Two years of pandemic restrictions between 2019 and 2022 revealed vulnerable links in China’s supply chain causing tighter profit margins for businesses and dissatisfied customers. While back-logs in major ports such as Shanghai are beginning to loosen, we can´t assume that similar disruptions won’t happen again.
Now more than ever, it is important to understand how to navigate the manufacturing and shipping landscape in China. Let’s take a closer look at what causes slowdowns in the Middle Kingdom and what you can do to make your supply chain less vulnerable.
Two main factors contributing to China’s supply chain disruptions are labor shortages and internal border crossings. These challenges can affect your supply chain in the region at any time.
Labor shortages
Experts have warned about labor shortages in China since the early 2000s. With an aging blue-collar population, the supply of entry-level industrial workers shrinks.
To make matters worse, many younger Chinese citizens choose not to enter the manufacturing sector. The Ministry of Education predicts that by 2025, there will be a shortage of nearly 30 million manufacturing workers.
China has 22 provinces controlled by the People’s Republic of China, but these provinces also are locally governed with distinct cultural and political identities. Therefore, provinces can have different policies regarding trade and transport, and even choose to restrict travel in and out of a region.
During the pandemic, China enforced strict restrictions on inter-state or provincial travel. Provincial border closings and lockdowns in hubs like Shenzhen caused major industries to shut down overnight.
By choosing providers located in the same province or even the same city, you can minimize border crossings and make your supply chain less vulnerable. A good way to do this is to take advantage of industry clusters.
Source and manufacture in industry clusters
Industry clusters are regions in China where similar industry-related companies and suppliers are concentrated frequently located close to ports. Different regions have industry-specific advantages for obtaining raw materials or parts, they also have access to specialized labor forces lowering the risk of shortages. There are more than one hundred industry clusters in China that the government promotes through policies encouraging international trade.
Many of these regions are in one of China’s 21 Free Trade Zones (FTZs) — areas where businesses can benefit from lower corporate tax rates, free currency exchange, and streamlined customs clearance. If you need to switch suppliers, we’d advise you to find new manufacturers in the same cluster, avoiding major logistical changes.
Does your ecommerce business deal in electronics? Then you might want to focus on providers in Guangdong Province where the electronics hubs of Shenzhen, Guangzhou, and Dongguan are located. 90% of electronic products exported from China come from these three cities, Shenzhen being the biggest contributor. Electronics accessories like smartphone cases are also produced in large quantities in this area.
Or maybe your brand tailors to the clothing industry. Guangzhou is again a good area to start, but there are also separate clusters for specific markets such as men’s apparel or swimwear. Haining in Zhejiang Province, for example, is home to the largest leather industrial cluster in China, and Shishi also boasts a large clothing industry cluster focused on sportswear.
Looking for eyewear manufacturers? Danyang in Jiangsu Province is the largest glasses cluster and manufactures about 40% of the global market for eyewear. Wenzhou in Zhejiang is also an important hub, specializing in more high-end and international brands. But, if you want to manufacture less expensive plastic-framed sunglasses, Taizhou in Zhejiang is your cluster.
You need access to major ports
No matter where your goods are manufactured in the country, they will eventually need to be shipped out of one of China’s many ports.
China’s 12,000 miles of coastline on the mainland gives it access to both the East and South China Sea as well as the Pacific Ocean, making its ports a natural stop along busy trade routes. If you have access to several major ports, your supply chain can also react more quickly to possible disruptions.
Here are the three largest ports in China and some of their unique advantages.
Port of Shanghai
Located on the East China Sea at the junctions of the Yangtze, Huangpu, and Qiantang rivers, the Port of Shanghai is both the largest and busiest in the world. Sourcing from areas close to the Port of Shanghai gives you access to many manufacturers and a well-established industrial infrastructure.
Because of its proximity to the surrounding megacity, neighboring smaller ports, and busy trade routes, The United Nations Conference on Trade and Development has named Shanghai the “Best Connected Port.” Shanghai is also the oldest of China’s 21 Free Trade Zones, where policies like tax exemptions and free currency exchange make exporting easier.
Port of Shenzhen
If your business deals in electronics, sourcing from manufacturers close to the Port of Shenzhen can cut down on transport time, decrease the risk of supply chain disruptions, and ultimately streamline your operations.
The port of Shenzhen is a collection of smaller ports covering 250 kilometers of coastline along the Hong Kong-Shenzhen Western Corridor, which opens up into the South China Sea. The area is also located in the Guangdong Province Free Trade Zone, so local operators benefit from simplified customs and export logistics.
Port of Ningbo-Zhoushan
Just south of the Port of Shanghai are the twin ports of Ningbo and Zhoushan who together ship over one billion tons of cargo annually.
Ningbo-Zhoushan is a hub for the mining, oil, and gas industries. The port has one of the largest ore handling yards for the storage of raw materials, and there are also individual terminals for processing crude oil and liquid chemicals. Additionally, Ningbo-Zhoushan´s proximity to Shanghai and important water, rail, and roadways to inland China make it an important junction for national and international trade.
Ningbo-Zhoushan is also located in the Zhejiang Free Trade Zone, which has policies promoting trade in oil products and optimizing customs clearance. In fact, Ningbo-Zhoushan has a reputation for having easier customs than Shanghai, since protocols in Shanghai tend to be stricter and more time-consuming.
Partner with Wayfindr to set up logistics in China correctly
You need to get your logistics right the first time, no matter where you operate. Shifting a factory or finding new suppliers can take months of precious time and devour huge portions of your bottom line.
If are based outside of China and want to get your logistics in the country right the first time, you need to work with a partner who knows the region inside and out.
At Wayfindr (formerly CBIP Logistics), we are those local experts. We’ve been operating in China and the West for over a decade, creating complex logistics plans for brands like yours using local providers. We not only can create a supply chain catered to your needs, we also give you regular updates and reporting you won’t get using major shipping providers.
Want to know more about how we can help you set up your manufacturing and logistics in China? Sign up for a free consultation on our website.
About Author
Nick Bartlett
Co-founder & Director
Nick co-founded Wayfindr to help brands design and build market-leading carbon-neutral D2C logistics. As Director, he brings 15+ years of experience across logistics, marketing, supply chain and retail from Asia Pacific to the world.
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