Questions & Answers Section Given in HKICPA Seminar on 23 Jun 2012

Question 10:
So as an international buyer how can we complete with domestic buyers who don’t require as much shipping costs and have lower quality standards? – I mean we source for international furniture companies and find that Chinese suppliers are not interested in working with International buyers anymore because they have enough business in China.

The main factor remains with the strategy of the Chinese supplier. And this may depend on which industry that you are in. But the advantage of the international buyers is that they have a technology advantage either in engineering, branding or management that the Chinese supplier is eager to learn. Do you as a buyer have non-monetary items to give to the Chinese supplier? – Knowing what non-financial factor they value highly is critical, as you might be able to provide these with little cost to you. For example, in textiles, Chinese supplier will use their international customers to learn about new design which they will develop for the domestic market. If as an international buyer you do not intend to compete in the domestic market in China, then the cost of sharing designs/ideas might not be as high. With the increasing growth and size of the China domestic market it is imperative that buyers include more non-financial factors in their discussions with Chinese suppliers. The domestic Chinese buyer competition makes this a priority as they largely compete on cost and have that lower quality standard. Then there will be a better chance you will have in developing a win-win relationship.

We know that 2018 is about the time when the China domestic market will be the largest in the world, so challenges remain for buyers to think about their China domestic market strategy if they haven’t already done so.