Setting Up Shop in China?

Given a level playing field, the U.S. manufacturer can out-compete all others

Having read your article on manufacturing [First Up: "The Wrong Path," Nov. 2010] I have some direct comments concerning same.

I have been a manufacturer for over 16 years now and have designed my own products, opened a manufacturing plant from scratch, marketed and sold my products in over 43 countries around the world. I think of myself as having some experience, including experience in China.

In 1997 I tried to enter the Chinese markets with my products, and at that time the import duties and fees totaled more than 100%. My products at the time sold around the world for $120,000 per unit. Selling into the Chinese market meant having to sustain an end cost of $240,000 per unit. I quickly looked elsewhere.

Today I am trying to re-enter the Chinese market with my products with a sales price of -- you guessed it -- $120,000, which, adjusted for the last 13 years' inflation, put my product at under $100,000. Now as to the import duty, that has come down a bit to 27% plus 17% VAT plus 6% sales tax for a total of 58%.

Sounds doable so far. The Chinese dollar is another part of the equation that if properly adjusted would bring this all in line, but I do not see that happening anytime soon.

My Chinese customers now say "manufacture here," since there will be no import duty. This is the way we have lost so many jobs in the United States. Of course that is a big reason China is doing this. If I was to set up a manufacturing plant, the requirement is I have a Chinese partner who will be 51% owner and I have to give up any rights to the intellectual property in China.

Chinese companies sending product to the U.S. pay almost no import duty and have a petition system in place passed by our congressmen to have their import duties reduced to almost nothing.

Given a level playing field, the U.S. manufacturer can out-compete all others. But given the unlevel field described above, the U.S. manufacturer is in a noncompetitive position, to say the least, and would be at risk of losing its technology and company to the Chinese partners. So we have a big mess to clean up with our trade agreements and Washington bureaucrats who have let this occur.

Frank McClintic
CEO, MaxFlight Corp.

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