For companies both big and small that have ventured to China, the decision has not been taken lightly nor gone down easily.
Lighting systems supplier Lumitex Inc. of Strongsville, Ohio, wrung its hands for about 18 months in the late 1990s before deciding to open plants in Shanghai and Suzhou, China.
Officials were nervous. They had heard stories about swiping intellectual property, and about the poor quality of work coming from that sometimes-inscrutable nation.
But that was balanced with a line from Business 101: You have to go where the work is.
Molding of such products as backlit liquid-crystal-display units and lighting for hand-held devices was moving to China in a huge, immediate wave. Lumitex President Peter Broer likened his decision to standing on the highest diving board for the first time.
``You're at the top of the high dive and it's shaking your knees,'' he said July 16 at a one-day conference in Cleveland. ``But then you look at the faces of your peers climbing the steps behind you. The fear of your peers is greater than the fear of death.''
Lumitex made the jump and did not regret it. It sold its plastics molding facilities in late 2000 to its Chinese partner and since has expanded other parts of its business to China.
Issues of fear vs. opportunity engaged several companies represented at the China Business Strategy Conference, sponsored by accounting firm Plante & Moran LLC and co-sponsored by law firm Benesch Friedlander Coplan & Aronoff LLP and several banks and associations.
The conference brought together more than 400 people, mainly manufacturers, wanting to hear whether the plunge from a high dive is necessary and what to expect once they hit the water. An audience poll showed 61 percent said they had not formulated a China strategy and another 26 percent said they were just starting to take action. Clearly, it was a room full of beginners looking for answers.
The message they heard was both as flavorful and pungent as a bowl of hot and sour soup. China has its merits and its speed traps that can slow down the best of plans, said Allan Goldner, a partner with Cleveland-based Benesch Friedlander and chairman of the firm's polymer team.
Working in China is a hybrid of seemingly unfettered growth and potential frustration, he said.
``Anything is possible in China,'' he said. ``And everything is difficult.''
At Cleveland-based Eaton Corp., a $7.2 billion manufacturing giant, the decision was an easy one, said Stephen Nikrant, director of commodity management. China's cost of labor is about 53 cents an hour, and China could surpass Mexico as a top importer of goods to the United States as soon as 2004, he said.
Meanwhile, U.S. investment in China rose to $53 billion last year, feeding the country's double-digit business growth, Nikrant said.
The same sense of excitement fed Moen, the world's best-selling maker of faucets. The company, based in North Olmsted, Ohio, buys tooling in China and has performed injection molding in Ghangzhou, China, since 1998, said Ken Slusher, Moen vice president for global sourcing and productivity engineering.
``We started to lose business to Chinese sources in 1996, both in Taiwan and China,'' Slusher said. ``We expected China to have a crumbling infrastructure and facilities with poor working conditions. Instead, we were excited to find world-class facilities and an unlimited work force.''
Moen can work in China for about one-third the cost of U.S. production and at twice the speed, Slusher said. His company has created a sales unit, Moen China Ltd., to target that market.
While the news from original equipment manufacturers generally was glowing, Andrew Hinkly of Ford Motor Co. said suppliers cannot dismiss the challenges. On the human resources side, the automaker has faced the fear of the unknown and a culture that goes against the grain of a big company, he said.
Yet, China is a necessary part of Ford's strategy, said Hinkly, director of global core commodity purchasing for Dearborn, Mich.-based Ford.
The passenger car market in China is growing 100 percent each year, Hinkly said. Taking what he called a ``Trojan horse strategy,'' the company could use China to conquer markets in Japan and, farther afield, in Europe, he said.
``You might get burned,'' he said. ``But that's not a reason not to start in China.''
That go-for-broke attitude was tempered by the comments of Tyler Haines, engineering director for GI Plastek of Newburyport, Mass. Haines had worked in China before, sourcing molds.
He warned that Chinese toolmakers might offer low prices and short lead times, but their molds often may not match specifications, meaning more back-end work and higher costs. Shipping can be delayed for weeks waiting for customs, Haines said.
``Communication is very difficult,'' he said. ``You have to confirm [the order] twice and pray often.''
GI Plastek has avoided the need to go to China because of the type of parts it favors, including large pieces and those that require short lead times for delivery, Haines said.