The Blog:

Cotton Price Hike affects Textile Industry 11/3/2010

Cotton futures on the New York Stock Exchange have reached an all-time high; the highest that the NYSE has seen since the start of cotton trading 140 years ago. China, the world’s largest buyer of cotton is experiencing this shortage firsthand. Chinese manufacturers, who use 40% of the world’s cotton, have said to be considered endangered, according to a report published in yesterday’s Bloomberg BusinessWeek.

Why the price increase?

China’s vast size and agricultural strength still cannot keep up with their demands, and hasn’t been able to for some 12 years now. Hence, China has been importing from other countries, further decreasing the global stockpile, driving prices up. Weather also plays a factor, as a cold spell has slowed harvesting and stunted production in China this October. The global supply is forecast to be at a 14 year low. Asia’s stockpile is at a 16 year low.

Interesting Fact! The U.S. has sold almost 26 times more cotton to China compared to last year, thus far.

Full Article
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Harman expands China Operations by $100 Million 10/27/2010

Harman Expands in ChinaThe global audio and entertainment product manufacturer based in Stamford, Connecticut announced their plans to expand their China manufacturing and research capabilities by $100 Million USD this Monday. The new operation is set to be built in Dandong in the Liaoning Province in Northern China. They currently have operations in Shanghai, Suzhou and Shenzhen. Harman will be able to take advantage of some of the investment incentives provided to foreign investors by the city of Dandong.

Harman provides automotive electronics and audio systems for global automotive brands such as Audi, BMW, Chrysler, FIAT, Ferrari, General Motors and many more. Harman’s plan to expand in China seems like a logical step; last year China surpassed the U.S. as the leading automotive market in the world. Harman already has over 120 employees in China and has set a $1 Billion China sales objective to work towards.

Harman has seen reason to continue China expansion after the success of their participation as a sponsor and supplier to the Shanghai World Expo this year and record results at the 2008 Beijing Olympics as well.

Bloomberg Newsweek’s full article
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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.

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