A Chinese Outsourcer Speaks Out

I play in a basketball league a few times a week, and recently struck up a conversation with a Chinese guy, about my age, who goes by the name of Mark.

I wasn't surprised to find out that Mark is a huge fan of huge (both literally and figuratively) Chinese basketball star Yao Ming. I also wasn't especially surprised to find out that Mark is involved in the import/export business here in Cleveland -- specifically the import of auto parts like windows and bus frames -- from China to the US.

I seized the opportunity to get an idea of just what life is like for him, a first-generation Chinese immigrant, especially as far as his business is concerned.

Mark is the owner of a factory in the Shenzhen province of China (one of its first special economic zones) and provides a turnkey, order-to-dock supply chain solution to his clients, wherein he takes orders for products from American customers and coordinates everything from the design to materials sourcing to crafting/stamping/ plating/injecting/extrusion/assembly to packing and shipping to rail/truck transport to warehouse door delivery.

As a made-to-order parts manufacturer, he is flexible, can retool his 5-year-old factory quickly and efficiently when necessary, and has a network of regular suppliers and other manufacturers so if he can’t get the job done within his own stamping/injection/extrusion facilities, he contracts out the additional work to others in the area (of which there are many, all willing and able to go high-volume at a hat’s drop) and then brings the parts back in-house for assembly.

Like me, Mark is in his 30s, and grew up working class. Unlike me, he has seen his hometown grow from a small village to a city of 10 million in the last two decades. (Also unlike me, he is quite wealthy!)

To get an idea of how else we stacked up competitively, I wrangled some numbers out of him:

Mark pays his manufacturing labor and assemblers the equivalent of $120 per month. Per month. He also says that his laborers are so hungry to work that they will work overtime, for the same rate, to get the job done (no matter how large a volume it is). If one won’t do it, there’s two who will (he hasn’t seen a labor crunch at all, by the way).

It only costs Mark about $3,000 to bring a shipping container full of goods to the west coast of the U.S., and an extra $1,000 will bring it around to the eastern seaboard.

As far as health care, which is crippling some sectors of our economy, Mark's costs are minimal. He is required to and does pay for catastrophic insurance for the factory employee group as a whole, in case something unforseen would happen. His employees also have the option of paying for a health insurance plan that covers them individually, which I thought was strange since this is, after all, still a Communist country (if only in name).

Regardless, Mark says a lot of his laborers opt out of the insurance plan anyway: “They’re young, they feel like they don’t need it,” he says. “They’ll live forever.”

So between China's fixed currency (which some say equates to a 40% subsidy), a huge (and growing) manufacturing base, extremely low labor and materials costs, lack of a comparative regulatory restrictions, no real health care expenses to speak of and with shipping as cheap as it is, how can we even hope to compete?