China had a booming growth in recent decades and we all believe it will not stop in the future. China was being well-known as world factory thanks to the large population and the
encouraging policy.
The developed countries love to ship goods from China because of the nice quality & wonderful price. However, merchandise gets out and money comes in which leads several China cities becoming mega city.
The China market changes here.
Before 21 century, higher labor cost & long distance transportation barrier most Chinese people to purchase overseas goods even the quality is better. The factories only produce goods for export and no one would consider selling overseas goods to China people. But nowadays, story has changed. China is the second biggest market worldwide. The domestic procurement spending is getting higher so buying raw materials from overseas becomes popular. On the other hand, thanks to the strong purchasing power, the good margin attracts thousands merchandise flock into China.
I have been working with a US global leading 3PL company since 2013. The whole company was being proud of the top 3 FCL volume of the export lanes from Eastern China to United States. But their minds are being changed since 2015, the China offices started to build dedicated import sales & operation team. The high management invested more on inbound service lanes. Incentives are being launched to encourage the whole company to focus more on inbound business into China. Without questions, the market trend & profit are the main factors to push the company to make the changes. Even though export business still occupy 75% of the company performance. But more and more manufacturers are moving to surrounding countries, the sharp competition & the higher labors cost squeeze so much profit compared to 5 years ago.
I was selected into the dedicated import sales team in 2015. It was a hard time because literally none of our team members know how to do import business. It took almost a year for me to match my performance target. But that period convinced me that the import market in China is incredibly huge. The top-class industries such as semi-con vertical are eager to get advanced products & technique from developed countries for implementation. Large numbers of China manufacturers are already playing irreplaceable roles in the related industries chain that auto-parts is a typical one. Consumers goods, foods, groceries are also being accepted by China consumers. Hundreds of businessmen are trying to find ways bringing them inbound. However, years ago most forwarders and agents do not put much attention on inbound lanes. So we spent a lot of times on finding ways to improve our service to secure more business. And fortunately we survived in this field. And I would like to share several of my perspectives.
First of all, generally speaking the inbound commodities have much higher cargo value than outbound. In the past decades, China has almost the world’s cheapest labor cost so the outbound shipments are not being sold in a good price. And overseas countries have more advanced technique which is exactly why their products are more value-added. So relatively the importers in China care more about cargo safety & efficiency instead of shipping cost. Secondly, the international transportation market level largely depends on supply and demand. Export volume in China is roughly 5 times of the import volume which causes much higher pricing for exporting. Here is an example in early 2018, an average ocean cost of 1x40’ from Shanghai to Los Angeles was around USD 1300.00. But forwarders only charges USD 350.00 for a returned 1x40’. Apparently, the ships need to sail back and the empty containers need to be brought back so it make sense that carriers are willing to offer ultra-low pricing. Therefore, the above two reasons cause higher profit margin for us, who were suffering from the high market competition of exporting. And for the traders, they will surprisingly found the shipping cost is only 3% or 5% of the total buying expense.
The third is overseas connection, focus more on your overseas partners would definitely enhance your competitiveness. Global networks, one-time communication, lead-time controlling would build up your reputation. The fourth concern is the China customs, make sure your or your customers’ products are legal according to local regulations. To learn more about the tax & duty rate and follow up timely for any new customs announcement helps a lot on adjusting the market activities.
Last but not least, China opens numbers of new policy for international trades. Free trade zone, bonded warehouse & E-commerce are hot topics in recent years. Leading enterprises are already moving into these new business mode. Many world-famous 3PL companies built warehouses in free trade zone. JD, Alibaba & T-mall get permits of bonded warehouse for purchasing overseas goods by personal purpose. My company also set up a transportation team to develop domestics business covers contract logistics and warehouse service of both bonded & normal. And in 2018, we had an E-commerce team who made us to be more professional on this new field.
Anyway, the world’s connection are being more tightening. China is changing its role globally. So please don’t just put your attention on the traditional export trades. Focus more on import trades, and focus more on new trends would lead to new opportunities.
This is a guest post contributed by Mr. Ricky ZHENG, Import sales supervisor in C.H. Robinson CHINA, you may connect him on Linkedin.