The US remains the largest 生产 (sheng1chan3 – manufacturing) nation, but few if any people I have asked have been able to answer correctly which country it is.

Several days ago, I spoke with a trader who deals in appliances and power tools sourcing some components from the Mainland.  I was particularly curious about one component of his trade:电池 (dian4chi3 – batteries).  I wanted to know which companies supplied them, which were good, and which could be better.

According to him, the company 比亚迪 (bi3ya4di4- BYD, a company in which Warren Buffett and many retail investors have invested) is not a great supplier, and they should be a cost leader.  He added that their batteries do not make use of the best technology.

Surprised to hear this, I asked a confidant who works in finance and holds a stock position in BYD.  He remarked that BYD’s manufacturing could be made cheaper through further development of optimized practice (including things such as assembly lines).  However, BYD continues to rely on manual labor for the assembly of many parts, holding that an overhaul of its manufacturing process would result in fewer jobs overall as well as significant resource investment in the 短期 (duan3qi1 – short term).  Despite the fact that 1000 taxis powered by BYD technology are set to be piloted in Shenzhen next month, BYD’s small battery division does not have the same successes. Even top companies are faced with the battle of margins.

If you want to see the toll that margins can take, take a look at China’s textile industry.  The competition is 日益激烈 (ri4yi4ji1lie4 – increasing in intensity every day).  Indeed, while speaking to a factory producing jeans for export to large retailers in the US, I encountered her frustration at  turning a meager profit after paying out for materials, housing employees in dorms, and other assorted business expenses. She added that European and US standards make it nearly impossible for her to use certain cost-cutting measures such as changing dyes or using a different type of cloth.  As more companies spring up in saturated industries, the existing profit margins will only diminish further.

Readers, what have you experienced regarding Chinese manufacturing?  Are any of you planning to contact Chinese companies for sourcing?