Different clients can have very different procurement projects. As an example are two cases in central and east China, in Hubei and Jiangsu provinces. One is a large African manufacturer seeking to integrate China into their supply chain of advanced weighing equipment; the other is a government entity seeking to procure special purpose vehicles. One common theme we have seen and is a constant in China is the specialization of cities/towns. For the former client, there is one city, Changzhou that produces roughly 40 percent of China's weighing systems, while another city, Suizhou produces more than half of the country's special purpose vehicles. What is incredible however is that in each city there are literally hundreds of suppliers producing the same products. In most cases, suppliers are simply spring offs from one major company (usually a state-owned company or an international firm) and then replicate the larger firm's products. Despite this agglomeration of suppliers, the sheer complexity of identifying reliable suppliers with adequate international experience that can guarantee consistent quality remains a challenge.

Different strategies

Another interesting observation is how each of these suppliers, even the small firms, have different strategies of gaining and maintaining market share. For instance, those that focus entirely on the lower end market are bound to keeping their prices low in order to stay competitive. On the other end, if a company is to compete on quality, their prices must be higher, and they must also be able to compete with the top international firms (or SOEs) on quality, brand recognition and price. The result is most companies will compete on the lower end creating what is known in China as "exing jingzheng" (vicious competition). A given city can have hundreds, if not thousands, of suppliers all competing in the same space. However, even in this "lower end" of production, there is still a drastic distinction among firms in quality and price.

Balancing cost and quality

One way to divide these companies for instance can be "lower low end,""middle low end" and "upper low end." The former two are typically not suitable for international export, but the upper lower end may be exportable depending on the actual product, industry standards amongst other factors. Most African companies seek a "middle of the road" company that balances cost and quality. However these companies can rarely sustain their market for one key reason. Since their products are more expensive than the lower end companies, they are not attractive to buyers focused on price. Yet at the same time, it is unlikely that their products can match the quality of top domestic or global brands to warrant a higher cost. Therefore, such companies struggle to attract any reliable customer base domestically. The "middle of the road" companies are few and are at most times either highly dependent on the export market or they divide their products into "upper lower end" for export and "low/middle lower end" products that can compete in the domestic market.

Getting what you pay for

Therefore, when African companies are procuring from China, they should be aware of the "yifen qian yifen huo" concept in China, simply put, "you get what you pay for." One should therefore not seek a product based on price, but rather one should seek a quality product and then understand the pricing. Given the exing jingzheng situation mentioned above, most companies (not all) will try to match a product to a client's budget even if it's not of the desired quality. If one is lucky to identify a "middle of the road" company that is honest, it may be possible to balance cost and quality. However, if one is exclusively focused on price, it is very possible that one will find a product, but there cannot be a guarantee on its quality.

The goal in China sourcing therefore should be to identify who are the doyens of each market as they set the industry benchmark for quality and standards. These are usually large domestic state-owned companies such as CITIC machinery or Northern Heavy Industries or global companies such as Caterpillar and Sandvick. Once one understands where a given supplier stands in relation to the price and quality of such companies, one can successfully begin the process of identifying suitable domestic suppliers.