China’s edge: an efficient clerical labour force

I think no one would dispute that one of the competitive advantages of China in the business world is that it has an abundant supply of cheap labour force. This advantage is clearly shown in the manufacturing sector as China is now the largest manufacturing country in the world.

This advantage is also evident in the commercial sector. I am saying that from my personal experience.  In my business, I have been assisting my China clients to buy foreign made parts through my US principal, AMRO Supply Inc, a procurement agent.  I have advised my China clients umpteen times that one way to save costs is to have their orders from different suppliers consolidated in one shipment, in which way, among others things, they would save on administration costs. The concept is that instead of having the client’s administration staff handle ten sets of documents and ten shipments for purchases from ten suppliers, if they consolidate them in one order, they need only to handle one set of documents and one shipment, likewise for managers who supervise them. At the end of the day, less documents or works means less headaches. Further by consolidation, over the long run, the company could reduce its headcount, thereby improving its bottom line. I shall call this concept the said concept hereinbelow. However, a lot of my China clients are unconvinced of the said concept.

I have discussed the above issue with my US principal. I was told that our US company has no problem getting the said concept across to clients in developed countries like the US and those in Europe as their costs for clerical staff are understandably high. As for clients in developing countries, like in South East Asia, which related costs are low, their managers have no problem understanding the said concept as they realize that less works means less problems, as I said above.

Then the question is why Chinese managers do not buy the said concept. Often times, we received from our Chinese clients one order for one supplier, which I was told by my US principal, is uncommon for clients for the rest of the world. After much discussion, the only conclusion we can draw is that saving on the related administration costs apparently is a non factor to our Chinese clients and, with no disrespect to my fellow countrymen, the reason is that the costs for their clerical staff are cheap. Nonetheless, the China clerical staff, though making low salaries, they are highly efficient, which make them probably the most cost effective among their counterparts in the world, and that is what counts. In some parts of the world, one may hire similar staff at much lower cost, but if they are not productive it would not be meaningful.

From my personal experience, I vouch for that. I deal with client’s clerical staff day in and day out. Most of the clerks whom I deal with are freshly graduated from universities with an English degree or an international business degree (and English proficiency is a must), therefore, their English standard is high. Most of them make about USD600 a month (comparing to say USD3000 in the US or USD1500 in Hong Kong). Most of them are hardworking and have high aspirations. A lot of them take the entry level job as a stepping stone to bigger things. They are willing to go extra mile to get works done so as to impress on their managers. It is not unusual for them to start work at eight in the morning until six or seven in the evening and working on Saturdays and Sundays are not unacceptable to them. As a matter of fact a clerk of my client has a habit of sending me emails at 11 o’clock or even midnight from his home.

Further, almost all my China counterparts readily provide me with their cellular numbers, junior staff included. As a matter of fact, most of them have their cellular numbers printed on their business cards. In case of urgency I can always call them outside office hours. I think the same cannot be said for most employees, especially the clerical staff, for other countries, as once they leave the office they want nothing to do with business.

Further, it is common practice for a Chinese client to deal with more than one procurement agent. Again this could be handled efficiently thanks to those high caliber clerical staff. As a result of this, because of competition, these clients are getting very competitive prices, which I hate to say is not to my liking. Often times, they could pick the agent whoever provides the best price to them for one particular item. This is also one of the reasons that my Chinese clients are not enthusiastic about the said concept as the price advantages they gain from dealing with more than one agent outweigh the costs they could save on consolidation.

Finally, I have a lot of respect for my compatriot counterparts, who are so dedicated to their jobs. I think their dedications have given China an edge, which makes the country so competitive in the commercial world.

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Introducing the Canneed’s DER-3 Digital Enamel Rater

Description: The Canneed “DER-3 Digital Enamel Rater” is the industry standard. The new CANNEED Enamel Rater DER-3 instrument test the coverage of the enamel coating inside food and beverage cans. Also aerosol-cans may be tested with DER-3. It displays an index of the amount of metal exposed by incomplete enamel coverage on a clear, easily read digital LED.
The instrument applies a constant voltage across the can body and an electrode immersed in an electrolyte-filled can, and measures the resulting current. Test voltage is set at 6.3 VDC. Operating range is 0 to 300 milliamperes with accurate resolution within 0.1ma.
The instrument operates in industry standard 4 second mode, continuously, or can be programmed to measure any desired time. In 4-second mode, the display shows the reading only at 4 seconds. In continuous mode the reading is displayed beside elapsed time with the 4-second reading automatically stored in memory for recall. A simple and foolproof calibration self-test verifies correct, accurate operation.
Location of exposed metal can be determined by reversing voltage which causes bubbles of gas to form on exposed metal for easy visual identification. Electrolyte level and can contact sensors ensure that testing begins only when can is properly filled with electrolyte solution and good electrical contact with the can has been established.
The sturdy enclosure includes a sealed-membrane keypad for protection against moisture and corrosion in the factory environment. An RS232 serial interface permits use with remote computers, printers or data collectors.
The CANNEED End Panel Holder can be used with any CANNEED Enamel Rater to test for metal exposure on can ends. The test is performed in the same manner as on a can. Electrolyte is added to the plastic cup, the can end is fitted onto the beveled end of the cup, and a vacuum is applied to hold the end securely on the cup.
When the cup is inverted, the elctrode and can end become immersed in the electrolyte and the reading is displayed on the Enamel Rater.
The CANNEED End Panel Holder consists of a lucite cup mounted to rotate on its horizontal axis. The cup is beveled to make a tight seal on the can end. An electrode and vacuum connection are mounted within the cup. On the bakelite base a vacuum stopcock and a moveable contact arm, which completes the electrical circuit when the assembly is inverted. A cable adaptor footswitch is required to connect a CANNEED End Panel Holder to the CANNEED Digital Enamel Rater.
Technical Specifications (changes reserved):
Sample type : 2- and 3-piece cans. Also aerosol-cans
Range: 0 to 300 ma
Resolution: 0.1mA
Accuracy: 5%
Power supply: AC115 V/230V to DC9V
Rear Panel: RS232 serial output
Display unit Dimensions:162 x 200 x 80mm ( W x L x H )
Can holder Dimensions: 210 x 228 x 250 mm(W x L x H)
Weight: 4 kg

China banks are becoming world’s financial powerhouse

Readers of my blog, although not too many of them, know that I from time to time criticized my Chinese clients. In my last blog, I criticized the un- professionalism of a China bank. It seems that I am a China basher. However, as a matter of fact I am not. I am just using this blog to air my grievances. It is interesting to note that China bashing usually attracts more blog readers than otherwise. If it helps my blog, I don’t mind being seen as one of them. Further, I know the (Mainland) Chinese would not read my blog simply due to the fact all foreign social nets, such as WordPress, Twitter, Facebook, Google Blog and others, are blocked  in China. I can criticise my Chinese clients all I want and I won’t lose their businesses. The same cannot be said about my US principal. If I criticise them,  they may read it (although I doubt it) I may just as well kiss my job good-bye.

Talking about China Banks, I would like to bring up an interesting question. Recently, I came across a Chinese client who intended to pay for the goods ordered from us by a letter of credit (LC). The LC would be opened by one of the three largest state banks in China. When I mention “a China Bank” hereinbelow, I am referring to one of such banks.  My question is would you as a seller accept a LC opened by a China bank?. Personally, I would. A LC is essentially a bank guarantee. Therefore, the issue is whether a China bank is an acceptable risk. Do you know that currently the 3 largest banks in the world by market capitalisation are the 3 largest in China, namely Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB) and Bank of China (BOC), and in that order? It is the reason this blog is entitled “China Banks are becoming the world’s financial powerhouse”. I have so much confidence in them that over 7o% of my stock portfolio are invested in ICBC and BOC and I am sitting on very nice profits on these two stocks (see I am a China fan and not a basher).

Being one of the largest banks in the world and being a state bank, I can’t see how a China Bank could renege or default on a LC. Therefore my answer to the above question as to whether one could accept such LC is an undeniable YES.  What is your view?

The magic of the SWIFT Codes

I had a busy day today. I spent almost half a day trying to sort out a payment which a China client claimed to have made but was returned by the remitting Chinese bank. The client claimed that they had following the payment instructions appearing on our invoice to the letter. So if there were an error it could only be that the banking information provided by us was incorrect. Without checking,  I knew the client’s claim did not have a leg to stand on.  Personally, I think any company which got the instructions for making payments on its invoice wrong should not be in business at all.  I knew our company would not be one of them. Further, our bank, Citibank, is an international bank. I did not doubt for a minute their ability in handling such transaction.

The ball was clearly on the client’s court. I wrote an e-mail to the client asking them to sort out the matter with their bank. Apparently the client was not happy that I was pointing the finger at them or their bank. The client reiterated that it had done everything right and was trying to pass the ball to me.

Finally, the client sent me the note that Citibank sent to the remitting bank. When I looked at the note, lo and behold, I knew where the problem was.  Citibank was advising the remitting bank to comply with the SWIFT practice for remittance of such sort. Nevertheless I could not pin down what exactly went wrong. Thanks to my colleague’s  advice, the remitting bank apparently ommitted to put down the relevant SWIFT code. No wonder the remittance was rejected.

SWIFT codes are like branch codes but are applicable to banks when making overseas money transfers. The relevant SWIFT codes could easily be obtained through searching the SWIFT portal. I did that on the Citibank New York office by entering the name of the bank at the said portal. I was surprised why the China remitting bank, which should be familiar with international banking practices, could have overlooked such an important piece of information.

More on China banks tomorrow.

China, one tough market to crack

I had a tough day yesterday. A potential China client which I have attended to since April asked me to revise my revised revised quote.  I will call this potential client “the client” just for the sake of convenience, though  it is unlikely that I am going to get it. There were a lot of toings and froings with this client since April. I can’t remember how many times I have revised the quotes.  Finally the  client gave me the impression that the deal were to be closed imminently.

I spent the last couple of days liaising with my principals in the US and a freight forwarder in Hong Kong trying to give the client the best deal. Due to the time difference, I had to stay up late just to talk to my US office. There are so many rules and regulations for doing business in China.  Sometimes one has to be creative in structuring deals for making shipments into China. Finally, I thought I had come up with an excellent deal for the client and e-mailed the final quote to the client. Within 10 minutes I got a reply from the client claiming that my quote was not competitive and it decided to stay with the company which it had been dealing with for 10 years. Essentially he was asking me to substantially cut my prices which made us not making any money at all. Needless to say, my US company refused to budge. There goes the deal and the efforts my company and I had put into were “wasted”.

I think the Chinese buyers are really spoiled nowadays. There are so many overseas suppliers and manufacturers knocking on their doors.  It is a survival game out there.  For me to survive I just have to hang in there. It is two o’clock in the morning.  I will hit the sack and wake up tomorrow and go on with another deal.

A must for canmakers doing business with China: know the best selling drink in China, Wanglaoji 王老吉(Part 2)

It is a continuation of my preceding blog of the same title.

About WLJ the company

The history of WJL dated back to 170 years ago or the Qing dynasty. History has it that the legendary, Wang Lao Ji, a Chinese medicine practitioner, developed a formula for certain herbal tea, which was said to be effective for curing an epidemic in Guangzhou at that time. The tea was so popular that people from afar came to Wang’s  medicine shop to seek his medical advice and consumed the tea.  The formula was passed from generations to generations. The production of the tea became a business. It is said that several branches of the Wang’s family claimed to have the original formula.  When Communists took control of China in 1949, one branch of the Wong family moved to Hong Kong and continued the business under a Hong Kong company, while the business of the  Mainland WLJ was taken over by the China government.

The Hong Kong WLJ has been selling the tea in Hong Kong and overseas under the brand, Wong Lo Kut, which is the transliteration of its phonetic Cantonese name. WLJ was sold in Tetra paks until recently. The tea was only massively produced in cans in 2004. Prior to that it was thought that the tea would cause certain chemical reactions with metals, and therefore not compatible with cans. As a matter of fact the China WLJ thought it had little use for the related patent that it granted the use of license thereof to the Hong Kong WLJ for 20 years at a nominal fee.

After the Hong Kong company obtained the license, it undertook an aggressive marketing strategy in China by promoting the tea on national TV, buses, billboards and direct sales at supermarkets and restaurants. The tea soon became the number one drink in China. That woke up the China WLJ as it had apparently let go a money generating machine on the cheap. It is said that the China WLJ has been selling the tea parallelly in China. It is further said that there is an going legal battle between the two companies over the rights to sell the tea in China. One may have to look at the printing on the can to find out which is the producer, the Hong Kong or the China WLJ.

About WLJ the drink

A more appropriate description for the kind of tea that WLJ belongs to  is “cool tea” or liangcha 凉茶, a generic name for the kind of herbal tea in question. Liangcha used to be commonly found in family run liangcha shops in Hong Kong or could be home brewed each according to its own formula. Due to the change of demography in Hong Kong, less and less of those shops could be found, let alone the home brewed practice.

According to traditional Chinese medical theory, liangcha, is known for being able to remove the bodily heatness from one’s body and almost all symptoms of minor illnesses are due to excessive bodily or internal heatness (neiri 内热).  Such  symptoms can be dryness or cracks on lips, ulcers on gum or tongue, hot air in nasal cavity,  swelling of the throat, tiredness of the whole body, loss of appetite and etc..  If you mention any one of such symptoms to a Chinese, you don’t need expert medical advice, he or she, young or old, is likely to advise you to drink liangcha, to help reduce your bodily heatness,jianghuo 降火, hence the name cool tea. For this reason, one should not take “cool tea” literally as the tea does not necessarily have to be drunk cold. Quite the contrary, the proper way is to drink it while it is hot.  The coolness of the tea refers to one’s bodily heatness. If one has excess of the latter, he needs to be “cooled down” until a balance is restored.

Traditionally, it is not a cool thing (see the pun) to drink the cool tea in front of other people as it is bitter and is usually drunk from a rice bowl. However, WLJ added sugar to its tea and HKWLJ took it a step further by producing the drink in cans and undertook massive promotion efforts. Now WLJ can be consumed widely in restaurants and other public places. It is now a cool thing to do so after or with a meal, a hotpot dinner or a BBQ especially Chinese foods are known for their spiciness and greasiness, which are among the major causes for the excessive bodily heatness. Besides, some of the Chinese smokers and drinkers see WLJ as a soothing medicine, which has the effect of lessening the occurrence of illnesses or diseases brought on by such habits. No wonder WLJ literally sells like Cokes in China or should I say better than Cokes.

A must for canmakers doing business with China: know the best selling drink in China, Wanglaoji 王老吉(Part 1)

wangloji can2Guess which is the best selling drink in China? Coke? Pepsi? No, it is Wangloji 王老吉 (WLJ), which is little known to other peoples outside of China other than the Chinese communities. Look at the photo on the  left, one wonders what is inside this ordinarily looking can (I am being nice) and why it is so popular in China. WLJ is a kind of traditional Chinese herbal tea. According to a reliable source sales  of canned WLJ amounted to RMB2.5 billion or US$365 million in 2008, which surpassed sales of Coca Cola in the country.

What is relevant to the canmaking industry is that the canned WLJ emerged from its obscurity only in or about 2004, when the company first started to sell the drink in cans. At that time, WLJ was sold only in Tetra paks. The China WLJ, which holds the license, thought that WLJ in cans would have no market at all and  granted the use of the license to a Hong Kong company, which is related through history, at a low price for 20 years. Herbal teas in cans were then considered a revolutionary idea.

The type of cans currently used by WLJ belongs to the kind known as 3 piece steel can. The company is taking  another  innovative move this year by changing the cans to 2 piece aluminum. It is said  that the state owned corporation, COFCO, is building a huge plant in Wuhan for producing 2 piece cans mainly to cope with WLJ’s demands.

I am not an expert on canmaking technology. Nevertheless, I consider WLJ’s switching to 2 piece cans a bold move.  Some of the experts in the idnustry have doubts that herbal teas are chemically compatible with aluminum, the metal which most 2 piece cans are made of. Further, WLJ, being a non-carbonated drink, is said to be not suitable for a 2 piece can which relies on the gas of the liquid inside to support the soft aluminium wall and keep it in shape. I think WLJ will face a lot of challenges on the technical front for switching over to 2 piece cans. That said, I was told that WJL by doing so it could save about 15% of the costs for each can it produces and on the whole the company could save hundred millions of dollars in costs each year. It will save on materials costs as aluminium is cheaper than steel and also on operating costs as the former is a lighter material, hence, cheaper transportation and storing costs. I was told that WLJ’s competitor, Red Bull, which is in a similiar situtaion, is watching the related developments closely. If WLJ’s move is proven to be successful, Red Bull, will likely to follow suit.

That is enough on the tecnical aspect or I should say that is all I  know. As a matter of fact, the history of WLJ is quite intriguing and so is the drink. I will talk more on these two subjects in the subsequent blog.