U.S. Manufacturers Shift China Operations Strategy to Serve China Market

More than 100 top business leaders of U.S. manufacturers in China attended AmCham Shanghai 2012 Manufacturing Conference

Oct 24, 2012, 08:00 ET from The American Chamber of Commerce in Shanghai

SHANGHAI, Oct. 24, 2012 /PRNewswire/ -- China has evolved from the world's most attractive workshop to one of the world's most attractive markets. As a result, U.S. manufacturers are reconsidering export-driven strategies that have guided China-based operations in the past. At AmCham Shanghai's annual 2012 Manufacturing Conference held on October 23, top executives from leading U.S. companies reported that, as costs of production and labor increase in China, companies are increasingly transitioning their manufacturing operations to take advantage of opportunities being created by expanding demand within the Chinese domestic market.

The AmCham Shanghai 2012 Manufacturing Conference, themed The Yangtze River Delta Manufacturing Challenge: Transition, was attended by more than 100 top business leaders from companies such as Eaton, Armstrong, Dover, Delphi Electronics, Ford, General Motors, Kimberly Clark, WESCO and service providers SIP, Michael Page, Lend Lease, SSOE, McKinsey & Co. and dozens more.

Leading off the conference at the Suzhou Renaissance Hotel, keynote speaker Curtis Hutchins, President of Asia Pacific operations at Eaton Corporation, highlighted the increasing importance of China to Eaton's global growth strategy. "China remains a huge opportunity for multinational companies...It's just breathtaking growth. Whether the growth rate is 8.2, whether it's 9 percent, whether it's 7 percent, it's still tremendous growth when you compare it globally."

Hutchins remarked on Eaton's strategy to leverage their existing operations in China to transition from an export driven approach to one focused on serving the domestic China market. Eaton has four regional R&D centers in China with more than 1,200 local engineers that drive local product development. "We think its critical that our product development and design engineering are close to the customer," said Hutchins. He continued, "You've got to be in China to serve the China market."

Michael Zhang, Asia President of Dover Corporation said, "Asia Pacific has become an important strategic market of Dover Corporation rather than simply a low-cost labor intensive manufacturing base. As a global leader in diversified manufacturing, Dover will attach more importance to the emerging market of China by continuing investment to drive growth. It is worth mentioning that the subsidiary companies of Dover are opening up 7 operation bases in China amid the global economic downturn. At the same time, it is also our key focus to aim toward long-term growth through mergers and acquisitions."

Improving productivity should be a top priority for companies responding to one of the most critical challenges facing U.S. companies in China: increasing costs. As the cost of manufacturing in China continues to go up, leveraging sustainable value, product localization and "higher productivity are absolutely critical to countering rising labor costs," said Hutchins. "Just starting low-cost manufacturing is not a good long-term strategy. When we think about 'low-cost' manufacturing, it's about the management of total cost. It's about infrastructure. It's about logistics in another country. It's about the variability in team capability...It goes beyond people's narrow view of low-cost manufacturing."

Russell Scoular, Asia Pacific Regional Director of Government Affairs at Ford Motor Company echoed Hutchins' remarks during the first panel discussion. "Automakers need to win in China to win globally," he said, underlining the importance of the China market. To compete effectively in China, Scoular reported, Ford has invested almost US$5 billion in developing their China based manufacturing facilities and has a plan to introduce 15 new Ford models by 2015. "You build in the markets. You build where you sell," emphasized Scoular.

Highlighting the impact of a rising consumer base in China on corporate strategies, Ken Whitaker, Vice President of Sales, Marketing and Research & Engineering at consumer giant Kimberly-Clark China, stated that his company's focus is now also primarily domestic, transitioning from an export focus taken when the company arrived in China in 1999. "Exports played a significant role in our early years but the Chinese consumer is driving our change in manufacturing focus. Consumers are increasingly richer, more demanding and willing to pay for quality and are more confident and connected on the net."

With almost 1,600 of AmCham Shanghai's members engaged in manufacturing, the Chamber's annual manufacturing conference remains a signature event for AmCham Shanghai and is a must-attend event for U.S. manufacturers in the Yangtze River Delta. For the first time, The American Chamber of Commerce in Shanghai held the conference outside of Shanghai, in Suzhou, the heart of the Yangtze River Delta manufacturing belt.

This year's conference focused on transitions occurring in manufacturing globally, throughout the Asia-Pacific, China and the YRD region, and what actions leading companies are taking to respond. 

About AmCham Shanghai

The American Chamber of Commerce in Shanghai, known as the "Voice of American Business" in China, is the largest and fastest growing American Chamber in the Asia Pacific region.  Founded in 1915, AmCham Shanghai was the third American Chamber established outside the United States. 

As a non-profit, non-partisan business organization, AmCham Shanghai is committed to the principles of free trade, open markets, private enterprise and the unrestricted flow of information.

Visit www.amcham-shanghai.org for more information about AmCham Shanghai.

SOURCE The American Chamber of Commerce in Shanghai