case study outsourcing to china

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Outsourcing to China: Pros, cons & best practices

Outsourcing to China is a strategy that has led several businesses to success. 

However, it can also lead to financial losses if done with insufficient information and poor planning.

But, don’t worry! 

We’ll guide you through it.

In this article, we’ll discuss the 9 key benefits and 4 major challenges of outsourcing to China. We’ll also go over a few steps you can take to outsource to China successfully.

This article includes:

(Click on the links to go to a particular section)

• 9 Key Benefits of Outsourcing to China
• 4 Major Challenges of Outsourcing to China
• Outsourcing to China the Right Way

Let’s get started.

Learn more about outsourcing before you go further.

9 key benefits of outsourcing to China

According to Grand View Research, a business consulting firm, China’s outsourcing industry had contracts worth around $223.7 billion in 2019. 

In fact, American companies like Amazon, Apple, Pfizer, and many others have outsourced to China. 

The country is a popular global outsourcing hub because it offers these benefits:

1. Cheaper labor

China’s low labor costs are a huge selling point for labor-intensive industries.

As of July 2021, the average wage in China is 29,300 Chinese Yuan (CNY) per month (approximately 4,530 US Dollars, according to the exchange rate in July 2021). This means that their average salary is almost half that in the United States (about $7,900/month).

Businesses can further access lower labor costs by outsourcing to developing cities like Wuxi, Jiangsu, Chengdu, and Sichuan instead of larger cities like Beijing.

In addition, low labor costs can help companies with a high turnover rate (percentage of employees leaving the company).

By outsourcing to China, those companies may spend less capital on hiring and training employees. This way, they’ll lose less when an employee resigns.

2. Cheap products

China houses the world’s largest manufacturing sector and produced 28.7% of the global manufacturing output in 2019. This means that your business in China doesn’t have to import these products, helping you avoid import tariffs.

Additionally, the business ecosystem in Chinese cities has enabled manufacturing companies to build products at lower costs. 

These cities have cultivated a system that supports the China manufacturing supply chain . A Chinese factory can easily access component manufacturers, low-cost workers, technical workforce, assembly suppliers, and customers. 

This arrangement reduces the cost of production, enabling the manufacturers to sell products at lower prices.

3. Frees up more time to focus on core competency 

China has the talent and resources to handle IT, customer service, manufacturing, accounting, and more. This means that you can outsource almost any part of your business confidently to the country.

By outsourcing, you’ll have more time to concentrate on expanding your business or optimizing current business processes .

Your in-house team can focus on core competencies , like team building, leadership, and product development, instead of doing paperwork or other mundane tasks. An increase in performance in core competencies can help you increase your competitiveness and profits.

4. Increased flexibility

Most companies outsource manufacturing, production, bookkeeping, and other non-core business processes to contractors for the ease of scaling up and down.

For example, a western company outsourcing manufacturing to a Chinese manufacturer can reduce or increase its orders without any legal issues.

Contract manufacturing service providers usually have more than one client and manufacture stock for all of them. As a result, they can arrange additional products whenever you need them.

Similarly, they can manage excess production by manufacturing less for the next order. Manufacturing contractors may agree to immediate scale-downs more readily, giving you the flexibility to reduce your production quickly.

Moreover, China has a large potential workforce which enables Chinese contractors to scale up productions cheaply .

5. Access to mass markets

China is geographically situated between the Asian and European markets and is an active participant in world trade. As a result, outsourcing processes to this Asian country can give you easy access to profitable markets. 

Additionally, since China itself is a huge market , offshoring to the country can create huge opportunities for companies. The low labor wage, resource-intensive manufacturing, and exports make offshoring to China a profitable option.

6. Fast-paced innovations and research

According to the Global Innovation Index (GII) 2020, an annual ranking of countries based on their innovations, China ranks 14th among 113 countries. It comes before countries like Japan, the Philippines, and India.

Additionally, the GII also said that Chinese companies are on par with the best Switzerland, Sweden, and US companies when it comes to innovation.

This is because China houses tons of innovative companies, including high-tech startups like Weltmeister, an electric car brand.

According to a list of the 50 most innovative companies published by Boston’s Consulting Group (BCG), Huawei (a popular Chinese multinational smartphone company) ranks 8th in the world. The list also includes Alibaba (14th), Lenovo (25th), Tencent (26th), and Xiaomi (31st).

Outsourcing to a country with huge research potential, like China, can give you quick and easy access to technology. This will provide you with a competitive advantage over your competitors from other countries.

7. Supportive government policies

The Chinese government tends to welcome any foreign company that shows an interest in outsourcing. 

Additionally, China continually amends its outsourcing laws and works towards improving its infrastructure to ensure smooth outsourcing. In fact, the country spent around 10 times more on infrastructure than the US in 2018. 

But China’s investments in infrastructure stretch beyond bridges and railways. The country has also successfully developed digital infrastructure, particularly broadband and digital payment systems. 

8. Great startup culture

Startups offer business agility, access to new technology, insight into target markets, and customer-centric innovations.

As a result, outsourcing to the Chinese economy with tons of startups will get you access to resources that can help you overtake your competitors.

In addition, your business can get services or products from startups at lower costs when compared to established companies.

Chinese cities like Hong Kong , Shanghai, and Chengdu help high-tech startups flourish. They do this through initiatives that improve infrastructure and by giving access to top talent.

Additionally, these cities are politically stable with an open culture due to globalization. Such an adaptable and friendly environment makes outsourcing convenient and pleasant.

9. Access to a skilled workforce 

China saw 7.6 million students graduate from its universities in 2018, which is almost double of all degrees earned at American universities.

On top of that, China established a Thousand Talent Program, which aims to attract scientific talent to the country. This plan recruited over 7,000 scientists to the country, further increasing their research and talent pool quality.

4 major challenges of outsourcing to China

Let’s look at a few difficulties you might face while outsourcing to China:

1. Low service or product quality

The quality of Chinese products is sometimes lower when compared to foreign products.

Often, Chinese products don’t meet international standards and aren’t valued much despite their affordability. 

To avoid this, outsourcing companies must stay vigilant to ensure that their products are of high quality. You can do this by conducting regular quality control reviews or hiring an agent in China to run inspections for you.

2. Different IPR laws

IPR ( Intellectual Property Rights ) laws differ from country to country.

You’ll need to do some research on China’s copyright and trademark system, especially when the service provider has access to your products, designs, and more.

Even though the Chinese government and most outsourcing companies adopt strict IPR measures, manufacturers could make and sell copies of your new products at lower prices.

If you’re concerned about protecting your intellectual property, you could draft an NNN (non-disclosure, non-use, non-circumvention) agreement instead of the traditional NDA (Non-disclosure Agreement).

An NDA focuses only on preventing the service provider from releasing your trade secrets to the public. In contrast, a NNN agreement prevents your employees from disclosing, using, or selling your trade secrets.   

3. Language barriers

A Chinese company may find it hard to employ citizens with decent proficiency in English.

Outsourcing to such service providers can make it difficult for your employees to communicate with the outsourced company, interrupting work completion. 

In addition, if you outsource your customer support processes, your customers might not be able to communicate with your Chinese agents due to language barriers.

4. Time-consuming set up

Each Chinese city has a different technical and outsourcing potential. The wrong outsourcing destination can lead to a lengthy setup procedure and a long supply chain.

That being the case, you need to consider the strengths and weaknesses of cities before you outsource. For example, you should know how far your service provider is from your target market, the availability of required talent, the cost of resources, etc.

For example, it’s best to start your company in Dalian (a port city) if you want to export products overseas. Setting it up in a city like Beijing will cost you a lot of money in transportation.

Outsourcing to China the right way

Let’s look at a few tips that will help you outsource to China successfully:

1. Contact a local sourcing agent

A local sourcing agent (a third party that helps you with major outsourcing decisions) can help you select the right Chinese supplier and prevent you from investing money in the wrong place.

In addition, they can guide you on outsourcing to a suitable city, legal outsourcing procedures, and how to kick-start your business.

However, hiring a local agent isn’t a mandatory step for successful outsourcing to China.

2. Verify your supplier’s credentials

Once you’ve shortlisted a few outsourcing providers, verify their credentials . 

Recognize your outsourcing needs as China has many talented manufacturers and traders. You should choose a suitable outsourcing partner depending on your business needs. 

While verifying supplier’s credentials, you should:

• Check whether the supplier can produce according to your requirements. Make sure that they will be able to supply products if you decide to scale up.
• Cross-check the information they provide. An easy way to do this is by checking their website.
• Ask for their business license, international trade certificate, customs registration certificate, and VAT invoices. Ensure these documents are genuine by consulting a reliable source.
• Confirm the supplier’s name is the same across all the documents. 
• If possible, visit the factory or office before you finalize everything. You could also ask a representative to make the visits on your behalf. 

3. Draft agreements carefully

Outsourcing agreements must define the specifics of the arrangement precisely. 

For example, if you’re outsourcing production, the agreement should cover aspects like the price per product, volume, mode, etc. 

Similarly, you need to mention minimum productivity, working hours, KPIs (Key Performance Indicator), and more, when you’re going over your service outsourcing process. 

And irrespective of the nature of outsourced tasks, the agreement must specify ways to resolve disputes, agreement dissolution, and other legal matters. More importantly, ensure that the meaning of the agreement doesn’t change when translated to Mandarin or English.

4. Clearly define product/service specifications

To avoid issues in the future, you’ll need to explain what you expect from your outsourcing partner clearly. This includes your product’s specifications.

You should list down and explain even the minute details, like raw material or service quality. You should also conduct regular inspections to check whether all manufacturing processes or service updates are implemented correctly.

5. Gain support from your internal team

Once your company decides to outsource to a Chinese firm, you need to inform your internal team about it. 

To do this, you’ll need to explain why you’ve decided to outsource to China and how each department will benefit from it. You should also clarify the roles and responsibilities of each team member so that they know how to go about their outsourcing tasks. 

Without a clear understanding of their duties, they may get confused and feel disengaged.

6. Use performance monitoring software

Monitoring your outsourcing partner’s employees can be challenging, especially when you’re in a different country. 

To control absenteeism, distractions and ensure that they work productively, you need to use a performance monitoring tool like Time Doctor .

What’s Time Doctor?

Time Doctor is a powerful employee performance and productivity management tool used by small companies like Thrive Market, as well as large firms like Ericsson. This tool helps companies track and record the activities of their employees when they work.

With Time Doctor, you can:

• Track the time employees work using an interactive time tracker .
• Manage their performance based on real-time productivity reports .
• Control distractions using an idle time pop-up feature.
• Assign projects and tasks to outsourced employees.
• Schedule shifts efficiently from any corner of the world.

Additionally, you can keep track of billable hours and use Time Doctor’s payroll feature to pay your outsourced team through Wise, PayPay, or Gusto.

Wrapping up

Outsourcing to China is a cost-saving strategy that can be a turning point in your business. You can use the exposure you get in the country to grow your business across the globe. 

But to do this, you have to do your research, choose the right outsourcing partner, and put the right processes in place. 

To ensure that you meet a positive turning point, consider the pros, cons, and tips mentioned in this article before making a decision.

View a free demo of Time Doctor

Andy is a technology & marketing leader who has delivered award-winning and world-first experiences.

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Getting sourcing right in China

Five years ago , flights to China from Europe, North America, and Japan were filled with sales managers seeking markets for their companies' products. Today those flights have as many procurement and supply chain managers as marketers. Leading Western and Japanese companies are no less eager to source Chinese parts and products for developed markets than to sell into one of the world's fastest-growing economies.

The country's rapid rise as a low-cost manufacturing hub is what draws these men and women. Retailing giants such as Carrefour and Wal-Mart Stores are going to China to buy an expanding range of goods—from televisions and tools to clothing and crockery—for 25 to 50 percent less than the cost of comparable goods made in developed countries. Automakers around the world are pressing their leading suppliers to open operations in China or are themselves trying to source components there (see " Global sourcing in the auto industry "). Although the proportion of goods sourced in this way remains small even for companies that began buying Chinese-made goods more than a decade ago, the pace is accelerating, particularly in high technology, consumer electronics, retailing, and some industrial goods. The result is that leaders in these sectors are gaining cost advantages over competitors that source components or finished goods mostly in the developed world.

Although the opportunity is certainly enticing, it can be hard to get the many pieces of a procurement operation in China right. Lessons learned ten years ago by companies as they set up purchasing operations in other low-cost regions, such as Brazil and Mexico, travel only so far. Finding high-quality suppliers and negotiating agreements with them is a problem that companies face in any new locale, for example, but the greater geographic distance between suppliers in China and headquarters makes the job tougher for companies based in North and South America. Another challenge is coming to terms with the widespread use of sourcing agents, which can be a boon or a bane, depending on what individual companies need. Then too there are issues—such as sorting out logistics, securing reliable broadband connections, and cultural and language differences—that companies rarely face at home.

Those that do establish successful sourcing operations in China concentrate on a few fundamentals. They make changes at the home office to address the organizational inertia that can slow down the introduction of a purchasing program in China. They attend to the details, monitoring suppliers as closely as possible. And like one Western company that set and exceeded a $100 million first-year target, they establish a firm goal for sourcing and do what they must to achieve it. Such companies also learn to build local capabilities by staffing teams carefully and using third parties to support them in important tasks, such as quality assurance and logistics.

In these ways, companies lay a foundation they can use to relocate bigger and more crucial pieces of their supply chain operations. They gain cost and operational advantages that competitors can't match and capabilities that competitors can't easily replicate.

Opportunities and hurdles

Manufacturing accounted for 60 percent of China's GDP growth over the past decade. Multinationals set up operations there, and domestic companies expanded to make goods for export and to sell products and services to multinationals doing business in the country. But that was just the start of the boom.

Even though Ford Motor and General Motors have considerably beefed up their supply lines from China during the past few years, for example, those goods constitute only a fraction of the components used in their vehicles. If the two automakers sourced half of their basic parts (such as carpets, castings, electronics, tires, and wiring) from China, they could together save more than $10 billion a year. Both say that they expect to increase their purchases of Chinese-made parts vastly.

Companies in other sectors are also racing up the Chinese sourcing curve. Wal-Mart bought about $10 billion to $15 billion worth of goods from China in 2003 and hopes to almost double that amount by 2007. Other retailers, including Best Buy, Carrefour, and Tesco, have equally ambitious plans.

The potential is impressive, but so are the difficulties, ranging from intellectual-property infringements and customs delays to poor communication between headquarters and suppliers. Ford reportedly did not meet its target of sourcing $1 billion worth of components from China last year, largely because the job of evaluating suppliers and establishing supply chain connections was bigger than the company had thought. But these hurdles, while daunting, can be overcome. Our work with companies that source goods in China suggests that three important issues should be addressed at the outset; other problems can be resolved later.

Inertia at headquarters

One of the biggest barriers to a Chinese sourcing program is resistance from middle managers at home, who often have a limited perspective. If their performance is measured on inventory turns, for example, they might worry that distant and uncertain supply lines will require them to hold larger inventories, thereby driving up costs and reducing turns. Similarly, logistics managers, who are evaluated on their ability to economize, warn that using far-flung suppliers will push up costs. Procurement managers wave the yellow flag about the quality of goods, while product designers, manufacturing chiefs, and plant managers all have objections of their own.

And they are right, from their specific points of view. Inventory and logistics costs will rise. Adjustments will be needed to deal with the new risks of managing suppliers in China. But companies that succeed there have demonstrated that the benefits of lower-cost purchasing almost always outweigh the increase in operational costs and risks. Even after accounting for them, one retailer recorded overall savings of more than 20 percent in its sourcing operation.

Managers at such companies see the bigger picture. They commit the time needed to make the case for change, sell it internally, and transform organizational structures, incentives, and performance measures. And as we have seen in our own work, there is also clear direction from the top. Without unambiguous support from senior executives, programs languish when procurement departments or operational managers try to implement them.

Executives can overcome resistance to change by making a persuasive case for it. Some sponsor efforts to develop total-cost-of-ownership models that show whether the benefits of sourcing in China outweigh the additional logistics costs, lower inventory turns, and risks to quality (exhibit). At one high-tech company, for instance, managers from functions such as logistics and procurement worked with the CFO to create such a model. This exercise not only encouraged them to buy into the final assessment but also helped middle managers identify cross-functional sourcing issues, including how to get the logistics, inventory, and marketing teams working together to manage longer supply chains.

In addition, executives must find ways to minimize the pain of process changes and to make them acceptable quickly. One manufacturer began by using its existing processes to select, approve, negotiate with, and manage vendors instead of setting up a special Chinese initiative staffed by employees whose powers usurped the authority of sourcing and product managers. Processes and sourcing roles changed only after the company became comfortable working with Chinese suppliers. This manufacturer believes that the experiment helped its managers design a better sourcing program by allowing them to learn gradually about new approaches to purchasing, logistics, selecting vendors, and negotiations.

As a short-term measure, companies might redesign their performance incentives in order to encourage purchasing managers to buy goods from China. One retailer introduced "incubation" incentives to motivate its buyers, rewarding them with bonuses for the volume of products they sourced there.

Building capabilities

To source goods directly from China, a company must learn a set of basic capabilities. These include ensuring quality and control (evaluating a supplier's ability to meet requirements, for example), testing preproduction prototypes or samples, and assessing packing procedures. Logistics activities such as satisfying customs regulations and arranging shipments are important as well.

During the transition phase, a company might work with China-based agents—trading intermediaries that buy and ship goods—until it had identified and trained the internal talent needed to deal directly with Chinese suppliers. The first of the intermediaries to go will be those that merely buy and sell, because they offer the least added value. Naturally, these agents are likely to pull out all the stops to keep their treasured positions by arguing that they understand local business practices better than overseas managers can. They also claim to do the heavy lifting so foreign companies don't have to spend time trawling for suppliers, negotiating deals, and establishing infrastructure and organizations to manage supply. Ultimately, they will contend, they can "do a better job for you than you can do for yourself here."

In our experience, foreign companies can actually learn to do quite well for themselves, whatever the agents' persuasive claims to the contrary. The real issue is how to decide when to use third parties. If a company sources more than $100 million a year in goods from China, it makes economic sense to have a unit there that can go directly to suppliers, because the cost of running a direct-procurement operation is a third or less of what agents charge. But though they should generally be used as sparingly as possible and according to strict criteria, there are reasons to take advantage of the specialized services that some of them offer: certain agents are skilled at handling delicate materials or complex product categories, for example, or have exclusive rights to particular factories. Moreover, a steady flow of agents through a procurement office can promote market-led innovation and provide useful information about changes in the supplier base.

Direct sourcing may be cost-effective even if a company procures as little as $40 million a year in goods. In this case, however, it can turn to an array of specialist third-party providers that help it identify reliable suppliers, provide quality assurance and control, and perform logistics tasks. Combining in-house activity with the use of third parties permits a company with lower levels of direct sourcing to set up its own office in China and start reducing its reliance on intermediaries while capturing significant savings.

Companies that set up their own procurement operations should focus on building their leadership teams. Four important posts must be filled: the heads of the office, procurement and merchandising, quality assurance and control, and logistics. The ideal candidate for each role will have a knowledge of the company, the industry, and China—and be fluent in Mandarin. As many companies have discovered, the perfect candidate rarely exists. If no single person can be found for a job, it might be necessary to build a team that amalgamates these qualities.

Attention to detail

Direct sourcing is a complicated set of activities involving many detailed decisions, from selecting suppliers to managing production, quality, inventory, and logistics. Executives know that companies can stumble in any of these activities as they expand their sourcing options around the world. What surprises executives about sourcing in China is the number of details that can go wrong and the effort required to hold a program together. Companies find that they have to pay much more attention than expected to monitoring their suppliers' flow processes—working back from expected delivery dates to check that suppliers receive raw materials on time and meet every subsequent milestone until the products ship. In other words, you have to be there. Without hands-on supervision and quick action when milestones are missed, companies face delays. Intensive monitoring is required in every industry and with most suppliers in China.

This level of attention, though not unheard-of elsewhere, isn't common. What makes China particularly tricky is geographic distance. Managers must not only spend more time on tactical details but also—particularly in the case of North and South American corporations—must do so in vexingly different time zones: they might have to get on the telephone in the middle of the night to communicate with colleagues half a world away. Companies that haven't mastered the details incur shipment delays and additional costs. More important, some find that because they are constantly fighting fires, it is difficult to scale up the sourcing they do in China.

Setting the stage

Solving the leadership conundrum at home and establishing effective sourcing capabilities in China are today's challenges. Companies that get it right will be in a position to establish a long-term source of competitive advantage by taking the operations they build in China today to the next level.

One way would be developing additional capabilities in China to cut cycle times. Upstream activities such as the approval of prototypes and samples could be moved there and kept close to the manufacturing operations of suppliers, thus reducing the need to rely on headquarters. Streamlining this back-and-forth process could trim by a third the time—currently half a year or more in many cases—needed to develop and make new products. Bringing them to market more quickly can have a tremendous impact on a company's economics by improving its understanding of consumers, increasing the accuracy of forecasts, and reducing stockouts and markdowns. European "fast-fashion" retailers such as H&M and Zara have shown the possibilities of this model close to home. The next such opportunity is applying it to products from China.

Another possibility would be to relocate postproduction tasks there. Attaching price labels, ironing and hanging garments, packing consumer electronics product kits, repacking pallets for delivery to points of sale—all of these activities, currently undertaken in Western warehouses, could be completed more cheaply in China.

Shifting responsibility for procurement or even warehouse activities is a challenge. Not least important, a company that goes down this road will find it necessary to create a local staff that can make the correct decisions. Talented engineers and designers will have to be moved from headquarters or recruited and trained in China. More problematic still, headquarters staff will be required to surrender some decision-making power to counterparts based in that country. Processes and IT will have to change so that people can share information and images (for example, of designs or samples) and feel comfortable about decisions made under the new arrangements.

Procurement practices may well prove to be a source of competitive advantage. Companies that have strong ties to suppliers in China could work with them to adopt best practices that cut operating costs and improve lead times, as Toyota Motor has done in past years. Manufacturers, which already know how to run factories efficiently, will find this approach easier to implement than retailers will. Although retailers will have to learn new skills, they won't find it beyond their powers. Companies could also introduce sophisticated procurement tools, such as clean-sheet costing, to drive down supply costs further and to set targets for future cost benefits that could be shared by supplier and buyer.

But efforts to build for tomorrow must begin today. The significant competitive operating advantages that companies could begin to harvest in China within three to five years will be possible only for those that establish the proper fundamentals right away.

Robert Campbell is a consultant and Jimmy Hexter is a principal in McKinsey's Beijing office; Karen Yin is a consultant in the Shanghai office.

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Unlock the Benefits of Outsourcing to China: A Comprehensive Guide

Explore the intricacies of outsourcing in China, from salary trends to legal considerations. Discover how Insightful, a leading working remotely software, can help manage outsourced teams effectively.

Speak with a Productivity Expert

Give us 30 minutes and we’ll show you how we can help you achieve better results.

China is emerging as a significant player in the outsourcing industry, rivaling traditional powerhouses such as Indonesia and the Philippines, attracting businesses worldwide with its highly skilled talent pool and cost-effective solutions.

Numerous global companies have chosen to outsource in China, including Apple, HP, Dell, Adidas, and Nike - showcasing a growing trend among international businesses to take advantage of China's outsourcing capabilities.

In this comprehensive guide, we will delve into the intricacies of outsourcing in China, including salary trends, top industries, and best practices for managing outsourced teams. We will also explore how a work time cloud monitoring app, such as Insightful, can help you effectively manage your outsourced workforce.

Effectively Monitor Outsourced Teams with Insightful

Understanding the chinese yuan: a quick currency comparison.

China's currency, the Chinese Yuan Renminbi (CNY), plays a crucial role in the country's attractiveness for outsourcing. Here's a comparison of the Chinese Yuan against other major currencies:

1 US Dollar = 6.95 Chinese Yuan

1 Euro = 7.56 Chinese Yuan

1 Pound = 8.67 Chinese Yuan

The average monthly salary in China is around CNY 8,242 ($1,278 USD). While this may appear high compared to some other Asian countries, the cost of living varies significantly across China, with living costs in cities like Beijing and Shanghai being higher than the national average. 

Exploring the Salary Landscape in China

Salaries in China vary widely based on factors such as job title, education level, and location. High-paying roles typically include IT Managers, Financial Analysts, and Engineers, while low-paying roles might include Customer Service Representatives and Data Entry Specialists. 

There is a notable gender wage gap in China, with men often earning more than women. Bonuses and incentives are common in China and can greatly influence the total compensation.

The Top 3 Outsourced Industries in China

The top three outsourced industries in China are:

Manufacturing

One of the primary reasons China is often referred to as "the world's factory" is its unparalleled dominance in the manufacturing sector. Over the last few decades, China has invested heavily in its manufacturing infrastructure, leading to the development of a complex supply chain and logistics network that is hard to rival. 

The sector is supported by a massive workforce, advanced machinery, and efficient production techniques. Outsourcing manufacturing to China enables businesses to leverage these resources for a wide range of products, from electronics and automobiles to textiles and consumer goods. 

IT and Software Development

China's emphasis on STEM (Science, Technology, Engineering, and Mathematics) education has resulted in a vast pool of highly skilled IT professionals. The country's universities churn out millions of engineering and computer science graduates each year, many of whom are well-versed in the latest technologies and programming languages. 

This makes China an attractive destination for outsourcing IT and software development services. From software programming and app development to artificial intelligence and machine learning, Chinese IT professionals are capable of handling a wide range of tasks.

Customer Service

Customer service is another area where China shines in the outsourcing industry. One of the key reasons for this is the availability of a large, multilingual talent pool. As more Chinese students study abroad and return home, and as English education becomes more prevalent in Chinese schools, there is an increasing number of Chinese workers proficient in English and other languages. 

This enables them to handle customer service operations for global businesses effectively. Moreover, the Chinese government has been actively promoting the service sector, including customer service, as a part of its economic restructuring efforts, leading to better training programs and infrastructure for customer service operations.

The Benefits of Outsourcing to China

Outsourcing to China can provide businesses with many potential benefits: 

• Access to a vast, highly skilled talent pool: China's vast population and emphasis on STEM education creates a massive pool of skilled professionals in sectors like manufacturing, IT, and customer service.
• Competitive pricing: Despite rising costs, China maintains competitive prices for many types of work, particularly in manufacturing, offering businesses excellent value for money.
• Advanced infrastructure: China's significant investment in physical and technological infrastructure positions it as a global leader in areas like e-commerce, mobile technology, and AI.
• Rapid scalability: The extensive workforce and comprehensive infrastructure in China allow businesses to scale their operations quickly, accommodating growth and fluctuating demand levels.
• Government support: The Chinese government encourages the outsourcing industry and foreign investment, making the process smoother and more attractive for foreign businesses.

Communication and Collaboration: The Key to Success with China Outsourcing Partners

Effective communication and collaboration are paramount for any prosperous outsourcing partnership. When working with an outsourced team in China, consider the following points:

• Time Zones: China operates on China Standard Time (CST), which might be considerably different from your own. Schedule meetings and deadlines with this in mind to ensure smooth collaboration and prompt project completion.
• Language: While English is taught in schools and is commonly used in the business world in China, communication should be clear and concise. Avoid using idioms or colloquial phrases that might lead to misunderstandings.
• Tools and Technology: To ensure seamless communication and collaboration, familiarize yourself with the digital tools widely used in China such as WeChat, DingTalk, and Alibaba's Aliyun. These platforms could be pivotal in facilitating effective communication with your Chinese counterparts.
• Building Relationships: Known as "Guanxi," relationship-building is a crucial aspect of Chinese business culture. Investing time in building personal relationships can result in a more harmonious and effective working relationship with your Chinese outsourced team.

Legal and Compliance Considerations for Outsourcing to China

Outsourcing can provide several advantages to businesses, including cost savings and access to a diverse, skilled workforce. However, when outsourcing to China, it's critical to consider the legal and compliance aspects to avoid potential pitfalls. Below are some key factors to bear in mind:

Data Protection Laws

Ensure your Chinese outsourcing partner adheres to data protection laws and has robust measures in place to safeguard sensitive data. For instance, China's Cybersecurity Law mandates the protection of personal data and sets out specific requirements for data privacy. For clients based in the European Union, GDPR compliance is equally critical.

Intellectual Property Rights

Securing your company's intellectual property is crucial. Engage legal experts to draft agreements that clearly define the ownership and usage of intellectual property generated during the outsourcing process. Be aware of China's IP laws and regulations, including the Patent Law of the People's Republic of China and the Copyright Law of the People's Republic of China, to ensure your IP rights are protected.

Chinese Labor Laws and Regulations

Verify that your outsourcing partner adheres to Chinese labor laws and regulations, such as minimum wage, working hours, and employee benefits. Familiarize yourself with local labor laws like the Labor Law of the People's Republic of China and the Labor Contract Law of the People's Republic of China, to ensure your outsourcing partner's compliance.

Tax Implications

Engage with tax professionals to understand the potential tax implications of outsourcing to China, including any relevant taxes or double taxation agreements. China has different tax rates depending on the services involved, so be aware of any potential tax liabilities.

Understanding the Cultural Differences of Your Outsourced Chinese Teams

Working with teams from different cultural backgrounds can be enriching, but it's crucial to understand and respect cultural differences. When working with Chinese teams, consider the following cultural aspects:

Family and Relationships

Chinese culture places significant emphasis on family and personal relationships. This concept extends to the workplace, where building strong relationships can lead to more effective collaborations. Take time to know your Chinese team members on a personal level and show sincere interest in their lives.

Hierarchy and Respect

Chinese culture is deeply rooted in Confucianism, which values hierarchy and respect for authority. This respect for hierarchy is reflected in the workplace, where decisions often flow from the top down. When communicating, ensure you're addressing the appropriate person within the organization, showing respect to leadership and acknowledging the hierarchical structure.

Religious and Philosophical Considerations

While China is officially atheistic, Buddhism, Taoism, and Confucianism have significantly influenced Chinese culture. Additionally, some Chinese follow Christianity or Islam. These belief systems may influence the worldview and practices of your Chinese team members. Be respectful of these beliefs and consider them when planning meetings or setting deadlines.

Indirect Communication

Chinese culture often favors indirect communication to maintain harmony and avoid confrontation. This approach can sometimes lead to misunderstandings with Western counterparts who are used to more direct communication. Be patient, read between the lines, and use tact and diplomacy when providing feedback.

Monitor Outsourced Teams’ Performance with Insightful

To effectively manage your outsourced team in China, you need tools for working remotely, software like Insightful can be invaluable in this case. Insightful provides:

• Employee Monitoring: Monitor your outsourced team's work activity in real-time, ensuring they stay on task and productive.
• Time Tracking: Track time spent on projects and tasks, enabling you to better allocate resources and manage budgets.
• Detailed Reports: Gain insights into your team's performance with detailed reports on work hours, task completion, and project progress.

Insightful helps teams improve productivity!

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Alibaba and the Future of Business

Alibaba is not a retailer in the traditional sense. It doesn’t source or keep stock, and logistics services are carried out by third-party providers. Instead, Alibaba is what you get if you take all the functions associated with retail and coordinate them online into a sprawling, data-driven network of sellers, marketers, service providers, logistics companies, and manufacturers. Indeed, Alibaba does what Amazon, eBay, PayPal, Google, FedEx, all of the wholesalers, and a good portion of manufacturers in the U.S. do, with a healthy helping of financial services for garnish.

Alibaba achieves this by leveraging the new technologies of network coordination and data intelligence. It harnesses the efforts of thousands of Chinese businesses to create an ecosystem that is faster, smarter, and more efficient than traditional business infrastructures.

This is an emerging business model that Ming Zeng, the chair of Alibaba’s Academic Council, calls smart business. Players in the ecosystem share data and apply machine-learning technology to identify and better fulfill consumer needs. This article provides a framework for transforming a company into a smart business.

Lessons from China’s innovative digital giant

Idea in Brief

A new business model.

Alibaba is an example of tomorrow’s “smart business”: a tech-enabled platform that coordinates multiple business players in an ecosystem.

How It Works

Players in the ecosystem share data and apply machine-learning technology to identify and better fulfill consumer needs.

How to Build It

Automate decision making by:

• making sure every interaction yields as much data as possible

• ensuring that all business activities are mediated by software

• using APIs and other interface protocols to ensure smooth interaction among software systems

• applying machine learning to make sense of data in real time

Alibaba hit the headlines with the world’s biggest IPO in September 2014. Today, the company has a market cap among the global top 10, has surpassed Walmart in global sales, and has expanded into all the major markets in the world. Founder Jack Ma has become a household name.

• Ming Zeng is the chairman of the Academic Council of the Alibaba Group, an e-commerce, retail, and technology conglomerate, based in Hangzhou, China, and the author of Smart Business: What Alibaba’s Success Reveals About the Future of Strategy (Harvard Business Review Press, September 2018). He is also the dean of Hupan School of Entrepreneurship, a private business school founded by Alibaba chairman Jack Ma and other leading Chinese entrepreneurs in Hangzhou.

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Apple diversifies supply chain but keeps China at the center

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Apple is moving some production out of China to overcome operational, geopolitical, and regulatory hurdles. However, China remains the central production hub for its devices.

Apple employs an extensive list of outsourcing partners to supply and manufacture components used in iPhones, iPads, Macs, and wearable devices. In 2020, the vast majority (98%) of Apple’s direct spending on materials, manufacturing, and assembly went to 200 suppliers. The manufacturing facilities of 85% of these suppliers were in Asia.

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Out of the 30 countries where Apple devices were manufactured in 2020, six accounted for over 80% of annual production. China contributed 42%, followed by Japan (16%), the US (9%), Taiwan (6%), South Korea (5%), and Vietnam (4%). China’s leading position in Apple’s supply chain is attributable to several factors, including:

• the country’s massive industrial infrastructure,
• the availability of a large, affordable, and skilled labour force;
• the low cost of production compared to most other countries; and
• the ability of Chinese manufacturers to automate production lines.

According to Nikkei Asia, Apple increased its number of Chinese suppliers to 51 in 2020, up from 42 in 2018. Chinese suppliers typically offer high cost-efficiency and low turn-around time for production and increasingly focus on innovation.

China is a lucrative market for Apple

Greater China (which includes mainland China, Hong Kong, and Taiwan) is the third-largest market for Apple by revenue, behind the Americas and Europe. In the three months to the end of March 2021, Apple reported 87% year-on-year revenue growth in the region, significantly higher than in the Americas (35% growth) and Europe (56%).

China’s affluent consumer base is a critical driver for Apple’s revenue and brand growth. According to McKinsey, over 75% of China’s urban population will be considered middle class by 2022, and Chinese consumers will account for about 40% of global spending on luxury goods by 2025. Thus, China will be a vital market for Apple in the future.

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Chinese suppliers are expanding the Apple’s supply chain

The ongoing US-China trade war and rising labour costs in China have prompted Apple to move some production from China to Vietnam, Malaysia, and India. However, a large-scale shift is unlikely in the future as most countries do not offer China-like infrastructure, skilled labour, and governmental support. In addition, many components for Apple devices such as circuit boards, display panels, chargers, cables, and batteries are manufactured in China. Importing them to other countries before assembling the final devices would incur tariff expenses and labour training costs for Apple.

In 2019, Apple reportedly asked its suppliers to evaluate the cost of moving 15% to 30% of their production capacity from China to Southeast Asia. At the time of writing, several of Apple’s Chinese suppliers have production and assembly facilities in neighbouring countries. For instance, seven of nine Apple suppliers in India and 10 out of 23 in Vietnam are headquartered in China and Taiwan. This diversifies Apple’s supply chain while still keeping China at its center.

Apple will still explore revenue and other opportunities beyond China

Apple was expected to be heavily impacted by the COVID-19 lockdowns in China in early 2020. However, China’s quick recovery enabled the company to maintain shipments and launch new products amidst the pandemic. Apple’s supply chain has proved its resilience during uncertain times, but over-reliance on one country could prove to be a disaster in the future.

Apple must use other countries as complementary production hubs, explore ways to reduce production costs further, and mitigate tariff impositions on imported, explicitly China-made products. Domestic production will help alleviate a fair share of import tariffs, which will reduce the retail prices for Apple devices, making them more appealing to customers.

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The Most Versatile Nearshore Software Development Company

How Apple Achieved a Legendary $2.98 Trillion Fortune by Outsourcing | Case Study

In the annals of technological innovation, Apple Inc. stands as a testament to what strategic decisions and visionary leadership can achieve. From its humble beginnings in a garage to becoming a three trillion-dollar behemoth, Apple’s success narrative is a tale woven with threads of innovation, design excellence, and a shrewd approach to outsourcing. In this extensive case study, we embark on a journey to dissect the intricate layers of outsourcing strategy to extract valuable lessons for businesses aiming at sustainable growth.

Apple’s evolution is a saga of perpetual reinvention. Founded in 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne, the company started as a player in the personal computer industry. [ 1 ] Fast forward to the present day, and Apple Inc. has transformed into a global powerhouse, setting industry benchmarks and captivating consumers with its innovative products.

Table of Contents

#1: outsourcing: apple inc.’s manufacturing backbone, a: challenge: scaling up production.

As Apple Inc. ventured into the realm of consumer electronics with products like the iPhone, iPad, and MacBook, the challenge of meeting unprecedented demand emerged. In response, Apple strategically embraced outsourcing, forging key partnerships to tackle this manufacturing conundrum.

Foxconn, also known as Hon Hai Precision Industry Co., Ltd., emerged as Apple’s manufacturing linchpin. With its headquarters in Taiwan, Foxconn became the largest electronics contract manufacturer globally. The statistics tell a compelling story—Foxconn’s revenue in 2021 reached a staggering $214 billion, ranked 20th in the 2023 Fortune Global 500—a significant portion of which was attributed to its collaboration with Apple.

B: Benefit: Cost Savings and Efficiency

The outsourcing strategy wasn’t merely about meeting demand but a calculated move to optimize costs. According to industry reports, the cost of manufacturing an iPhone X was estimated to be around $370, with the device retailing at $999. This exemplifies the cost-effectiveness achieved through outsourcing, particularly with partners like Foxconn, renowned for their efficiency in mass production. In 2023, Apple Inc. launched the titanium-based iPhone 15 Pro Max, manufactured at $558 and currently retailing from $1199 to $1599.

#2: Leveraging Global Talent and Expertise

A: challenge: the pursuit of excellence.

Apple’s commitment to excellence extends beyond its sleek product designs to encompass the entire user experience. To provide this seamless experience, Apple Inc. strategically tapped into a global talent pool, seeking specialized expertise through outsourcing.

Beyond manufacturing, Apple’s collaboration extended to specialized components. For instance, Apple Inc. sourced its A-series chips from Taiwan Semiconductor Manufacturing Company (TSMC), a world leader in semiconductor manufacturing. In 2022, TSMC’s revenue soared to $63 billion, a testament to its pivotal role in Apple’s supply chain.

B: Benefit: Innovation and Quality Assurance

Outsourcing to experts meant that Apple could integrate cutting-edge technology seamlessly. The A-series chips, fabricated by TSMC, consistently pushed the boundaries of performance, ensuring that Apple’s devices were aesthetically pleasing and technological marvels. This collaborative approach contributed to Apple’s reputation for innovation and quality assurance.

#3: The Design Imperative

A: challenge: nurturing creativity.

Apple’s design philosophy is synonymous with elegance and innovation. Outsourcing became a tool to liberate internal resources, allowing Apple’s design team to focus solely on what they do best—creating iconic products.

By outsourcing components and manufacturing, Apple’s in-house design team gained the freedom to innovate without being bogged down by production intricacies. Statistics reveal the impact—Apple’s design-led approach contributed to a brand value of $263.4 billion in 2022, making it the most valuable brand globally.

B: Benefit: Unleashing Creativity

This focus on design resulted in visually stunning products and fostered a culture of innovation within Apple Inc. The iPhone’s iconic design, for instance, not only captured the market but set a new standard for the entire industry. The freedom to innovate became a catalyst for Apple’s success.

#4: Outsourcing in the Digital Age

A: Challenge: Navigating the Digital Landscape

As the digital landscape evolved, Apple Inc. faced the challenge of staying at the forefront of software development. The solution lies in strategic outsourcing partnerships that complement Apple’s internal capabilities.

Apple’s collaboration extended to software development, with partnerships and acquisitions reinforcing its commitment to excellence. For instance, the acquisition of Beats Electronics in 2014 for $3 billion not only bolstered Apple’s presence in the audio industry but also brought the expertise of Beats’ software engineers into the Apple ecosystem.

B: Benefit: Software Synergy

Outsourcing software development allowed Apple to harness the collective expertise of a global talent pool. The collaborative synergy translated into user-friendly interfaces, seamless integration across devices, and a robust app ecosystem. The strategic outsourcing of software development became a key ingredient in Apple’s recipe for success in the digital age.

#5: Ethical Considerations and Corporate Responsibility

A: challenge: balancing success and responsibility.

While the outsourcing strategy contributed significantly to Apple’s success, it also brought attention to ethical considerations and corporate responsibility. Reports of challenging working conditions at some manufacturing partners prompted Apple to reevaluate its approach.

Apple’s response to these ethical concerns showcased adaptability and a commitment to responsible business practices. According to Apple’s Supplier Responsibility Progress Report in 2022, the company conducted over 1,100 supplier assessments, addressing issues related to labor practices, environmental impact, and ethical sourcing.

B: Benefit: Ethical Leadership

Addressing ethical concerns associated with outsourcing elevated Apple’s corporate image. The commitment to responsible business practices resonated with consumers and set a precedent for the industry. This ethical leadership became a crucial element in Apple’s success story.

Final Verdict: The Outsourcing Symphony

In the grand symphony of Apple’s success, outsourcing plays a pivotal role as a harmonious melody that elevates the entire composition. The strategic outsourcing of manufacturing, expertise, design, and software development has propelled Apple to unprecedented heights and is currently worth almost $3 trillion. This in-depth exploration attests to the transformative power of strategic outsourcing.

* Lessons Learned: A Call to Action

1. Strategic Partnerships : Identify and cultivate strategic outsourcing partnerships that align with your business goals and values. Partnering with industry giants like Foxconn and TSMC gave a solid foundation.

2. Focus on Core Competencies : Outsourcing allows you to concentrate on your core competencies, whether design, innovation, or marketing. As exemplified above, streamlining the design process can lead to market-leading products.

3. Global Talent Pool : Tap into a global talent pool to access specialized expertise and stay at the forefront of innovation. Partnerships with global leaders, such as TSMC in semiconductor manufacturing, were proven to be instrumental.

4. Ethical Outsourcing : Prioritize ethical considerations and corporate responsibility in your outsourcing practices to build a positive brand image. As demonstrated above, regular assessments and a commitment to transparency can set industry standards.

5. Adaptability : Be adaptable and responsive to challenges, iterating your outsourcing strategy to meet evolving demands. Responsiveness to ethical concerns showcases the importance of adaptability in sustaining success.

In the business landscape, the outsourcing symphony can be the key to sustained success. As businesses consider their growth strategies, the above case study serves as a compelling testament to the transformative power of strategic outsourcing. Embrace the symphony, conduct it with precision, and let the echoes of success reverberate through the corridors of your organization.

Get in touch with us at CodersOnFire and start outsourcing your software development projects to gain monumental success in your business.

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Apple in China and India

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The Apple in China and India case explores the competitive challenges faced by a global company in two large emerging markets - China and India. Specifically, in these two large emerging markets,…

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The Apple in China and India case explores the competitive challenges faced by a global company in two large emerging markets - China and India. Specifically, in these two large emerging markets, Apple's sales of its flagship iPhone are falling significantly short of its market share in many developed country markets, and well below its own professed and announced revenue and volume targets. The company has to make key strategic decisions regarding its product offerings and the competitive positioning of its products, taking into account the offerings of its key global and local competitors and the unique needs of customers in the two emerging markets in terms of desired product features, and their ability and willingness to pay. In making these choices, Apple has to consider how the decisions made with respect to these two markets align with the broader global strategy for iPhone.

Learning Objectives

1.) Analyzing Global Competition.

2.) Understanding Challenges of Succeeding in Emerging Markt

3) Crafting Global Strategies.

Jul 1, 2020

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General Management

Geographies:

China, India, United States

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Please note you do not have access to teaching notes, managing production outsourcing risks in china's apparel industry: a case study of two apparel retailers.

Supply Chain Management

ISSN : 1359-8546

Article publication date: 27 September 2011

This paper aims to examine how Chinese apparel retailers manage their production outsourcing risks and why they elect to manage those risks in a particular manner.

Design/methodology/approach

The investigation used the case study approach to explore factors driving two Chinese apparel retailers operating in different market environments to manage their production outsourcing risks.

The selection of production outsourcing risk management strategies hinges on what apparel retailers view as the most important value their products provide to customers. Product values were linked to specific product characteristics as well as the market environment in which the apparel retailers operated. The retailer that regarded product quality as a key value driver was found to place emphasis on manufacturer selection and use of a formal contract for process control. The retailer that viewed newness and variety as a value driver opted to cultivate a strong, committed business relationship based on Guanxi to achieve speed‐to‐market.

Research limitations/implications

As a case study research, the findings of this study have their limitations in generalisability. Given that one of the retailers did not invoke Guanxi to cultivate a long‐term business relationship with its outsourced manufacturers, the role of Guanxi in outsourcing risk management in China deserves further exploration, as businesses in China become more globalised.

Practical implications/value

This study grounds mainstream outsourcing strategy literature on operational practice through case studies. It highlights the influence of both product characteristics and market environment in dictating the choice of outsourcing risk management strategies in apparel manufacturing.

Originality/value

The study views outsourcing risk management from the perspective of minimizing outsourcing failures, rather than achieving outsourcing success. It reveals that risk management behavior of apparel retailers was linked to the notion of value protection, which varied according to what they considered as their principal product value drivers.

• Outsourcing risks
• Speed‐to‐market
• Value protection

Hon Kam, B. , Chen, L. and Wilding, R. (2011), "Managing production outsourcing risks in China's apparel industry: a case study of two apparel retailers", Supply Chain Management , Vol. 16 No. 6, pp. 428-445. https://doi.org/10.1108/13598541111171147

Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited

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First oral treatment for chronic kidney disease launched in China by Everest Medicine

14-May-2024 - Last updated on 14-May-2024 at 13:24 GMT

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This official launch marks a significant advancement in patient care in mainland China, introducing a new era in the treatment of IgA nephropathy ​ (IgAN). IgA nephropathy (IgAN) is a common chronic kidney disease which mainly affects young adults. In IgAN a protein called immunoglobulin A (IgA) becomes trapped in the very fine filters of the kidney (glomeruli), causing damage and scarring to the whole kidney.

China has the highest prevalence of primary glomerular diseases globally, with IgAN accounting for about 35% to 50% of cases. Most IgAN patients risk progressing to end-stage renal disease during their lifetime, often requiring dialysis or kidney transplantation.

Current treatments, like renin-angiotensin system (RAS) inhibitors, fail to address the underlying disease progression, highlighting a significant unmet medical need.

Rogers Yongqing Luo, chief executive officer of Everest Medicines, said the commercialization of Nefecon in the Chinese market represents a significant milestone for Everest and a breakthrough for IgAN patients in China. Nefecon has undergone a 20-year research and development process, becoming the first non-oncology therapeutic to receive Breakthrough Therapy Designation in China by the China National Medical Products Administration (NMPA), and the first treatment for IgAN to receive full approval from the US Food and Drug Administration (FDA).

Five million IgAN patients in China

Professor Zhang Hong is from Peking University First Hospital, a member of the global steering committee for the phase 3 clinical study NefIgArd. He said: “We will actively engage with all stakeholders to improve the accessibility and affordability of this innovative therapy for IgAN. Moreover, we will contribute to improving nephropathy diagnosis, treatment, and disease management, ultimately benefiting more patients. As we advance the commercialization of Nefecon in China and Asia, we will also actively promote the development of other innovative drugs in the nephropathy field, extending benefits to more patients.”

“IgAN is the most common primary glomerular disease, occurring at a young age with a high possibility of progressing to end-stage renal disease. Compared to European and American populations, Chinese IgAN patients experience faster disease progression and poorer prognosis, imposing a heavy burden on patients and society. The full results of the NefIgArd study demonstrate that Nefecon can protect renal function, delay progression to dialysis or kidney transplantation, and significantly reduce urinary protein and hematuria. It is also safe and well-tolerated.”

“Data analysis of the Chinese population shows that Nefecon reduces kidney function decline by 66%, and delays disease progression to dialysis or kidney transplantation by 12.8 years. The approval of Nefecon fills the gap in targeted therapy for IgAN in China, benefiting Chinese patients, improving disease prognosis, and providing clinicians with new treatment options.”

Nefecon - even greater benefit in delaying kidney function decline

The company says the latest analysis, presented at the World Congress of Nephrology 2024, provides further evidence that Nefecon may offer even greater benefit in delaying kidney function decline in Chinese patients with more rapidly progressing disease, without compromising patients' quality of life. Positive results from the global Open Label Extension (OLE) study based on the NefIgArd phase 3 study validated the efficacy and safety of re-treatment with Nefecon independent of prior treatment cycles, providing a solid scientific basis for future long-term maintenance regimens of Nefecon.

"IgAN is highly prevalent in Asia and is one of the main causes of kidney failure in young adults in China. Among IgAN patients, the risk of progressing to end-stage renal disease in Asian populations is 56% higher compared to other populations, and the disease progresses more rapidly, imposing a significant medical burden on patients, families, and society. Therefore, more proactive treatment is needed to intervene and control the risk of disease progression, delaying the need for dialysis or kidney transplantation.

“For a long time, this disease has lacked targeted treatment options, resulting in significant unmet clinical needs," said Professor Xie Jingyuan, chief physician of the Department of Nephrology, Ruijin Hospital affiliated with Shanghai Jiao Tong University School of Medicine.

“Nefecon, as the world's first-in-disease therapy for IgAN, has treated over one hundred patients in total through its early-access program in Boao last April. During the follow-up period, Nefecon was found to be effective in stabilizing renal function, reducing proteinuria and hematuria, and was well tolerated by the patients. It is of great significance for Nefecon to be officially commercialized in mainland China, helping patients with IgAN to initiate treatment as early as possible.”

Nefecon received approval from the China NMPA in November 2023 for the treatment of primary IgAN in adults at risk of disease progression. Additionally, Nefecon has been approved in multiple countries and territories across Europe, the US, and Asia.

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U.S. Raises Tariffs On Chinese EVs to 100%

Photo: iStock.com/Dilok Klaisataporn

President Joe Biden confirmed May 13 that the U.S. is increasing tariffs on Chinese-made electric cars , solar panels, steel and other goods.

BBC News reports that the White House said the measures, which include a 100% border tax on electric cars from China, were a response to unfair policies, and were intended to protect U.S. jobs. The tariffs would hit an estimated $18 billion worth of imports.

China’s Foreign Ministry said the tariffs imposed by the previous U.S. administration “seriously disrupted” economic and trade exchanges between the two countries. It called on Washington to cancel the restrictions, and added that China will take steps to defend its rights and interests.

They follow months of criticism by former President Donald Trump, who is running for the White House against Biden and has argued his rival's support for electric cars would "kill" the U.S. car industry .

As well as a rise from 25% to 100% on electric vehicle tariffs, levies on solar cells would go up from 25% to 50%.

Tariff rates on certain steel and aluminum products will more than triple to 25%, up from 7.5% or less. 

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How Biden Adopted Trump’s Trade War With China

The president has proposed new barriers to electric vehicles, steel and other goods..

This transcript was created using speech recognition software. While it has been reviewed by human transcribers, it may contain errors. Please review the episode audio before quoting from this transcript and email [email protected] with any questions.

From “The New York Times,” I’m Sabrina Tavernise, and this is “The Daily.”

[MUSIC PLAYING]

Donald Trump upended decades of American policy when he started a trade war with China. Many thought that President Biden would reverse those policies. Instead, he’s stepping them up. Today, my colleague, Jim Tankersley, explains.

It’s Monday, May 13.

Jim, it’s very nice to have you in the studio.

It’s so great to be here, Sabrina. Thank you so much.

So we are going to talk today about something I find very interesting and I know you’ve been following. We’re in the middle of a presidential campaign. You are an economics reporter looking at these two candidates, and you’ve been trying to understand how Trump and Biden are thinking about our number one economic rival, and that is China.

As we know, Trump has been very loud and very clear about his views on China. What about Biden?

Well, no one is going to accuse President Biden of being as loud as former President Trump. But I think he’s actually been fairly clear in a way that might surprise a lot of people about how he sees economic competition with China.

We’re going after China in the wrong way. China is stealing intellectual property. China is conditioning —

And Biden has, kind of surprisingly, sounded a lot, in his own Joe Biden way, like Trump.

They’re not competing. They’re cheating. They’re cheating. And we’ve seen the damage here in America.

He has been very clear that he thinks China is cheating in trade.

The bottom line is I want fair competition with China, not conflict. And we’re in a stronger position to win the economic competition of the 21st century against China or anyone else because we’re investing in America and American workers again. Finally.

And maybe the most surprising thing from a policy perspective is just how much Biden has built on top of the anti-China moves that Trump made and really is the verge of his own sort of trade war with China.

Interesting. So remind us, Jim, what did Trump do when he actually came into office? We, of course, remember Trump really talking about China and banging that drum hard during the campaign, but remind us what he actually did when he came into office.

Yeah, it’s really instructive to start with the campaign, because Trump is talking about China in some very specific ways.

We have a $500 billion deficit, trade deficit, with China. We’re going to turn it around. And we have the cards. Don’t forget —

They’re ripping us off. They’re stealing our jobs.

They’re using our country as a piggy bank to rebuild China, and many other countries are doing the same thing. So we’re losing our good jobs, so many.

The economic context here is the United States has lost a couple of million jobs in what was called the China shock of the early 2000s. And Trump is tapping into that.

But when the Chinese come in, and they want to make great trade deals — and they make the best trade deals, and not anymore. When I’m there, we turn it around, folks. We turn it around. We have —

And what he’s promising as president is that he’s going to bring those jobs back.

I’ll be the greatest jobs president that God ever created. I’ll take them back from China, from Japan.

And not just any jobs, good-paying manufacturing jobs, all of it — clothes, shoes, steel, all of these jobs that have been lost that American workers, particularly in the industrial Midwest, used to do. Trump’s going to bring them back with policy meant to rebalance the trade relationship with China to get a better deal with China.

So he’s saying China is eating our lunch and has been for decades. That’s the reason why factory workers in rural North Carolina don’t have work. It’s those guys. And I’m going to change that.

Right. And he likes to say it’s because our leaders didn’t cut the right deal with them, so I’m going to make a better deal. And to get a better deal, you need leverage. So a year into his presidency, he starts taking steps to amass leverage with China.

And so what does that look like?

Just an hour ago, surrounded by a hand-picked group of steelworkers, President Trump revealed he was not bluffing.

It starts with tariffs. Tariffs are taxes that the government imposes on imports.

Two key global imports into America now face a major new barrier.

Today, I’m defending America’s national security by placing tariffs on foreign imports of steel and aluminum.

And in this case, it’s imports from a lot of different countries, but particularly China.

Let’s take it straight to the White House. The president of the United States announcing new trade tariffs against China. Let’s listen in.

This has been long in the making. You’ve heard —

So Trump starts, in 2018, this series of tariffs that he’s imposing on all sorts of things — washing machines, solar panels, steel, aluminum. I went to Delaware to a lighting store at that time, I remember, where basically everything they sold came from China and was subject to the Trump tariffs, because that’s where lighting was made now.

Interesting.

Hundreds of billions of dollars of Chinese goods now start falling under these Trump tariffs. The Chinese, of course, don’t take this lying down.

China says it is not afraid of a trade war with the US, and it’s fighting back against President Trump with its own tariffs on US goods.

They do their own retaliatory tariffs. Now American exports to China cost more for Chinese consumers. And boom, all of a sudden, we are in the midst of a full-blown trade war between the United States and Beijing.

Right. And that trade war was kind of a shock because for decades, politicians had avoided that kind of policy. It was the consensus of the political class in the United States that there should not be tariffs like that. It should be free trade. And Trump just came in and blew up the consensus.

Yeah. And Sabrina, I may have mentioned this once or 700 times before on this program, but I talk to a lot of economists in my job.

Yeah, it’s weird. I talk to a lot of economists. And in 2018 when this started, there were very, very, very few economists of any political persuasion who thought that imposing all these tariffs were a good idea. Republican economists in particular, this is antithetical to how they think about the world, which is low taxes, free trade. And even Democratic economists who thought they had some problems with the way free trade had been conducted did not think that Trump’s “I’m going to get a better deal” approach was going to work. And so there was a lot of criticism at the time, and a lot of politicians really didn’t like it, a lot of Democrats, many Republicans. And it all added up to just a real, whoa, I don’t think this is going to work.

So that begs the question, did it?

Well, it depends on what you mean by work. Economically, it does not appear to have achieved what Trump wanted. There’s no evidence yet in the best economic research that’s been done on this that enormous amounts of manufacturing jobs came back to the United States because of Trump’s tariffs. There was research, for example, on the tariffs on washing machines. They appear to have helped a couple thousand jobs, manufacturing jobs be created in the United States, but they also raised the price of washing machines for everybody who bought them by enough that each additional job that was created by those tariffs effectively cost consumers, like, $800,000 per job.

There’s like lots of evidence that the sectors Trump was targeting to try to help here, he didn’t. There just wasn’t a lot of employment rebound to the United States. But politically, it really worked. The tariffs were very popular. They had this effect of showing voters in those hollowed-out manufacturing areas that Trump was on their team and that he was fighting for them. Even if they didn’t see the jobs coming back, they felt like he was standing up for them.

So the research suggests this was a savvy political move by Trump. And in the process, it sort of changes the political economic landscape in both parties in the United States.

Right. So Trump made these policies that seemed, for many, many years in the American political system, fringe, isolationist, economically bad, suddenly quite palatable and even desirable to mainstream policymakers.

Yeah. Suddenly getting tough on China is something everyone wants to do across both parties. And so from a political messaging standpoint, being tough on China is now where the mainstream is. But at the same time, there is still big disagreement over whether Trump is getting tough on China in the right way, whether he’s actually being effective at changing the trade relationship with China.

Remember that Trump was imposing these tariffs as a way to get leverage for a better deal with China. Well, he gets a deal of sorts, actually, with the Chinese government, which includes some things about tariffs, and also China agreeing to buy some products from the United States. Trump spins it as this huge win, but nobody else really, including Republicans, acts like Trump has solved the problem that Trump himself has identified. This deal is not enough to make everybody go, well, everything’s great with China now. We can move on to the next thing.

China remains this huge issue. And the question of what is the most effective way to deal with them is still an animating force in politics.

Got it. So politically, huge win, but policy-wise and economically, and fundamentally, the problem of China still very much unresolved.

Absolutely.

So then Biden comes in. What does Biden do? Does he keep the tariffs on?

Biden comes to office, and there remains this real pressure from economists to roll back what they consider to be the ineffective parts of Trump’s trade policy. That includes many of the tariffs. And it’s especially true at a time when almost immediately after Biden takes office, inflation spikes. And so Americans are paying a lot of money for products, and there’s this pressure on Biden, including from inside his administration, to roll back some of the China tariffs to give Americans some relief on prices.

And Biden considers this, but he doesn’t do it. He doesn’t reverse Trump’s tariff policy. In the end, he’s actually building on it.

We’ll be right back.

So Jim, you said that Biden is actually building on Trump’s anti-China policy. What exactly does that look like?

So Biden builds on the Trump China policy in three key ways, but he does it with a really specific goal that I just want you to keep in mind as we talk about all of this, which is that Biden isn’t just trying to beat China on everything. He’s not trying to cut a better deal. Biden is trying to beat China in a specific race to own the clean-energy future.

Clean energy.

Yeah. So keep that in mind, clean energy. And the animating force behind all of the things Biden does with China is that Biden wants to beat China on what he thinks are the jobs of the future, and that’s green technology.

Got it. OK. So what does he do first?

OK. Thing number one — let’s talk about the tariffs. He does not roll them back. And actually, he builds on them. For years, for the most part, he just lets the tariffs be. His administration reviews them. And it’s only now, this week, when his administration is going to actually act on the tariffs. And what they’re going to do is raise some of them. They’re going to raise them on strategic green tech things, like electric vehicles, in order to make them more expensive.

And I think it’s important to know the backdrop here, which is since Biden has taken office, China has started flooding global markets with really low-cost green technologies. Solar panels, electric vehicles are the two really big ones. And Biden’s aides are terrified that those imports are going to wash over the United States and basically wipe out American automakers, solar panel manufacturers, that essentially, if Americans can just buy super-cheap stuff from China, they’re not going to buy it from American factories. Those factories are going to go out of business.

So Biden’s goal of manufacturing jobs in clean energy, China is really threatening that by dumping all these products on the American market.

Exactly. And so what he wants to do is protect those factories with tariffs. And that means increasing the tariffs that Trump put on electric vehicles in hopes that American consumers will find them too expensive to buy.

But doesn’t that go against Biden’s goal of clean energy and things better for the environment? Lots of mass-market electric vehicles into the United States would seem to advance that goal. And here, he’s saying, no, you can’t come in.

Right, because Biden isn’t just trying to reduce emissions at all costs. He wants to reduce emissions while boosting American manufacturing jobs. He doesn’t want China to get a monopoly in these areas. And he’s also, in particular, worried about the politics of lost American manufacturing jobs. So Biden does not want to just let you buy cheaper Chinese technologies, even if that means reducing emissions.

He wants to boost American manufacturing of those things to compete with China, which brings us to our second thing that Biden has done to build on Trump’s China policy, which is that Biden has started to act like the Chinese government in particular areas by showering American manufacturers with subsidies.

I see. So dumping government money into American businesses.

Yes, tax incentives, direct grants. This is a way that China has, in the past decades, built its manufacturing dominance, is with state support for factories. Biden is trying to do that in particular targeted industries, including electric vehicles, solar power, wind power, semiconductors. Biden has passed a bunch of legislation that showers those sectors with incentives and government support in hopes of growing up much faster American industry.

Got it. So basically, Biden is trying to beat China at its own game.

Yeah, he’s essentially using tariffs to build a fortress around American industry so that he can train the troops to fight the clean energy battle with China.

And the troops being American companies.

Yes. It’s like, we’re going to give them protection — protectionist policy — in order to get up to size, get up to strength as an army in this battle for clean energy dominance against the Chinese.

Got it. So he’s trying to build up the fortress. What’s the third thing Biden does? You mentioned three things.

Biden does not want the United States going it alone against China. He’s trying to build an international coalition, wealthy countries and some other emerging countries that are going to take on China and try to stop the Chinese from using their trade playbook to take over all these new emerging industrial markets.

But, Jim, why? What does the US get from bringing our allies into this trade war? Why does the US want that?

Some of this really is about stopping China from gaining access to new markets. It’s like, if you put the low-cost Chinese exports on a boat, and it’s going around the world, looking for a dock to stop and offload the stuff and sell it, Biden wants barriers up at every possible port. And he wants factories in those places that are competing with the Chinese.

And a crucial fact to know here is that the United States and Europe, they are behind China when it comes to clean-energy technology. The Chinese government has invested a lot more than America and Europe in building up its industrial capacity for clean energy. So America and its allies want to deny China dominance of those markets and to build up their own access to them.

And they’re behind, so they’ve got to get going. It’s like they’re in a race, and they’re trailing.

Yeah, it’s an economic race to own these industries, and it’s that global emissions race. They also want to be bringing down fossil-fuel emissions faster than they currently are, and this is their plan.

So I guess, Jim, the question in my mind is, Trump effectively broke the seal, right? He started all of these tariffs. He started this trade war with China. But he did it in this kind of jackhammer, non-targeted way, and it didn’t really work economically. Now Biden is taking it a step further. But the question is, is his effort here going to work?

The answer to whether it’s going to work really depends on what your goals are. And Biden and Trump have very different goals. If Trump wins the White House back, he has made very clear that his goal is to try to rip the United States trade relationship with China even more than he already has. He just wants less trade with China and more stuff of all types made in the United States that used to be made in China. That’s a very difficult goal, but it’s not Biden’s goal.

Biden’s goal is that he wants America to make more stuff in these targeted industries. And there is real skepticism from free-market economists that his industrial policies will work on that, but there’s a lot of enthusiasm for it from a new strain of Democratic economists, in particular, who believe that the only chance Biden has to make that work is by pulling all of these levers, by doing the big subsidies and by putting up the tariffs, that you have to have both the troops training and the wall around them. And if it’s going to work, he has to build on the Trump policies. And so I guess you’re asking, will it work? It may be dependent upon just how far he’s willing to go on the subsidies and the barriers.

There’s a chance of it.

So, Jim, at the highest level, whatever the economic outcome here, it strikes me that these moves by Biden are pretty remarkably different from the policies of the Democratic Party over the decades, really going in the opposite direction. I’m thinking of Bill Clinton and NAFTA in the 1990s. Free trade was the real central mantra of the Democratic Party, really of both parties.

Yeah, and Biden is a real break from Clinton. And Clinton was the one who actually signed the law that really opened up trade with China, and Biden’s a break from that. He’s a break from even President Obama when he was vice president. Biden is doing something different. He’s breaking from that Democratic tradition, and he’s building on what Trump did, but with some throwback elements to it from the Roosevelt administration and the Eisenhower administration. This is this grand American tradition of industrial policy that gave us the space race and the interstate highway system. It’s the idea of using the power of the federal government to build up specific industrial capacities. It was in vogue for a time. It fell out of fashion and was replaced by this idea that the government should get out of the way, and you let the free market drive innovation. And now that industrial policy idea is back in vogue, and Biden is doing it.

So it isn’t just a shift or an evolution. It’s actually a return to big government spending of the ‘30s and the ‘40s and the ‘50s of American industrialism of that era. So what goes around comes around.

Yeah, and it’s a return to that older economic theory with new elements. And it’s in part because of the almost jealousy that American policymakers have of China and the success that it’s had building up its own industrial base. But it also has this political element to it. It’s, in part, animated by the success that Trump had making China an issue with working-class American voters.

You didn’t have to lose your job to China to feel like China was a stand-in for the forces that have taken away good-paying middle-class jobs from American workers who expected those jobs to be there. And so Trump tapped into that. And Biden is trying to tap into that. And the political incentives are pushing every future American president to do more of that. So I think we are going to see even more of this going forward, and that’s why we’re in such an interesting moment right now.

So we’re going to see more fortresses.

More fortresses, more troops, more money.

Jim, thank you.

You’re welcome.

Here’s what else you should know today. Intense fighting between Hamas fighters and Israeli troops raged in parts of Northern Gaza over the weekend, an area where Israel had declared Hamas defeated earlier in the war, only to see the group reconstitute in the power vacuum that was left behind. The persistent lawlessness raised concerns about the future of Gaza among American officials. Secretary of State Antony Blinken said on “Face the Nation” on Sunday that the return of Hamas to the North left him concerned that Israeli victories there would be, quote, “not sustainable,” and said that Israel had not presented the United States with any plan for when the war ends.

And the United Nations aid agency in Gaza said early on Sunday that about 300,000 people had fled from Rafah over the past week, the city in the enclave’s southernmost tip where more than a million displaced Gazans had sought shelter from Israeli bombardments elsewhere. The UN made the announcement hours after the Israeli government issued new evacuation orders in Rafah, deepening fears that the Israeli military was preparing to invade the city despite international warnings.

Today’s episode was produced by Nina Feldman, Carlos Prieto, Sidney Harper, and Luke Vander Ploeg. It was edited by M.J. Davis Lin, Brendan Klinkenberg, and Lisa Chow. Contains original music by Diane Wong, Marion Lozano, and Dan Powell, and was engineered by Alyssa Moxley. Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly.

That’s it for “The Daily.” I’m Sabrina Tavernise. See you tomorrow.

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Hosted by Sabrina Tavernise

Produced by Nina Feldman ,  Carlos Prieto ,  Sydney Harper and Luke Vander Ploeg

Edited by M.J. Davis Lin ,  Brendan Klinkenberg and Lisa Chow

Original music by Diane Wong ,  Marion Lozano and Dan Powell

Engineered by Alyssa Moxley

Listen and follow The Daily Apple Podcasts | Spotify | Amazon Music | YouTube

Donald Trump upended decades of American policy when he started a trade war with China. Many thought that President Biden would reverse those policies. Instead, he’s stepping them up.

Jim Tankersley, who covers economic policy at the White House, explains.

On today’s episode

Jim Tankersley , who covers economic policy at the White House for The New York Times.

Background reading

Mr. Biden, competing with Mr. Trump to be tough on China , called for steel tariffs last month.

The Biden administration may raise tariffs on electric vehicles from China to 100 percent .

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