Where should you set up a factory in China? 9/30/2010

Good Question.  That’s something that most companies struggle with at first, and something many companies struggle with after they set up a factory.  I recommend avoiding the latter by doing your research.  China is slightly larger than the United States in total land area and has cities (some more desirable than others) scattered throughout the country.  I often use this example to help people begin this conversation:  If you were an automotive manufacturer, would you be better off setting up your factory in Detroit or South Beach?  Obviously in Detroit.  Detroit would provide a skilled labor force, companies in similar industries, a pro-manufacturing regulatory environment, local supply chains, etc.  As such, I recommend thinking about the location of your existing facilities first.  What works?  What hurts?  Then you can begin to look for similarities in China and begin to narrow down investment locations.

Most foreign companies end up in the greater Shanghai area or in the greater Guangzhou area.  This is largely because these are the major manufacturing regions that have invested heavily in infrastructure.  These regions may both be places you want to consider, but I recommend doing additional research as you may find that another region will be far more suited to your industry and may offer more attractive investment incentives as a result.

Start with your customers.

Locating a facility down the street from your customers is always a good idea.  I recommend using Google Maps or Google Earth to map out all of your customers on a map of China.  This will help you to identify regional groupings that exist.

Focus on your competition.

After you know where your customers are, take a look at your competitors.  If you find that your competitors are all located near your customers, there might be a reason for this…

What about your supply chain?

This may be one of the most critical factors to take into consideration as you evaluate different regions and go through your site selection process.  It is extremely important to make sure that your supply chain can support a facility in a certain geography.