How To Establish OEM Processing Trade With Chinese Characteristics

How big is the profit difference between OEM enterprises and ODM enterprises?

The profit distribution pattern of a Bobbi doll made by Chinese processing trade enterprises is: 35 cents, falling into the pocket of Chinese enterprises; 20 dollars, loaded into foreign bosses.

From shoes to shirts, from Christmas trees to electric toys, from computers to Apple phones, many

Enterprises have been or are producing such a distribution story.

Profits are relatively small, and core technologies are controlled by multinational companies.

Over the past 30 years since the reform and opening up, processing trade has played an important role in the process of China's industrialization and internationalization, but at the same time, it has also suffered many controversies and even disagreements.

Especially in recent years, when the development of processing trade is facing new pressures such as the rapid increase of operating costs, the increasing pressure on resources and environment, and the increasingly fierce international competition, the discussion on processing trade is endless.

Should we continue to develop processing trade at present? What key points should we grasp in the process of pformation and upgrading of processing trade?

1. is it necessary for us to vigorously develop the processing trade?

For a long time to come, processing trade is still an important way to expand employment, promote trade and increase taxes in China.

"Washing the feet to the fields" is the image representation of Cantonese to the development of processing trade.

Since the introduction of this unique trade form, tens of thousands of rural population have been successfully pformed into industrial workers in China. A large number of competitive industrial clusters have been developed in Humen clothing, Shunde household appliances and Suzhou notebook computers. The Pearl River Delta and Yangtze River Delta have become the most important manufacturing bases in the world, and thus become one of the fastest growing regions in China.

Not only that, processing trade has played an important role in the development of China's economy: to solve the large number of migrant workers' employment, China's processing trade enterprises directly employed more than 40 million people last year, accounting for 20% of the second industry's employment. Foreign direct investment has been brought to a solution to the problem of capital shortage in China; the level of industry has been raised, the supporting industries have been promoted, and advanced technology and management methods have been learned and learned in the process of participating in the global division of labor.

Achievements belong to the past.

Now, when China has become the world's largest exporter, the trade surplus exceeds US $150 billion and foreign exchange reserves exceed US $2 trillion, is it necessary for us to vigorously develop the processing trade?

To answer this question, we first need to understand the concept and connotation of processing trade.

From the point of view of global division of labor, processing trade is a trade mode based on intra product specialization, which takes on a link in the global supply chain of multinational corporations.

China has a strict definition of processing trade. It refers to the business activities of the export of finished products from the bonded or imported parts or components, components and raw and auxiliary materials, which are processed or assembled by domestic enterprises.

Because China has the advantages of abundant labor force, low factor cost and better manufacturing base, the international industrial chain has been shifting and extending to China in the main form of processing trade.

With the deepening of globalization, China's participation in international division of labor is getting deeper and deeper. Processing trade is no longer limited to multinational corporations, and state-owned enterprises and private enterprises are increasingly joining the division system of multinational corporations.

Developing processing trade is an important way for our country to utilize two kinds of resources, two markets and enhance international competitiveness.

We must not give up this trade mode voluntarily, but we should seize the opportunity to participate more actively in the international division of labor. "

Vice Minister of Commerce Jiang Yaoping said.

Over the past 30 years since the reform and opening up, China's economic and social development has been developing rapidly, but it has not fundamentally escaped from the underdeveloped state. The situation of lack of resources, insufficient domestic demand and surplus labor has not changed. The development has not changed in the middle stage of industrialization, in some areas or even in the early stage of industrialization, and the situation in the middle and low end of the international division of labor has not changed.

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"Any country can only adapt itself to the international development trend and promote its own economic development only if it finds the right position in the international division of labor according to its own actual conditions."

Ma Yu, director of the Ministry of foreign affairs of the Ministry of Commerce, said that vigorously developing the processing trade will continue to be an important way for China to expand employment, promote trade and increase taxes in the future.

Taking employment as an example, because of the limited domestic market growth, many manufacturing industries are in a state of overcapacity. Relying solely on the domestic market is difficult to solve the problem of labor release and labor force employment.

"Processing trade can promote employment, and because processing trade exports occupy the international market, it means huge expansion of market capacity and employment space for our country."

Ma Yu said.

2. must the processing trade be at the low end of the industrial chain?

Processing trade itself does not have the characteristics of "advanced" or "backward". More and more processing trade enterprises have mastered advanced technology and have their own brands.

In the past, processing trade was labeled as "low-end industry" because of the low end products such as toys and clothing.

The frequently cited example is "800 million shirts can not be replaced by a plane, and a train lighter does not match a computer software".

Some people say that processing trade can promote employment and help integrate into the international market. This is not controversial, but its technical content is not high and belongs to backward industries. It should not encourage development.

Is that true?

Ecovacs Robotics (Suzhou) Co., Ltd. is a processing and trading company that produces intelligent cleaning appliances.

The first 10 years of the company's establishment were mainly OEM processing mode.

Since 2006, it has developed into a OBM (private brand production) mode, and created the Ecovacs ECOVACS brand, pforming from traditional cleaning appliances to intelligent service robots.

The company has invested more than 50 million yuan in research and development every year, has applied for 63 registered trademarks in more than 60 countries, and applied for 498 patents at home and abroad.

In 2011, the proportion of self owned brand business was 23%, which will increase to 40% this year, and realize the magnificent turn of pformation and upgrading.

In China, there are numerous processing trade enterprises like Ecovacs, which have mastered advanced technology, can manufacture advanced products, and gradually have their own brands and sales channels.

In fact, processing trade is only a kind of trade mode, and it does not exist the characteristics of "advanced" or "backward" in itself, nor can it be directly equated with "low level industry" and "backward production capacity".

HUAWEI, ZTE, Midea, GREE, TCL, Galanz and a large number of well-known enterprises are also engaged in processing trade business. More than 96% of China's shipbuilding industry and nearly 70% of PV products are exported by processing trade. They all have strong international competitiveness.

Processing trade has brought about technological spillover effects.

According to the Ministry of Commerce Research Report, with the continuous development of processing trade and improvement of investment environment, large multinational companies pay more and more attention to the establishment of R & D institutions in China, and advanced technology and management experience are dominant or implicit diffusion trend.

According to a survey conducted in Suzhou, as of the end of 2011, there were 522 Foreign-Funded R & D institutions in Suzhou, of which 85 were independent R & D enterprises, 437 were independent R & D centers, and the average R & D investment of a single R & D institution was over ten million US dollars.

Of course, there are still many processing trade enterprises in China concentrating on labor-intensive products.

"However, the basic level of China's processing trade can not be measured at the highest end of the international level, but it should be measured by reference frame of China's industrial development level."

Ma Yu said that if the technology and products of processing trade are all higher than the average level of the same industry in China, it should be the advanced level of the industry. It will play a more active role in China's industrial progress and market competition.