Emerging Market of China

1
Emerging Market of China

• Dr Ping Wang
• Deputy Director, Public Procurement Research
  Group
• University of Nottingham

2
World Population today

• 350m people
• EU

• 300 m people
• North America

• 2.9Bn people
• Asia
• 1.3b China
• 1.1b India

• 24 m people
• Australia and
• New Zealand

• Over 1 million Engineering Graduates per year

3
Globalisation across Emerging economies

• Source Boston Consulting Group

4
The top 10 most attractive FDI destination
Where are people investing?

• China is by far most attractive
• India is very close to edging out United
  Statesand probably will in near future
• China and Indias attractiveness to investors
  will remain high for the next 10 years

5

• KPMG survey (Jan 2007)

Four in Ten foreign companies with operations in
the China mainland suffered losses due to
fraud Only 50 investigated them Only 25 of
companies have a supply chain review
programme Only 31 conduct due diligence on
their suppliers and business partners When
dealing with a 3rd party, either as customer,
supplier or JV partner, you are essentially
importing their ethics and integrity into your
control frameworks
6

• PMMS research into Defect Free delivery

• Direct measurement of over 100 China based
  suppliers across 2 industry sectors showed
  that..
• less than 5 of suppliers delivered on time and
  to agreed quality standards every time over a two
  year period

7

• Some comments European/NA organisations with
  sourcing operations in China

• Our China based suppliers are often late

• Our suppliers dont seem to understand our
  requirements

• The supplier cannot meet our volume demands

• Our local China office is not able to influence
  the supplier

• We cannot get any attention to our problem at the
  supplier

• IPO Office

• Local

• Quality is fine one shipment but not the next

• The supplier does not manage his sub suppliers
  well

•  

•  

• It was ok when we were here but slips when we are
  back home

•   

8

• Some comments from on-the-ground Sourcing teams
  in China

• Communications with home office not clear

• Your English is not English as I was taught in
  China

• Everything urgent, unrealistic time-frames

• We cannot get up-to-date drawings

• Supplier defers to westerner in meetings and we
  lose face

• IPO Office

• Local

• Black-Hole syndrome

• Forecasts are wrong, Suppliers become vary of
  estimates

•  

•  

• Need more resources in China if we are to assure
  quality

•   

9
Sourcing in China obstacles

• Suppliers in some industry sectors in China are
  very busy with domestic business (eg Utilities).
  Not interested in business outside of China.
• Even less interested in audits or questionnaires
  from potential customers who are just checking
  the market or who promise but do not deliver.
• Quality requirements greater outside of China.
  Sometimes viewed as a hassle
• Cultural differences
• Lack of reliability
• Lack of continuous effort from Western utilities
• Subsidiary operations of major overseas suppliers
  which the utilities will already know

10
Sourcing in China Advantages

• Cost reduction
• Chinese government willing to foster
  internationalisation of Chinese suppliers
• Chinese suppliers general interest in gaining
  business with utilities outside China.
• Some suppliers will be keen to pay to
  participate, seeing this as a marketing
  opportunity

11
Changing Legal Environment

• Foreign Investment Laws
• Enterprise Income Tax Law
• Labour Contract Law
• Anti-Monopoly Law
• Tendering Law
• Government Procurement Law

12
Chinas GPA Accession

• Background
• Progress
• Issues
• Solutions