Manufacturing Factory Towns in China

Webinar offered by Tom Galey from 3Chinas.com Friday, September 11, 2009

Read the short exerpt below for more information..

Manufacturing Pockets in China. We’re going to talk about these factory towns, zones where a huge concentration of one single type of product is made. You can find a town that has thousands of factories that all make the same thing. How can this help you? Make it easy on yourself, once these zones are identified your search is largely over. Sure there are hundreds of places to chose, but you will have found what you are looking for.


I visited a city recently, actually it was among the sprawling megalopolis of the Pearl River Delta, the region of hundreds of thousands of factories all in an interconnected mass of factory and factory housing. It was somewhere around Dongguan, or around Guangzhou, up the river from Shenzhen. I say town or city with some qualification … you can’t really tell the difference between cities there, somehow the Chinese do.

In any event, we were in this city where I was told, about ¾ of the world’s denim is made. I was told that there were somewhere between 2000 and 2500 factories, probably more and they ALL made denim. Thousands and thousands of blue jean factories. Now, I wouldn’t have known this if I wasn’t told it. But once you start looking around, you can see a similarity.

Why are they all there? … several reasons, some of which may surprise you.

the best reason is for transportation and logistics of raw materials. If there are 2000 assembly plants, you can bet that all the raw material suppliers of cotton and poly materials were represented in this town! It makes a lot of sense, why not set up your wholesale spools right there where they are met.
They multiply, how? Interestingly, the intellectual property is stolen from one factory and set up with another.

It is common, and seems quite unethical… but it happens all the time. One manager works his tail off for years and years, only for the boss to get really rich off his labor. The factory manager will sometimes set up a facility, usually nearby. Who’s going to stop him, there’s no intellectual property involved with denim blue jeans! Designers would differ, in fact would strongly disagree … but we’re not DKNY or Gucci designers, these are factories making a living working hard.

Growth, one small factory does a good job, he’s selling a few to a small retail chain, and maybe a small European client. Then, by doing good work, he lands the big chain orders. This can be Wal-Mart or K-Mart, any large retail chain that will immediately spell a need for rapid expansion, or go broke. They expand…. As quickly as humanly possible. That’s done by immediately buying the next factory that is for sale, as close as the first one. This is a separate factory, it may be some distance away, but is often owned by the same management. It’s just a different factory.

Family, that goes without saying in China. The above expansion model works, and the caution of a non-family member is real and at the top of the mind of the expanding factory.

Risk, and mitigation of import Risk. We’re going to be joined by my partner, President and CEO of Soltus Group, strategic planning…………… Chris Kauza will tell us about some critical basics involving risk in the international arena.