Outsource to China

Is it worth it to outsource to China?

Yes, many firms outsource to China because it pairs low production costs with a skilled workforce and a huge supply base.

• China leads the world in manufacturing, so parts and materials are easy to source.
• Labor costs stay well below rates in most Western countries.
• The main trade-offs are quality control, language gaps, and longer lead times.

When you outsource to China, you tap one of the largest economies in the world. From business to tourism, China has a lot to offer. It is the third-largest country by area and the most populous nation on earth. In fact, its size spans five time zones. For outsourcing, China is a strong fit for making clothes, electronics, steel, and more. This is thanks to its deep infrastructure and resources. As a result, many Western firms outsource to China for low-cost service and a well-trained workforce.

The impressive growth of China’s BPO sector

China’s outsourcing business started small in the early 2000s. Since then, it has grown fast. The country’s business process outsourcing (BPO) industry now covers IT and other offshore services for local and global markets.

China is the world’s largest manufacturing nation. In fact, it contributed 28.7 percent of global manufacturing output in 2019. Today, that share still sits near 28 percent. Meanwhile, Shanghai remains a hub for high-quality electrical gear. This is because it has skilled workers and strong engineers.

Achievo is one of the top US-focused outsourcing suppliers in China. The firm has served a number of Fortune 1000 companies. For example, its clients have included Fujitsu, Siemens, and Hitachi.

Why do companies outsource to China?

Still, offshoring is not an easy call. First, it takes deep research to protect your budget and your product quality. However, firms from many countries outsource to China for good reasons. So here are a few of the main ones.

Lower costs

In most factories, low labor costs are the top reason to outsource. Many firms believe China can help them save money. In addition, they can shift work without moving their whole operation. So the offshore setup stays flexible.

Chinese workers are well-trained

China has long been a top spot for outsourced manufacturing. As a result, firms there train workers well to make imported goods. In addition, Chinese workers hold specialized skills. So they can produce many types of products with care.

Offshoring offers more flexibility

Making goods in China helps you grow without production stress. With staff and infrastructure already in place, changes are simple. In addition, contract makers can serve many clients at once. This is because they hold more capacity and can meet fast-rising demand.

China has vast raw materials

One big reason firms outsource to China is easy access to raw materials. This is a real edge for factories that need a steady stock of supplies. As a result, they can build products faster and at scale.

Why is it cheaper to outsource to China?

Outsourcing to China is often a low-cost way to grow in Asian and European markets. When people hear of it, they think of savings. So where do the savings come from?

Lower costs in China come from a few factors. These include low labor costs, a skilled workforce, and government support through tax breaks and trade policies. As a result, outsourcing to China often costs far less than working with Western firms. And that is why firms outsource: to save money.

By outsourcing to China, you can take advantage of the low-cost labor. In addition, you skip much of the cost of training and setup. China also plays a key role in global output. So it offers wide supplier networks and resources that cut your costs.

American companies that outsource to China

US firms often make goods in China to build products without heavy spending. Here are some top American brands outsourcing in China.

Nike

Nike Inc. designs, makes, and sells footwear and apparel. For example, the brand is known worldwide for its gear and accessories. Meanwhile, Nike runs more plants in China than in any other country. Still, it keeps many facilities across Southeast Asia too.

Apple

Apple Inc. is a top US maker of electronics, software, and online services. It has worked with Foxconn, a Chinese maker, for years. In the past, Apple faced long labor shortages at home. However, when it built in China, the process took only weeks.

IBM

International Business Machines Corporation (IBM) is a US tech firm based in New York City. It leads in cloud and cognitive tools. In addition, IBM sends many programming jobs to China to keep costs down for the firm and its clients.

Walmart

Walmart Inc. is a US-based global retailer with stores across the country. It makes most of its products in China. As a result, Walmart gains a real cost edge.

Drawbacks of outsourcing to China

China’s fast growth has not met all global demand. Because the economy is still growing, some providers stay small and spread out. So a firm that plans to outsource to China should note a few drawbacks.

Products may not meet your requirements

Some makers in China have faced questions over product safety. For example, officials flagged poisonous toys that were intercepted in June 2021 at a US seaport by Customs and Border Protection. Goods that pass China’s standards may not always match local rules. As a result, quality can vary if no one is watching closely.

Lack of English fluency

Limited English and IP concerns can slow China’s push into North American and European markets. Complex software work and fluent English remain two big hurdles for Chinese labor. As a result, some China’s IT outsourcing providers struggle with complex tasks from the West.

Extended operation period

To outsource to China, you deal with long supply chains. So setting up a process can take time and effort. In addition, high staff turnover means longer lead times. As a result, firms often train new managers on a regular basis.

Frequently asked questions

Why do businesses outsource to China?

Most firms outsource to China to cut costs and reach skilled workers. In addition, the country offers deep supply chains and raw materials. As a result, it is a strong fit for making goods at scale.

Is it cheaper to outsource to China?

Often, yes. Labor costs in China sit well below Western rates. In addition, government tax breaks and trade policies help lower costs. So many firms save a lot by making goods there.

What are the risks of outsourcing to China?

The main risks are quality control, language gaps, and long lead times. So you should set clear standards and check goods often. As a result, you protect your brand and your buyers.

Which American companies outsource to China?

Many large US firms make goods in China. For example, Nike, Apple, IBM, and Walmart all do. As a result, they gain lower costs and faster production.

Key takeaways

• Firms outsource to China for low costs, skilled workers, and deep supply chains.
• China leads global manufacturing, so materials and parts are easy to source.
• Big US brands like Nike, Apple, IBM, and Walmart make goods there.
• The main drawbacks are quality control, language gaps, and long lead times.
• Clear standards and regular checks help you manage those risks.