China's manufacturers need to upgrade in order to remain competitive: UPS white paper

During economic difficulties, China's export-oriented manufacturers may improve their performance through developing a diversified customer base, attaching more importance to logistics, and selling less unfinished goods than finished ones, according to a white paper issued by UPS on Tuesday in Shanghai.

The white paper attempts to provide practical advice to China's manufacturing sector which aims to remain competitive during the country's economic transformation. "Chinese export manufacturers should learn from industrial leaders who have implemented successful strategies to achieve better business performance and growth," said the report.

Chinese export manufacturers are facing challenges from both demand and supply: two of the most commonly-cited challenges are increasing competition from Chinese companies and decreasing demand from Chinese customers, added the report.

Export manufacturers are more pessimistic than before, with 29 percent of the companies saying the economy is worse，compared with 16 percent in 2014.

The report also advised a wider geographical footprint, serving a more diversified customer base of both B2B and B2C customers, understanding the role of logistics, priorities for the future, selling less unfinished goods than finished ones, as well as identifying the impact of emerging trends.

A total of 1,000 senior decision-makers in export manufacturing companies across China were interviewed for the report.

"Against a backdrop of intensifying pressures in China, it is clearer now than before that the future survival and success of export manufacturers would depend on their willingness to make changes to the way they do business," said Richard Loi, president of UPS China.

But Loi also ruled out price cuts as the optimal solution to remain competitive. Instead, higher quality products, showing an understanding of the customers' business and offering a faster and more efficient supply chain are the top reasons for customers to switch suppliers, he said.

"There is a need to shift from low prices to offering higher quality products and adding value by building a closer partnership with customers," Loi said.

Huang Yiping, professor at Peking University's National School of Development, believed the pillar industries that are used to support China's economy have been losing vitality for a long time, and there is an urgent need for new industries to drive the next round of economic growth.

"However, the majority of export manufacturers have yet to take the first step toward industry upgrading. What can be done to convert the successful experiences of leading companies into practical guidelines for tens of thousands of other companies in China? This is precisely the question this year's Made in China 2.0 report aims to tackle," Huang said.