30th May 2018 /
investment

China Manufacturing Tour & Canton Trade Fair – A developer’s solution for rising costs?

A common theme over the last 5 years amongst all property developers is the rising costs of construction prices. This has been further exacerbated with an unprecedented increase in infrastructure spending.

With land prices also appreciating, builders and developers have been looking for alternative measures to control construction costs, including products manufactured in China and modular. To better understand these options, White & Partners attended the April 2018 Canton Import and Export Fair in Guangzhou, China. Billed as the largest convention of its kind in the world, the fair displays the latest building products and construction techniques, connecting over 20,000 vendors with the international development community. We also inspected tiling, joinery and window factories in Shanghai, Foshan and Shenzhen. It was a short but fact filled trip which left us with several key impressions:

  • Setups of the production warehouses were comparable with Australian standards
  • Quality of the outputs we inspected was impressive and well presented
  • Back offices for the Chinese manufacturers we visited were well resourced and worked across the entire supply chain from assisting with the import of goods to managing the quality compliance process post installation
  • Price advantages, factoring in logistics costs, were at least 50% more favourable than compared products in the Australian market
  • Australia was a key target export market and one which has the highest quality standards globally. Something to be proud of!

Sourcing products from China has the added benefit of passing through an established supply chain. Australian developers can also be assured with accountability, with many suppliers offering warranties on their products. The biggest question is if these suppliers can handle orders in large quantities. All prospective suppliers will say yes. However, we believe the only way this can be managed is if an Australian developer has a Chinese based supply partner who could oversee quality control and logistics. This would critically provide oversight into the supply chain.

High quality, low cost materials is an advantage many Australian developers and builders are beginning to exploit by importing from China. We know arbitrages are not permanent, particularly as China moves up the cost curve. But as the opportunity window remains open, we believe now is a good time to take advantage.