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Using a China Agent vs Going Direct

As companies weigh the pros and cons of working directly with a factory vs. dealing through an agent for their China sourcing needs there are many points to consider.

Top 10 Pros and Cons

1.  The scale or dollar volume purchased annually. (I published an article in M&A Magazine which argued it requires $40-$50MM in throughput for any ROI on a direct sourcing office.)

2.  The number of varying categories and SKUs being sourced.

3.  The complexity of products being sourced. Cotton socks are a lot less difficult to make and package than electromechanical items with sophisticated firmware and specialized components.

4.  Experience levels, competence and proficiency with the language of the country with whom they’re dealing.

5.  The  sheer number of factories the buyers/agents have worked with including access to the owners or very least factory bosses and relationships with those individuals; the length of time and history with those factories and dollars of business placed with them; the ability to get production bumped forward in the schedule;  the ability to receive favorable payment terms which impacts cash flow of any business.

6.  Competency with provincial government regulations and requirements. (How would a New Yorker fare in an Alabama factory or vice versa?)

7.  Ability to travel to/from factory within one day for urgent matters, product/packaging changes, and production oversight.

8.  Quality Control-Generally considered the most critical.  The standard process for measuring QC and the depth of practices such as random and in production sampling, testing equipment and facilities, reports, photos, and now video.

9.  Experience with logistics, freight terms and all export documentation and activities.

10.  Does the agent or factory (for direct) share your sense of urgency and same philosophies and principals?  Are they vested in the outcome and long term success of the business?

New Product Development and “The Adaptation Curve”

Nobody has an ugly baby.  The same goes for new product developers.  Whether an independent entrepreneur or seasoned marketing team, once a new product concept is developed and months, even years in some cases are invested, our babies become prettier every day.  The same unconditional love and support that builds as our children mature and develop transfers into the professional mindset of innovators.

Calling All Product Developers

Creating a viable and robust market for a new product takes enormous resource, planning and resolve.  The sheer capital to unveil and furthermore generate brand equity is often the most overlooked aspect of getting a product to market.  Take the Segway for instance.  This emission free, efficient mode of personal transportation has been around for over a decade.  With some quick, simple training even children can master riding this marvel.  Reaching top speeds of 12.5 mph it has a range of up to 24 miles on a single charge.  Still commercial acceptance has been scant.  Why wouldn’t every warehouse and airport have a fleet of them?

Recently two Swedish designers have developed an entirely new concept for biking safety in the form of the Hovding, an airbag which deploys vies-a- vie algorithmic intelligence protecting riders from head trauma in the event of a fall or crash.  This revolutionary “bike helmet” is worn around riders’ necks and actually becomes a stylized accessory.  At $520 prospects for commercial distribution of any scale in the next five years may be slim.  However according to Forbes writer Jeremy Bogaisky this startup has already taken in $13 million in venture capital.  He cites bicycle industry analyst Gary Coffrin who gives a great summation stating “The adaptation curve for such a unique product at this price point is not likely to be rapid.”

Taking the tech factor down a notch, in my own gym sits a clever form of a door stop called “James the Doorman.”  I would imagine the designers, Black+Bum had their “Eureka” design moment and the wheels started spinning.  Honestly I have never seen such a cool variety of a door stop and  without knowing much about how they developed this unique version of an age old application, I can’t comment on what lengths they went to in commercializing their product.  I do know that the one in my club is the only that I have ever seen.

Every week we hear from inventors and product developers who have put great thought into products which offer unique solutions to every day needs.  Often though there are many missing pieces to their overall strategies.  Below are the Top 8 Hurdles to Successful New Product Launches.  In the coming months, I will be writing a series which individually expands on each of these, why they are often overlooked and how they are important for taking new products to market.

1. Product Development Costs 

Most inventors underestimate the cost for designing a manufacturing ready product.  Tools and molds can easily run into the five to six figure range and can dwarf first year profits.  Developing engineering drawings—those that translate into production and material specifications  require time and money.

2. Distribution Channels

Some products are ideal for Big Box retail but unless you know how to navigate this space, most category managers are not going to take a chance with a single line item vendor.  It creates additional administrative work for the system, and most inventors don’t have the capital to market their products.  Specialty and on-line retailers generally are better proving grounds for a products’ acceptance but you still have to generate interest and traffic.  Oh, and did you get a UPC code yet?

3. Inventory Capital 

Minimum order requirements (MOQs) by factories usually cause a lump in the throat.  Even if you have the greatest gadget in the world, how do you plan on financing that first big order?

4. Educating the Masses 

How will you announce the arrival of your new product to the world?  Magazines?  PR campaign?  Put an ad in the paper?  Direct Response Television (DRTV) is a great but often expensive form of advertising and one of the best ways to demonstrate a new application or use as well as building brand equity.  It’s great to have a video on your web site but again, how will you drive viewers and a following?

5. Price vs. Value 

In the initial phase of your product’s life-cycle there will likely not be the scale (volume) to drive down production cost.  Unless you can convince consumers they should pay a premium retail price, break-even may be longer off than you expect.  Plus, buyers will tell you whether your SRP (Suggested Retail Price) is in line with their category. 

6. Regulatory and Testing Requirements 

With your product in the public domain, most retailers will require some sort of regulatory or product safety testing and compliance with groups such as the Consumer Product Safety Commission (CPSC), Underwriters Laboratories (UL) and others.  Depending on what industry you are in, your item may require testing and certification by default.  To you this means additional time, red tape and money.

7. Patent and Intellectual Property Protection 

This is perhaps the most critical and misunderstood area of product development.  In many cases developers could have saved themselves months of work simply by doing some basic research and analysis.  The United States Patent and Trademark Office site has become more navigable and efficient thanks to improvements in their search functions.  There are three ways to begin your inquiry using key words, designs or a combination to see if someone else has registered a similar product.  Even if they have you may be able to make some functional changes to distinguish yours but again, many underestimate the time and capital required to protect the investment of your innovation.

8. Aftermarket Sales and Support

Now that you’ve got a patent pending, finalized your business plan, raised early stage capital, have product on the warehouse shelf and are starting to generate traction don’t forget the basic administrative requirements.  If you hit the lotto and are selling to Wal Mart, using retail link is a requirement.  This entails sending a staff member for training and ultimately using their on line tool daily or weekly.  Is someone manning the phones for product questions and concerns?  How robust is your web site?  Oh, we haven’t even discussed how much this will cost to build.

While these hurdles aren’t surmountable, it is critical to factor in all the critical and time consuming elements of bringing a product to life.  Even this list is not comprehensive enough to account for the unexpected turns in the pathway to new product development.  If it were easy, everyone would be doing it.

Read Part 1: New Product Development and the Adaptation Curve

David Alexander is president of Baysource Global and has a decade of experience with new product development and contract manufacturing.

A Community of Opportunity

Last fall I visited a state of the art precision die cast factory in Southern China. By my estimate they do a turnover of ~USD$400MM. This facility had two very sophisticated machines that were designed and manufactured by the Japanese and could essentially be used for highly technical military products although they were simply utilizing these for their advanced automation in making automotive (carburetor) parts. After a long lunch, the owner took us to their R&D building where they had something they wanted us to see. It was…a turkey fryer. That’s right. They had devised a turkey fryer that uses 80% less oil than deep frying. Already they had complete prototypes for cooking French fries.

You may be wondering where this story is headed. I had to admit I was a bit taken back by this “top secret” invention they whetted our curiosity over during our meal. But in their thorough marketing analysis, they had deduced there was no similar Western device yet on the market. It just so happened to be November and thus the American Thanksgiving holiday was just around the corner. This factory had a business plan in place, knew their total market universe in the U.S. of those who deep fried turkeys vs. oven, and even recognized this was a stronger activity in the South. In fact, they had determined that their distribution channel likely needed to begin with HSN or QVC and migrate into traditional retail.

What they didn’t have is a contact in the U.S. to assist with the launch nor did they know anyone who could introduce them into this market. They explained they were missing a key intermediary who could introduce this new product to a leading cookware company, someone familiar with infomercials, or a firm that could handle direct sales and distribution. If so, they believed annualized sales could reach USD$50-100MM. Have you seen this product on the market yet?

Sure there are low value added jobs that have gone offshore. And by the way, we haven’t stopped manufacturing in Central and South America and Eastern Europe. But there is an interdependency between China and the U.S. that can’t be ignored. There is also a huge market in China for our goods and services. Take the story of Dais Analytic whose desalination and wastewater technology will add up to 1,000 jobs in Tampa, FL over the next five years. Just this week, Warren Buffet’s Berkshire unit purchased Burlington Northern Santa Fe which is a huge bet on increased trade with China. And as a growing consumer market, the number of millionaires in China is 825,000 and growing, many under 40 years of age.

If you take this story out of the realm of turkey fryers, the Chinese are innovating every day but will rely on marketing expertise here to be successful. Likewise, there are Western companies who require cutting edge innovation and new product development to maintain and gain market share. Possibly this could lead to Eastern entities establishing beachheads in the U.S. The typical hurdle rates that private equity and investment banking firms require to do deals may be cast aside by Chinese courtiers who seek a foothold in the U.S. to incorporate their intellectual property, low cost labor structure and “can-do” spirit with U.S. brands.

It is truly a global landscape yet we seem to be protectionist by default. If we start embracing opportunities as a global “community” vs. simply a global business landscape, we have the chance to merge our creativity and assets to serve one another.

David Alexander is President of BaySource Global, specializing in project management, supply chain and cross border opportunities with China. www.baysourceglobal.com

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Embracing Global Resources for Local Advantages

David Alexander

David Alexander

In the midst of these economic challanges, decision makers need to understand the advantages of looking globally for positive domestic results. While jobs shrink in the U.S. it has been easy to cast a dark shadow with manufacturing outsourcing as the key culprit. Too often though we sit back and scratch our heads wondering why low value add jobs have moved offshore rather than strategize on how to effectively incorporate the benefits of low cost labor with supply chain initiatives here. For marketers in the U.S. the value propositions of product innovation, speed to market and service have to be the platform which separates winners from their competition.

In the April 8 Wall Street Journal, writer Tim Aeppel features Craftmaster Furniture and their story of winning market share while competitors flounder. By combining a solid offshore sourcing initiative for high labor components and unique upholstery with the need for quick turnaround time and service, CEO Roy Calcagne has “increased revenues by 4% in an $80 billion industry that has declined by 20% in the last six months. Craftmaster has even hired 75 additional workers in a factory that employs almost 500 according to Aeppel’s article.”

http://online.wsj.com/article/SB123879125297987681.html

 

Basically the company takes the approach of a nimble and responsive partner to their customer base, while maintaining margins through low cost country sourcing. This collaborative strategy is one that has continually proven effective in the U.S. and not immediately stereotyped for the demise of overpriced, low value jobs. See

http://www.baysourceglobal.com/PortlandBusinessJournal-BaySourceWhitePaper.pdf

A Conversation on doing business in China

baysourcelogo The following is a recap of a January 21, 2009 panel discussion hosted by the Orlando Chapter of ACG (Association for Corporate Growth) on the ins and outs of doing business in China. David Alexander, president of BaySource Global www.baysourceglobal.com was one of the featured speakers along with Brian Su of Artisan Business Group and Jim Gaynor, CEO of Lightpath Technologies.

ACG Moderator: Discuss how this global recession has impacted doing business with and in China

Alexander: The Credit crisis affecting all industries. Volumes are down and many factories dependent on U.S. retail and consumer volume have closed. People are strongly revisiting “In-Sourcing” due to attrition in volumes. A local trade association predicts that by late January, Dongguan and its neighbors Shenzhen and Guangzhou will lose 9,000 of their 45,000 factories.“Many factories are looking at completely empty order books,” warned Stephen Green, head of China research at Standard Chartered, who believes the export sector may even shrink next year. Green believes China will see 7.9% growth in 2009 – well below the double digit figures of the past five years.“Government statistics show that 67,000 factories of various sizes were shuttered in China in the first half of the year,” said Cao Jianhai, an industrial economics researcher at the Chinese Academy of Social Sciences. By year’s end, he said, more than 100,000 plants will have closed. The wave of factory closings began in Guangdong province, where the nation’s economic reforms were launched three decades ago. The region accounts for about 30% of China’s exports, but over the last couple of years, Shenzhen, Dongguan and other cities in the area have sought to clean up the environment and create an economy based more on services and higher-value products. Makers of labor-intensive goods such as shoes, garments and furniture no longer felt welcome.”Stanley Lau, deputy chairman of the Federation of Hong Kong Industries, a trade group with 3,000 members, has estimated that as many as 15% of the 70,000 factories run by Hong Kong businesspeople in the mainland will close this year. He says many more are likely to shut after Chinese New Year in February, when millions of migrant laborers will return home for several days. “Once workers go home, they can close down the factory quietly,” he said in an interview in Hong Kong.

ACG Moderator: Given this recession, specifically, how has the outsourced manufacturing space been impacted?

Alexander: People have been forced to re-analyze bringing manufacturing back due to lower volumes. Less scale means reduced leverage with factories. Reduced demand = longer lead times with higher volume/less frequent orders. Carrying costs of capital increases; customer response times impacted. IKEA for instance has recently opened a plant in Virginia.In an April survey of nearly 1,000 companies by RSM McGladrey, the number planning to move offshore fell by 20% from a year earlier

ACG Moderator: Further explore the costs of shipping/freight as they impact this model

Alexander: Increased energy costs toward the end of 08 meant freight as a % of COGS increased. There were fewer containers coming into port—first declines since 2006; down 1.5% from Nov 07. At $150 barrel 40’ container $8,000 vs. $3,000 a year ago or $100. At $200 it would be $15K. Through July 19, U.S. railroads had carried 5 million shipping containers, down 3.4% with the same period last year. Containers that slow to 23mph from 29MPH save 20% but this means freight lines have to add containers. However, freight increases alone not cause in wholesale trade pattern shift back to US mfg. The Economy is key driver. Higher fuel costs will also cause a shift in Lean inventory. May see proliferation in warehouses to be closer to customers. The Freight Transportation Services Index dropped 1.4 percent from October to November to 107.6, the lowest level since January, 2004. The index is down 4.9 percent from its historic peak of 113.1 reached in November, 2005, the Department of Transportation’s Bureau of Transportation Statistics reported.
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copy-of-china-08-031

ACG Moderator: Discuss the Chinese economy both how it’s being impacted by this economy internally and how externally the commodity markets are being impacted around the world.

Alexander: China’s exports fell in November for the first time in seven years and manufacturing activity shrank in December for a third straight month. Material costs will always fluctuate globally and are consistent around the world. With fuel and energy costs subsiding a bit and with material costs softening, Labor is still the key driver for the feasibility of offshore manufacturing.

Still it seems like the economy is chugging along normally though. In the city where one colleague lives there were more than 4000 cars newly registered in the first week of Jan alone. This is a city of 3M people and the roads are already crowded. We are not sure how many weeks like that one in Jan. we can survive and still keep cars moving along. Also, remember, the Chinese are good at saving money. The China economy is predicted to be as large as U.S. by 2030. All this said, this crisis has been a time of reckoning. Americans are buying fewer Chinese DVD players and microwave ovens. Trade is collapsing, and thousands of workers are losing their jobs. Chinese leaders are terrified of social unrest. Having allowed the renminbi to rise a little after 2005, the Chinese government is now under intense pressure domestically to reverse course and depreciate it. China’s fortunes remain tethered to those of the United States. And the reverse is equally true. The Treasury conducts nearly daily auctions of billions of dollars’ worth of government bonds. For the past five years, China has been one of the most prolific bidders. It holds $652 billion in Treasury debt, up from $459 billion a year ago. Add in its Fannie Mae bonds and other holdings, and analysts figure China owns $1 of every $10 of America’s public debt. The Treasury is conducting more auctions than ever to finance its $700 billion bailout of the banks. Still more will be needed to pay for the incoming Obama administration’s stimulus package. The United States, economists say, will depend on the Chinese to keep buying that debt, perpetuating the American spending habit.Many firms in the auto, luxury, travel & tourism and real estate industries have begun reporting a significant decline in spend. Where the greatest opportunity lies, is in the rural economy. It is the economy that has lagged far behind the others – It is the economy that has more than 700 million people – It is the economy were small nominal gains can equate to large.

ACG Moderator: Discuss the idea of building markets in China coming from the U.S. or Europe

Alexander: According to The Kiplinger Letter, for 2009, trade will shrink worldwide by 2.1 percent to $115 billion and U.S. exports will drop 0.5 percent. It said the hardest hit areas will be machine tools, chemicals, plastics, mining gear and turbines, while medical products, farm goods and construction equipment should weather 2009 relatively well. Kiplinger predicted no worldwide growth for gross domestic products in 2009, and negative growth in the U.S. There are still good opportunities for growth. Certain products that sell well in China and come from USA are mostly niche items. Examples: Zippo Lighters, cosmetics from famous names like Estee Lauder cars, and famous brand clothing. Western brands will always be in demand.

ACG Moderator: Discuss how the Chinese government is impacting companies that want to either invest in China financially or via a joint venture or with manufacturing facilities – VAT rebates, and clean industry versus smokestacks

Alexander: In July, 07 VAT rebates were rescinded for 553 industries. The gov’t just increased the VAT refund for exported goods to help with the economy. The price of raw materials is way down now so batteries, and other items have gone down in price about 30%. China will increase the export tax rebates for some machinery products as of Jan. 1, 2009, in a bid to alleviate cost burdens on exporters (back to 17%). The most recent increase took effect on Dec.1, covering 3,770 items of labor-intensive, mechanical and electrical products, or 27.9 percent of the country’s total exports.

ACG Moderator: Discuss product quality concerns in Chinese manufacturing

Alexander: Any U.S. concern marketing a product manufactured in China is ultimately responsible for product/project management. This means clearly stating product specs and tolerances, material specs, defect rates, etc When we leave too much in the hands of Chinese manufacturers is when we run into issues.China does need better IT and process control. There is a lot of opportunity for IT/IS but also the Chinese don’t know they need this. They don’t even use part numbers in most businesses… Our biggest opportunity from US to China is to engrain our production management know-how. One of the main problems in producing quality here is that the workers and managers themselves don’t know what to expect in a quality product because they don’t consume such items. “They have no feel for what quality is.”There is also little accountability for goods that fail after some time in service. Example: If you buy a new house, everything will be perfect when you buy it but things will soon start to break because they weren’t made well. They might try to fix it but how can you fix a tile floor if all the tiles were installed following a standard that is not up to par? Example: they paint bare wood or walls without priming the wood first. The paint looks great for a year, then it lifts off in big sections but it’s too late for anyone to be accountable then. Your average Chinese homeowner has no idea how to paint or do other home repairs compared to the average American.This is why you need to have your interests well looked after. Also, a serious weakness of Chinese engineers is their reluctance to ask questions. This has to do with the cultural myth of “lose face.”Because of the importance of relationships and family sometimes they will hire their friend/family member instead of hiring the best person for the job. This also limits their success in some ways. Take Auto parts for instance. The Speed at which China has been industrialized means quality concerns and recalls are growing. Their revolution happened in a quarter of the time that ours did.The Chinese are unfamiliar with or don’t care about U.S. auto quality standards. Under federal law the importer of record is responsible for recalls and quality concerns. Many small importers (anyone can be importer) aren’t familiar with regulations and suppliers don’t have the capital to handle recalls.We also have to communicate the long term implications of the business opportunity to the Chinese factory. If they think a project is ‘one and done’ then this impacts price Everything is a negotiation.

ACG Moderator: Discuss the cultural differences especially as it relates to building relationships in China.

Alexander: The Chinese always consider their relationship with another person when they do business with that person. For example, they can never turn away from doing business with a friend even if there is a better product they should be seeking. At least they can’t do it in front of everyone so they might do it secretly. The Chinese prefer to deal with people they know and trust. Western companies have to make themselves known to the Chinese before any business can take place. Furthermore, this relationship is not simply between companies but also between individuals at a personal level. The relationship is not just before sales take place but it is an ongoing process. The company has to maintain the relationship if it wants to do more business with the Chinese. The relationship sometimes begins based on money then moves to integrity and trustworthiness. Frequent contact is important.

ACG Moderator: Discuss other emerging markets such as Vietnam, South America and Mexico briefly as they relate to the evolution of the Chinese markets and increased shipping costs.

AlexanderMuch is predicated on fuel costs. Also higher expenses, plus higher taxes and stricter enforcement of labor and environmental standards, are causing some manufacturers to leave for lower-cost markets such as Vietnam, Indonesia and India.Despite its huge pool of unskilled rural laborers, China’s supply of experienced, skilled talent falls far short of demand. The gap has been pushing wages up by 10 percent to 15 percent a year.Inland cities like Luoyang and Wuhan, outside the traditional export zones of Guangdong and the Yangtze River Delta, near Shanghai are emerging. In inland China, wages still lag far behind the richer eastern and southern coastal areas.

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The Top Books on China

Recently I posed the question asking what the best books available on China were. My intention was to highlight both Western and Eastern perspectives on topics ranging from everything from business culture and protocol; political climate; culture, and basic life in China. There was a great response which is compiled below. Overwhelmingly there was sentiment that there is no substitute for the experience of living and working in China. However, for those without this limited or practical experience here is the top 30 that members from three Linked In Groups–China Trade Group, Business in China, and Procurement Professionals said: (listed by title and author)

Mr. China, Tim Clissold top 4
Managing the Dragon, Jack Perkowski top 4
The China Price, Alexandra Harney top 4
China Inc, Ted Fishman top 4
One Billion Customers, James McGregor
China StreetSmarts, John Chan
The Art of the Deal in China, Laurence J. Brahm
The Art of War, Sun Tzu
Chinese Business Negotiating Style, Tony Fang
Inside Chinese Business, Dr. Ming-Jer Chen
Chinese Business Etiquette, Scott D. Seligman
The Chinese, Jasper Becker
Business Leadership in China, Frank T. Gallo
The Coming Collapse of China, Gordon chang
Luxury China, Michael Chevalier
Elite China, Pierre Xiao Lu
Where East Eats West, Sam Goodman, Michelle Ree
Poorly Made in China, Paul Midler
Factory Girls, Leslie T. Chang
All the Tea in China, Kit Chow, Ione Kramer
China Shakes the World, James Kynge
China: Fragile Superpower, Susan L. Shirk
The Tiananmen Papers, Liang Zhang, Andrew Nathan
Gifts Favors and Banquets, Mayfair Mei-hui Yang
Capitalism with Chinese Characteristics, Yasheng Huang
The Great Wall, William Lindesay
What does China Think?, Mark Leonard
The Search for Modern China, Jonathan D. Spence
Chinese Religiosities, Mayfair Mei-hui Yang
When Asia Was the World, Stewart Gordon

Instead of worrying about China, companies are better off embracing the opportunities.

Solutia looks to capitlize on growing China market
ST. LOUIS POST-DISPATCH
06/17/2008

Solutia Inc. Chief Executive Jeffry Quinn on Monday signed $182 million in contracts with companies from China, a country that looms large in his corporation’s future as well as in the minds of many American executives.

Quinn was in a line of local industry leaders who put pen to paper and sealed deals with Chinese customers during a trade delegation conference at the Ritz-Carlton hotel in Clayton.

Among these, Ferguson-based Emerson sold $70 million in telecommunications and power-related equipment. And locally based soybean trade groups, representing companies such as Bunge, Cargill and ADM, closed deals worth nearly $5 billion.

“Solutia obviously is very pleased to participate in this event and have a small role in demonstrating the vitality of the St. Louis region, as a source of economic development and as a trading partner with China,” Quinn said. The company, based in Town and Country, makes specialty chemicals and performance-enhancing window films.

As the U.S. economy lags, rapid growth and an expanding middle class make China an irresistible market for domestic companies.

Solutia, with annual sales of nearly $4 billion, said that 58 percent of its total revenue growth between 2006 and 2011 will come from China. That translates to total Chinese sales of $439 million in 2011, up from $166 million in 2006. These sales stem from lines of business that are becoming increasingly profitable as Solutia raises prices and improves logistics and manufacturing efficiency, Quinn said.

Solutia exports nylon resins and polymers to China from a plant in Pensacola, Fla., which played host to nearly 30 members of the trade delegation on Sunday. Solutia’s products fill the holds of cargo ships returning to China after bringing loads of low-cost manufactured consumer goods to American shores.

The Asia-Pacific region is key in Solutia’s strategy of transforming its under performing domestic nylon carpet-fiber business into a global supplier of resins and polymers for plastics.

Gone is the view of China as simply a place to outsource jobs and lower the cost of manufacturing. The booming nation is a market in its own right — in Solutia’s case, for goods manufactured in the United States.

“We look at China not as a place to outsource production and find cheap labor, but as a vibrant market that needs and desires the quality products that Solutia produces around the world,” Quinn said.

But that’s not to say the company lacks investment in China — that was a key point in Solutia executives’ closed-door remarks to that country’s trade officials, the CEO said.

In China, Solutia produces tinted window films and, through a joint venture, makes heat-transfer fluid. Solutia recently disclosed plans to build a rubber-chemical plant. And its automotive and architectural window films are sold through more than 5,000 retail locations.

Zhou Lin, general manager for Liaoning Yinzhu Chem-Tex Group Co., said his company buys a type of nylon pellet produced at Solutia’s plant in Pensacola and spins it into fibers. His company chose Solutia for the high quality of its products, but will deepen the relationship by seeking its advice on how to make technical advances.

Kingfa Science & Technology Co. also buys the nylon pellets for melting into plastic materials. It is mainland China’s largest domestic engineered plastics compounding company, and is growing at a rapid clip — which will mean more business for Solutia, said Li Nan-jing, Kingfa’s vice general manager.

The products of these companies — along with Hangzhou Youngchang Nylon Co., which also signed a contract with Solutia on Monday — are found in everything from industrial products to non-stick spatulas, and from electrical-outlet covers to under-the-hood car parts.

Solutia’s drive to do business in China doesn’t mean it is neglecting the American market, Quinn said. North America remains the company’s biggest market in many product lines. However, China’s economy is growing fast, as is demand.

“China is still a work in progress, and, like many of the developing economies around the world, there is certain room for improvement” in its openness to American goods, said Quinn. “But we have found the Chinese marketplace to be a very receptive market.”