Spend Matters: Live From China (Fifth Dispatch)

All About the Expat / Foreigner: The Mezzanine Price is Alive and Well

Who says that Chinese suppliers don't know their market? Without question, one of the most hilarious things about the ISF this past week was not just how all of the MFG.com Western attendees were mobbed by Chinese suppliers throughout the three days -- at the booths, in the hallways, and even in the bathrooms -- but that all of the Chinese nationals working for IPOs were virtually ignored by the suppliers in attendance (even though were also part of the MFG.com entourage). Why? We'd argue that the more advanced global sourcing organizations that attended (e.g., Siemens, Emerson) that brought their local IPO teams staffed with Chinese nationals already know the China price, but many of the Westerners do not. And suppliers know this.

This suggested to us that the "mezzanine price", or the first price quoted to Western companies that is in between the China price and prices from domestic suppliers, is alive and well, despite the shrinking savings from China sourcing in the first place (thanks to the decline in the dollar, the VAT rebate reduction/elimination, and commodity inflation within China). So while we certainly appreciate all the attention, we'd suggest that Chinese suppliers readjust their views on the China sourcing sophistication of the Westerners who reach out to them. Seriously, don't we all know the mezzanine price trick by now? We guess not.

This post is part of the Spend Matters / MFG.com China Sourcing series. Aptium Global's Lisa Reisman contributed to this blog entry.

Jason Busch

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