Specialized source companies 

The other option while sourcing in China would be using services provided by specialized companies. Because of its advantages and lower costs, this strategy is widely used in China. In recent years we have seen the development of many service companies providing sourcing and purchasing solutions.

One of the biggest advantages of using this strategy is its efficiency and low cost. In fact, using these services, you do not need to establish a Chinese team because these companies usually provide their services in different languages, therefore you can manage your purchasing projects directly with these companies and avoid losing time and money to set up your own sourcing team.

In addition, sourcing service providers have usually a wide network of manufacturers in China. This will help your sourcing project to be completed much faster and with more efficiency. The experience of these companies in terms of knowledge of Chinese business etiquette and legal procedures could also be useful in price and contract negotiations.

Two types of sourcing projects are mainly performed in China with procedures that are slightly different. The first type is "industrial sourcing" which concerns mostly products with higher technology, more complex design and which are highly specialized. An example of this type of products would be auto parts or medical equipment. For this type of sourcing foreign entrepreneurs should work directly with manufacturers and not with trading companies.

For a matter of quality and control of the purchasing, it is important to establish contracts with the manufacturers highlighting the important issues. Even if your company does not have the experience and the right people to deal with Chinese manufacturers, you could use a consulting company to help you in this matter and to establish purchasing contracts through this company.

Commodities sourcing 

The other type is "commodities sourcing," which concerns more simple consumer products. For these types of products there are several strategies that are commonly used in China. You can firstly use trading companies that usually have many types of products. Of course the buying price will be higher than that of manufacturers, but you can find your products faster and easier. You should keep in mind that dealing with a trading company might be easier, however the control over quality and purchasing is lower.

Another solution could be the international commodities markets that could be found in cities such as Yiwu (Zhejiang Province) or Guangzhou (Guangdong Province). In this case, foreign buyers directly choose their products in different shops, then purchase and contract a freight forwarder to ship their product to their country. This option is suitable only for small-scale sourcing projects and the quality of the products is usually quite low. Another problem is that most of the shops in these markets accept only Chinese RMB as buying currency and this might be a problem for foreign entrepreneurs.

Choosing the right strategy and partner is the key point to sourcing in China. This first step affects all the following stages of purchasing projects in terms of quality and price, so it has to be performed carefully.

Column prepared by Milad Nouri Managing Director of China Consultants International Limited www.China-Consultants.biz