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Adapting Your Supply Chain to
'China for China'

Western firms sourcing from Asia are also in various stages of developing their sales into Asia markets. 

With China's explosive growth over the last 10-15 years, top priority must be given to the recent tidal shift in market focus by both foreign and Chinese firms, i.e., "in China for China."

The recession of 2008 and 2009 in the West, followed now by debt concerns, has made it clear to all that being in China primarily to capture local market opportunities is the higher priority versus focusing on China as the factory of the world. 

Further accentuating this shift for sales growth in China is the recently released 12th, 5-year plan. Among other priorities, the plan seeks to increase domestic consumption and improve infrastructure to support sustainable growth.

Many analysts see the new 5-year plan as a major shift in focus from growth for exports purposes to satisfying consumer demands of the domestic population. This will include a continued push for economic opportunity via an expansion of the manufacturing base by leveraging the coastal economic powers to a higher value R&D and service economy, along with expanding the interior infrastructure and manufacturing capabilities.

The policies articulated are founded on expanding the manufacturing base by developing inland opportunities - creating new city centers, and aggressive infrastructure expansion of highways, rail, waterways, inland ports, and air transportation.

At the same time, China's leaders recognize that the rising middle class has more discretionary income. And with global growth slowing, the country's leaders see great opportunity for growth in satisfying the domestic demand for goods and services.

Factors Driving Growth in China

Check out these compelling facts about future growth opportunities in China and consider the implications for your organization's supply chain:

• China is now the #2 market in the world behind the US and could close the gap within a decade. This fact is not lost on the world's leading companies, who are all clamoring for their share of the pie. But GDP growth will start to slow, resulting in higher competitive intensity and a greater need for efficient supply chains.

• Today, there are over 170 cities with a million or more people ... another 50 cities of this scale will emerge by 2020, many in central and west China. This will require significant expansion in your supply chain's geographic reach in a country that continues to be regionally centric and poses a myriad of cross-province trade challenges.

• China's "middle class" is estimated to include almost 300 million consumers, with another 150 million urban consumers expected to enter the market by the end of the decade. Reaching these consumers effectively will be a critical component of your growth strategy and will require a competitive supply chain.

• By the end of the decade, China will add thousands of kilometers of new highways (and 250 million more cars!), as well as over 100 new, modern airports, and increased rail capacity (though high speed rail has witnessed some setbacks recently).  Despite these additions, infrastructure will remain strained, inefficient and costly.

• China's retail landscape will morph as modern channels continue to erode traditional channels to market.  E-commerce sales - currently exploding - will change go-to-market strategies for many firms and, therefore, alter supply chain structures.

Creating the right supply chain strategies, understanding and navigating the complex Chinese business and consumer culture, and managing risk will create the winners of tomorrow in Asia.

Overcoming Sales & Distribution Challenges

For further insights into developing a "China for China" strategy, read the article Capitalizing on New Opportunities: Sales and Distribution in China by Gene Tyndall.

Jim Tompkins

CEO & President, Tompkins International

More resources

Capitalizing on New Opportunities: Sales and Distribution in China

China 2.0 - What the New Reality in China Means to You

Does Your Procurement Process Help Champion Your Organization's Business Strategy in Asia?

See previous issues of the Asia Supply Chain Excellence Report.

Tompkins International transforms supply chains for profitable growth.

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Raleigh, NC 27616