Trends:
Here is a look at some of the recent trends that are adding to the growing popularity of Outsourcing to China:

Cost Effectiveness
This results from a combination of a large cadre of skilled, disciplined work force; low labor rates; and continued incentives to both foreign and domestic firms to invest in key industries. In addition, ample nature resources, cheaper land and transportation, and continued improvement on production efficiency all help cut the cost down in final products and services.

Advanced Infrastructure
Key to this sustained economic growth is China's ever-improving economic infrastructure. While countries such as Thailand and Mexico may be able to compete on labor rate, they cannot guarantee on-time shipments. Their infrastructure is old and in much decay. However, throughout China, transportation networks are being upgraded to facilitate the large volumes of exports being produced in its factories:

• Rail tracks have been doubled
• Expressways are being built
• Sealed roads lead to factories throughout the country
• Ports are being modernized
• All major ports are connected with railways and highways

IP Conditions
As China is the leading manufacturing country of the world; its legislation has adopted new commercial and intellectual property laws in recent years to favor those foreign companies conducting business in China.

Accession to the WTO
China's formal accession to the WTO was agreed upon on December 11, 2001. With this accession it is predicted that China will become one of the largest Economies in 50 years.

Chinese Domestic Market
The number of businesses operating in China is rapidly increasing. Over 200,000 foreign companies are already manufacturing in China.

Agent or Direct source:
There are benefits and disadvantages to both approaches. A company must acquire a set of basic capabilities for outsourcing, such as the expertise to evaluate a suppliers' ability to meet requirements; test preproduction prototypes; create samples; and fulfill logistic activities such as setting up a bonded warehouse. It is very common for a company to work initially with U.S. - or China-based agents until the internal staff are trained to deal directly with the Chinese suppliers. Nevertheless, if your company sources more than $100 million a year in products from China, it makes economic sense to have a unit that can go directly to the suppliers. However, certain agents are skilled at handling complex product categories, and a healthy flow of agents can provide useful information about changes in the marketplace.

Savings:
What can happen if I do not proactively investigate the benefits of outsourcing manufacturing in China?
If your competitors successfully outsource manufacturing in China and can offer prices to your customers that are 30% to 50% less than they are currently paying you, you're going to lose customers in a hurry. Most large companies, including Wal-Mart and GE, are already asking their suppliers to set up manufacturing operations in China, and many of your customers are likely to follow suit in the near future.