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China Expats Staff making a Factory Visit in Foshan

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My personal QA inspection: The 2 holes are to take a 3-Stage Thermostatic Control Valve Set = 3 Large holes required! China Expats ended up Fully Testing every function of every shower from this company before loading - but the price was very good!

OEM Disability Walk-in Bath showing Trial Moldings. This company could not make them withour ripples, so we advised our Client to purchase elsewhere

German Print Machines as Used by our Preferred Print Supplier
Business - Factory
Your Factory in China (December 2008)

This section is quite complex because many options impact upon one another. You need to remain focused on what really matters, apart from making money on your investment of course. To generalise: If you need access to high-tech parts, or a range of skilled labour, then head for Guangzhou or Hangzhou. If what you really need are raw materials and cheap labour, then head for suitable rural locations with appropriate transportation. If you need a mix of above and are under funded or worry about making a massive bank loan, consider either partnerships or developing Cities offering huge incentives if you locate with them

Starting Your Own Factory in China

Your business may have grown to the point where you need a factory to support it, or perhaps to transfer production from an expensive UK plant to somewhere a lot cheaper. Normally this means starting a WOFE (Wholly Owned Foreign Enterprise) in China, although Joint Ventures also remain a viable option

Many companies and entrepreneurs have considered this as a very viable alternative to relying on local representatives and direct contact with manufacturers. If it were that easy then everybody would be doing it!

Type of Factory

1. The very first consideration is what type of factory do you need. Is it a full manufacturing operation, assembly plant, processing plant, or something to perform certain other functions?

2. Investment. How much money do you have available for investment? How much is cash, and how much is in the form of a Bank loan? Perhaps locating in a rural area or forming a Joint Venture with a Chinese partner may negate the need for the Bank loan

3. Is the expense of brand new premises warranted? Perhaps a better alternative is to acquire a factory that used to make what you want to, except it went bust. By doing this you will normally also get machinery, tooling, and local personnel with experience. Beware of buying a factory that was closed because the Government has banned manufacturing in the area, and is promoting modern alternatives. This option is very cost-effective, but seldom carries much weight with Government, which is also very important in China

4. Assembly Plants vs Manufacturing? This will be specific to your business and business plan. Both options give you total control of QA re finished products, but supplier sourced parts could be larger QA problem with an assembly plant. However, you can always change supplier, or build any problem part yourself. There is a possibility the former may give you greater flexibility regarding products and exports.

5. Areas of operation. In China there are very strict regulations concerning what a manufacturer can make and export = it has to be within the official company portfolio at inception (Or as altered subsequently). Therefore a bathroom manufacturer cannot suddenly start making nor exporting computers or kitchens, it is illegal! An assembly plant can have a broader area of operations - think carefully on this point before you decide what to do

China Expats have experience that can help you directly, and also ease your worries about how Chinese go about developing new business operations, relationships and partnerships


Are you in an Economic Development Zone? There are basically two areas for you to look at in China: The Pearl River Delta in Guangdong Province, centred on Guangzhou (Canton). The other is Northern Zhejiang province centred on Hangzhou City (Some refer to this as being the Shanghai Area, which is not quite technically correct).

Within these zones are areas set aside for particular enterprises, such as computers say. Opening a computer factory in the right location will have massive incentive packages, that do not apply if you open a bathroom factory in the same location

Some developing city districts within Economic Enterprise Zones may offer you huge incentives to locate with them; and in Guangdong Province (Pearl River Delta) Gaoming and Zhaoqing are two good examples. It may be possible to get the land and/or buildings for free. Tax concessions are also common. To get these incentives you may have to have a local partner, and commit for a certain period - say 10 years.

Some Cities such as Shen Zhen also have a very special status, and associated incentive packages, differing restrictions, especially regarding monetary exchange and export matters. However, you should weigh the real costs yourself, as Shen Zhen is relatively expensive compared to Gaoming or Zhaoqing, which both lie further inland on the same Pearl River shore, and also have customs clearance facilities

What is local and Regional Government Policy? How much Government support do you need - this is very important in China. Local resources and manpower availability. Social and environmental concerns. Transportation. Direct Export permitted from the region?

With all these attractive incentives + advice from 'Friends', it is very easy to be swayed into locating in a specific place. However, we urge you to remain focused upon what you really need to achieve. Lets say you need to make 100, 000 wooden doors every month. What is most important? Probably the raw timber and cheap labour. This could lead you far away from the Eastern Economic Zones, and too very rural areas where both are plentiful. Transportation then becomes a central part of the equation, and inland waterways although slow, may provide the perfect solution

Type of Company

After addressing all the alternatives presented above, plus any other we have not mentioned in this brief and generalised snap-shot, you should be well-placed to decide what type of company you need to create in China. As a guideline, most Foreign manufacturing bases in China are of the WOFE type

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  Nancy Li
2206 Citic Plaza, Guangzhou ... (Also Hong Kong & Shenzhen)
+86 020 2831 3523
+86 135 600 73294
+86 020 2831 3554 - 3523 and 020 2831 3556


Opening a factory in China is very cost effective when compared to Western alternatives. It is also not for the faint hearted, and can bankrupt you if you get it wrong or invest with shady characters who basically disappear with your money. You will probably need to work closely with local government, and may need their support

Remember the Four C's, which are essentials for anyone wishing to be successful in China: Connections, Clout, Cash, and Culture.

Finally: Don't give up, as China has a peculiar way of always coming through in the end. We call it "Here is China"!

This information is as supplied by the Chinese Embassy in UK, as dated 20th June 2008, and/or other reliable sources. Please check this information yourself as it may alter without notice, and whilst we try our best to ensure it is correct, please do not hold us responsible for any errors - this is intended as a simple guide only
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