Two Significant Reasons Why China is Key to International Expansion
WHY CHINA? Helge Kristensen, Vice President of Hansong Technology, tells us why he believes China’s position as a leading region for product development and sourcing will be strengthened in the near and mid-term future. Infrastructure and the labor force are two key points, but there are many more insights as well as Kristensen’s insider perspective on what they mean for you.
Hansong Technology is a privately owned company with assets in Asia and North America. Its headquarters and manufacturing facilities are located in Nanjing China, one of China’s principal centers of education, technology research, and culture roughly 300 km west of Shanghai on the Yangtze River.
By asking a number of professionals with special insight to answer the question “why China” in more depth and detail, we hope to make it easier for you to decide if China is a route you should consider right now.
9 minute read
Summary: In the short- to mid-term future, the infrastructure and workforce of China, in combination with the political emphasis on development and tech, will keep China at the global center of product sourcing and development. The geopolitical situation is one factor that might change that in the long term, but Kristensen lists his reasons why he believes the changes that are coming will be looking more like an expansion.
trade wars, and on top of that entering the second year in the shadows of a global pandemic, I believe many people are wondering how it will impact the world both short and long-term when it comes to product sourcing, development, and sustainability in Asia.
I have been living in China for more than 20 years now, and I have seen the rise and changes in China’s development, from focusing on low-cost manufacturing to being more driven in development and high-end technologies. It has been amazing and unprecedented what China has achieved in a relatively short period of time—the growth to become leading in product development, manufacturing, product sourcing, and now to be leading in certain high-tech areas.
The foundation for this development has been the establishment of an infrastructure, which is supported at all the steps in this development process. The government has been incentivized to support business growth, and this is especially apparent when it comes to the infrastructure of road networks, shipping, and logistics handling. This has been perfected, so
(...) China now has the most well-established high-speed road network in the world, which is the key to optimizing manufacturing and supply chains.
The supply chain is well-established and flexible, and again most likely one of the biggest assets in Asia/China manufacturing. The value-added supply chain can cover all aspects in product development and keep it in same region. This alone provides speed to market, flexibility, innovation, and with that new opportunities.
The labor force, which is another critical and fundamental part of the equation to sustainable development in the Asia region, is next to none in quantity and has a fantastic quality, thanks to the extensive focus on bringing the brain trust back to Asia to establish a home-grown high technology environment that will further support the region as a natural product sourcing and development hub.
What could impact Asia as the leading region as a development partner and what could change the sustainability of the Asia region as leading in product supply?
The geopolitical situation has had an impact as well as a focus on bettering the living standard with increasing salaries, living costs, and a change in the perception of being a factory worker. We can see and feel the changes coming and believe that we will see trends where companies will become more globally/locally presented.
This is done to minimize the risks in the supply chains and with the regional political or environmental impact. Companies will constantly try to mitigate potential risk or disruptions and we will see some companies move factories from the region due to the above-mentioned factors. I believe the total impact will be insignificant in the larger scope as the supply chain is too well-established.
As mentioned, moving production and sourcing from Asia/China is not a simple task. It involves very long-term planning and establishing supply chains, education, and so forth, so
instead of moving, we will see factories and companies expanding from the region, as part of a more global risk management strategy.
Manufacturers will establish what I will call satellite factories/hubs in strategic global locations, which will work as local representatives for the factories on a global scale. This will minimize the risk for disruption in supply chains due to changes in resources, politics, or the environment.
There is little doubt in my mind that it will have an impact on China as the manufacturing hub going forward but it will not change the Asian region as a center for development and sourcing. Rather, it will initiate a broader natural expansion of the value-chain, regional and local product customization, as well as risk management. I see this as an opportunity for expansion.
For decades, China has built up a complete supply chain infrastructure, which is unparalleled in any other region, and it is difficult to fully shift manufacturing/product sourcing to other regions both short-term and long-term for certain products.
As a result, in the future, we will see more regional/local satellite manufacturing hubs going forward to support local trends in product design and speed to market. Local in this context means different global regions.
However, as supply chain infrastructure is crucial for any brand, manufacturing, and innovation, I continue to be positive about the suitability of China as a prime location for product development and sourcing.
Asia and China have changed focus a lot and are now driving high-tech product development more strongly than before.
The inflow of incredibly talented resources who are coming back to China driven by the geopolitical situation and incentives, continue to position the Asian region, particularly China, as a very strong partner in manufacturing, development, and sourcing.
The focus from only making products will change going forward if it has not already, and we will see a more holistic approach to product development and design. China has all the parts of the puzzle to support this change and it is already happening. Keywords like Cloud, AI, control, connectivity, and sustainable development are all key parameters that play an important role in why China will continue to be a center for product development, design, and manufacturing.
The clusters of high-tech companies and the focus on development in China make new technologies more approachable and with the well-established supply chain create opportunities for innovative development, which in the end can be transferred to the satellite factories/hubs globally.
In addition to this, we should not forget the region’s market potential is huge. China itself is still one of the biggest markets so that alone will drive innovative product development and a better and cheaper supply chain.
From my perspective, the product development and product sourcing in Asia and China will not particularly change short- or mid-term. We cannot predict the long term, but it is highly unlikely that so well-established an environment moves to other regions entirely. We will see a broader value proposition from manufacturers, brands, and solution providers from being a region-based partner to being a more global partner with local satellite factories and hubs.
This is an updated version of the article that originally appeared in Loudspeaker Industry Sourcebook.
Do you have questions about YOUR journey to China? Send your comments, questions, or feedback or book a meeting at firstname.lastname@example.org.
Connect with Helge Kristensen on LinkedIn.
Hansong Technology is one of the partners behind Innovation House China-Denmark.