maintain good relationships. Nonetheless, these Chinese companies have much fewer orders compared with 2007 and early 2008. I saw 8-10 sets of equipment standing in the open area of one supplier’s factory waiting for collection. The supplier told me that at the same time last year, there was a great deal more equipment in the open area and the yard was full of finished products and trucks that came for collection.

• Innovation

Although the market is at the bottom, the suppliers are all very optimistic and spending more time on R&D. I attended ‘Australia Sino IronФ7.93m×13.6m Ball Mill Factory Test Run & Delivery Ceremony’ hosted by CITIC Heavy Industry. TheФ7.93m×13.6m ball mill is the largest mill manufactured in the world and totally developed and manufactured by CITIC HIC. The other private mining equipment company I visited said they have over 100 engineers working in their R&D department and develop on average 10 new products every year.

• Expanding overseas market

Although I know that the Chinese mining equipment industry is expanding its overseas markets, what I saw and felt during this visit was still very surprising. The companies I visited all have a large international business department with 20-30 people. The people receiving me generally spoke good English, were sensitive to western culture and have accumulated remarkable knowledge and experience in dealing with orders, negotiations and crises with overseas buyers. Some of them have started to actively approach overseas clients by searching on the Internet and sending emails directly, or attending exhibitions.

There is no doubt that the Chinese mining equipment industry still has a long way to go before their manufacturing capability and after-sale service can be recognized internationally, but this objective could be attained much sooner than when many international buyers assume, especially those who never come to China and see these factories for themselves.

To get some perspective on where we currently stand with the global economic crisis, we’ve put together the following snapshot of the current economic situation in a few selected countries.

为更好地了解目全球经济危机发展到目前阶段给各国的影响，我们收集了以下的一些国家关于目前经济情况的新闻。

South Africa 南非
South Africa’s manufacturing output declined by a record 21.6% year-on-year in April, with the country recording its lowest manufacturing output since January 2004. Statistics South Africa (Stats SA) reported that the basic iron and steel, nonferrous metal products, metal products and machinery division had declined by 26.4% year-on-year in April. The motor vehicles, parts and accessories and other transport equipment industry registered a 49% decline year-on-year. The petroleum, chemical products, rubber and plastic products division declined by 15.2% year-on-year.

2009年4月，南非的制造业产值与上年同期相比创纪录的下降了21.6％，这也是该国自2004年1月起最低的制造业产值。南非统计局的报告显示钢铁，有色金属产品，金属制品和机械制造业同期下降了26.4％，有助于6.1 ％的下降。汽车及零部件和其他交通设备行业产值同比下降了49%。石油，化学品，橡胶和塑料产品工业同比下降了15.2%。
Source: Engineering News

CIS 独联体国家
During January-April industrial output increased only in Azerbaijan among the CIS states, according to data provided by the CIS Interstate Statistics Committee. A decline in industrial output was registered in the other CIS states. The decline is lowest in Belarus — 3.6%. Belarus is followed by Kazakhstan (4.8%), Armenia (11.1%), and Tajikistan (11.9%). Among the CIS the industrial output decline is largest in the Ukraine (31.9%), Moldova (25.7%), Kyrgyzstan (15.6%), and Russia (14.9%). In January-April the average industrial output decline across the CIS states totalled 16% in comparison with the same period of last year. The statistics committee has no data regarding the industrial output of Georgia, which is pulling out of the CIS, and no data either from Uzbekistan and Turkmenistan.

根据独联体国家间统计委员会提供的数据，2009年1月至4月独联体国家中只有阿塞拜疆的工业产值有所上升。 其他的独联体国家工业产值都有下降。下降比较轻微的是白俄罗斯- 3.6％。其次是哈萨克斯坦（4.8％），亚美尼亚（11.1％）和塔吉克斯坦（11.9％） 。下降最严重的是乌克兰（31.9 ％），摩尔多瓦（25.7％），吉尔吉斯斯坦（15.6％），俄罗斯（14.9 ％）。 1月至4月独联体国家平均工业产值同比下降16％。以上数据统计不包括格鲁吉亚，乌兹别克斯坦和土库曼斯坦。
Source: BelTA

Australia 澳大利亚
Australian Industry Group-PricewaterhouseCoopers Australian PMI® fell by 3.1 points to a historically low 30.1 in April. The seasonally-adjusted new orders sub index fell 3.8 points to 26.7. Exports fell for the eighth consecutive month, manufacturing activity fell in all states. The largest falls were recorded in Western Australia and South Australia.

澳大利亚工业集团和普华永道联合公布的2009年4月制造业表现指数下跌3.1点至30.1，是迄今为止的最低值。新订单指数下降3.8点至26.7 。出口连续第八个月下降。制造业活动指数在澳大利亚各个地区都有所下降。下滑最严重的地区是西澳和南澳。
Source: Australian Industry Group

Brazil 巴西
Industrial production in Brazil rose 1.1% in April from March, the government's statistics agency IBGE said. When compared with April 2008, industrial production plunged 14.8%.

根据巴西政府统计机构IBGE的数据，2009年4月巴西工业总产值比3月增长了1.1%，与上年同期相比下降了14.8%。
Source: Reuters

The new edition of The China Analyst (May 2009) has been released, and is now available for download by clicking the link below.

As one of the main themes, this edition tracks China's progress in charting a way out of the financial crisis, paying particular attention to the implementation and impact of China's ongoing stimulus package and the outlook for growth in the course of 2009. Yet we also analyze China's stimulus package more closely in terms of its environmental policy implications, and the third leading article provides an assessment of new issues and salient trends in China's growing relationship with the African continent.

The Macroeconomic Monitor section provides an assessment of the performance of China's economy in the first quarter of 2009 and the prospects for the rest of the year, followed by all the usual range of sections filled with data and analysis on China's financial markets, trade, investment and industry. The China Sourcing Strategy section in this edition outlines the latest info and analysis on the successful formulation of China sourcing strategies in the current environment. This edition also features an expanded series of Regional Focus sections, constituting 14 pages filled with data, research and analysis on the strategic space between China and Africa, Australia, Latin America and Russia.

I trust our readers will enjoy this edition, and as always we welcome all feedback. 

To download this free publication, please click the following link:

The China Analyst - May 2009.pdf

B. Sourcing through a professional service provider

Nowadays, there are a great number of sourcing service providers who play an active role in China. Their scope, deliverables, and fee structures are diverse. Some of their service models are similar to that of a trading company. However, some models are more creative and a foreign buyer can get great benefit and success by sourcing with the right service provider.

In my opinion, the ideal model is for the sourcing service provider to serve as your own sourcing team in China. This team can do all the work related to sourcing: 1) Identify potential suppliers, 2) Collect quotations, 3) Arrange a trip plan to China for the buyer, and accompany them to meet the potential suppliers, 4) Negotiate with the suppliers, 5) Assist the buyer and the suppliers to sign the supply contracts (while keeping prices transparent among the three parties), 6) Supervise the subsequent transaction process (with the suppliers exporting directly to the buyer) and manage the potential risks, 7) Manage the ongoing relationship between the buyer and the suppliers, and 8) Monitor the development of the industry.

A good sourcing service provider can help a buyer save both time and money in sourcing from China, although there are also issues to look out for when working with a sourcing service provider, such as making sure the service provider does not overcharge the buyer in terms of service fees. Yet obviously, using the wrong service provider can entail a great deal of risk. Therefore, it is essential to find the best sourcing service provider through a proper filter, taking into account the ideal service model, a reasonable fee structure, and reliable service quality.

From my point of view, the ideal sourcing service provider for someone who buys from China should meet the following criteria: 1) They should have a multi-cultural sourcing team to be able to communicate thoroughly with both the buyers and the suppliers; 2) The team members, especially the Chinese team members, should have extensive industrial and trading knowledge and experience; and 3) The sourcing service provider should have very good and solid references for their sourcing services.

Lastly, sourcing through a sourcing service provider obviously applies to these kinds of buyers: 1) Those who need to find the original suppliers; and 2) Those who do not have their own sourcing team in China or the team they currently have is not yet working well or fully operational.

The time that a buyer spends at a plant is crucially important. The main goal of taking a plant tour is to observe and judge the plant. So, taking full advantage of this visit comes down to a few very important considerations: What aspects should you pay particular attention to during the trip? and What questions should be asked in addition to inquiries about the product itself?

Here I want to share some tips based on my personal experience.

• The boss/decision maker of the plant
  
  In general, the boss/decision maker’s attitude or working style is conveyed to his/her subordinates, and hence it will affect the efficiency of the whole production/delivery procedure. So if you find the boss is unprofessional or uncooperative from the very beginning, you should think twice about your choice of supplier.
  


• The equipment of the plant
  
  The equipment can normally give a clear impression of the abilities of the plant. We are not necessarily saying the equipment has to be imported equipment; rather, we try to understand if the given equipment can deliver the ideal product. Asking the plant for the equipment list and maintenance status will be a smart test.
  
  
• The production procedure and quality control
  
  Asking the plant if they have proper production procedures/quality control systems is very important. That helps us to understand if there is a systematic way to audit the whole process of implementing our order and insuring the right product is delivered on time. Normally, our questions would be along the following lines:

1. Does the factory have daily production reports?
2. Does it keep a weekly production progress report to identify and compare in-process and completed orders with order delivery dates?
3. Does the factory have a written QA procedures or manuals?
4. Does the factory complete its own final audits?
5. Does the factory have documentation inspection standards?
6. What percentage of received raw materials is inspected?
7. Is there an inspection process between each production section?
   

Of course, the questions above are only part of what should make up the most frequently asked questions, and these are also subject to each buyer's individual needs during the visit. Yet they can be used as a basic guideline of what needs to be asked. 

• The working environment of the plant
  

People sometimes tend to neglect the working environment of the plant. But this is actually an important indicator of the quality of the plant and of some aspects that will affect the quality of the product, such as cleanliness and tidiness of the production areas, and adequate lighting in the factory, especially in areas that will affect the quality of the product (inspection, hand operations, painting, silk screening, printing, packing, testing, etc.), etc.

Generally speaking, many aspects affect and can reflect the quality or the standard of the plant. Different products, different amounts of an order can sometimes also make different requirements of the plant. The visitor should prepare the necessary questions beforehand, and not merely ask random questions during the visit.