Manufacturing in China pros and cons: Compare your options here!

Manufacturing in China Compare some proscons of your options here

Time to compare your options for manufacturing in China

When it comes to manufacturing in China there are a number of options for companies to choose from such as registering a WFOE, dealing with a sourcing agent or partnering with a contract manufacturer. Finding the right manufacturing solution for your company and its specific needs is certainly possible, but the question you have to ask yourself before you risk wasting your time, your money and possibly losing your nerve is, “Which of these solutions fit in best with what my company needs?”.

Knowing the pros and cons of each of these options all of this and how each different option may fit in with your specific needs is the very first step in deciding how you want to take on manufacturing in China. To this end, PassageMaker has compiled an infographic that provides a head-to-head of the pros and cons of some of the available options for companies looking to manufacture in China. Our infographic covers:

  • WFOE
  • Contract Manufacturer
  • Trading Company/Agent

Take a look below to discover what the manufacturing in China pros and cons are…


An insider’s look at options for manufacturing in china today!

An insiders look at options for manufacturing in China

Manufacturing in China from my perspective

During my 20 years living in Asia, I’ve owned or operated a number of different business entities in China, ranging from manufacturing WFOE’s to US-China joint ventures to trading companies to buying offices. I’ve also dealt with agents, factories and service providers of every variety imaginable, from professional companies to total scam artists.

China is not only a massive market but it changes rapidly, so I don’t claim to be an expert on all aspects of your China business. And anybody that claims to know “everything about China” should not be taken seriously! I’ve had my share of success as well as failure, and this has prompted me to compile a whitepaper where I’d like to share some of the key lessons, pitfalls and best practices that I learned the hard way when answering the deceivingly simple question of “what are the options for manufacturing in China?”.

Read on to find out what you can expect from this whitepaper and how it will benefit you…

“What can you expect?”

This whitepaper covers each of the following options for manufacturing in China:

  • WFOE
  • JV
  • Contract Manufacturer
  • Sourcing Agent

For each of the above mentioned supply options, as well as some of their lesser known variants, I go over the pros and cons in great detail, share information on their costs and divulge insider information based on my experience.

How can you benefit from this whitepaper?

My goal is to help the reader identify the best option for their particular needs as selecting the right partner is the single most important step in the overseas manufacturing process.  And the “right” supply option is highly depending on the buyer’s particular mix of order size, budget, available time, quality level, intellectual property exposure and general China understanding.

Below you can see the 5 key criteria I have used to help readers make a decision about which production option is best for their particular needs:

1. Level of Chinese Expertise Required
How well do you need to know the language, business culture & legal systems.

2. Typical Order Size
Does the buyer have to be a certain size?

3. Control over Lead-times, Intellectual Property, Quality Standards, Social Compliance & Price
How exposed is the buyer to non-confirming goods and are there additional costs needed to ensure quality standards are achieved? How hard is it to be a responsible corporate citizen in terms of workplace safety, labor practices and environmental protection? How exposed is the buyer to having their ideas ripped off?

4. Transparency
Does the buyer get to know the true identity, compensation and motives of the key players in the supply chain?

5. Tax Complications
What’s the impact on global taxes and the costs of filing at home or abroad?


PassageMaker is a Type 2 China sourcing agent!

PassageMaker is a Type 2 China sourcing agent!

Great post from Renaud entitled “The different kinds of sourcing agents“. Although PassageMaker is really a contract assembly company, we end up doing a lot of sourcing as well. We are a “Type 2″ China sourcing agent according to Renaud’s categories.

I agree with Renaud’s advice in general, though I am a bit more negative of the Type 1, the trading company. Too often we see trading companies that are really glorified Type 3’s. They are making money on both sides of the deal and vanish in a flash the minute the going gets rough.

Avoid Type 3’s like the plague. Mike Bellamy tells a great story of going to a trade show years ago and playing the big dumb American (something he does surprisingly well). He stood in the lobby of the trade show and held a complex automotive casting over his head (Mike is 6′ 4”, so he towers over a crowd of Chinese people) and shouted, “who can help me source this part?”. Suffice it to say he was mobbed.

He took the time after the show to go through all the business cards he was given (50+) and perform due diligence on all of them. Two (2) were manufacturers of automotive castings. Three (3) were taxi cab drivers who claimed to be manufacturers. Thus I have referred to Type 3’s as “Cab Drivers” ever since.

Obviously I think Type 2’s are the way to go. PassageMaker used to be a trading company and we developed our model because we saw there had to be a better way.

If you really, really insist that you want a Type 1, there is only one I’ve ever encountered that I would recommend to anyone, Silk Road International. David Dayton knows his stuff and writes a great blog to boot.

But you really, really, REALLY need to work with PassageMaker!