Do you need to buy E0, E1, E2, or CARB MDF, Particleboard, or Plywood?

Some of the more common materials used to make furniture are MDF, particleboard, and plywood. Although these items may sound familiar, knowing what they are made with could be the difference between following the law and breaking it.

Medium Density Fiberboard (MDF) is one of the most commonly used materials. It is a wood-based sheet material prepared by pressing together wood fibers with a synthetic resin adhesive. MDF is principally composed of softwood, but some brands may contain a considerable percentage of hardwood as well.  MDF is very strong, easy to veneer, and commonly used in high-end as well as more economically priced furniture.

Plywood is commonly used in cabinet construction.  It is an ideal choice for slightly flexible resources. Plywood is made of wood veneer layers that are laid and pressed together with a synthetic resin adhesive. This sort of construction technique makes it less prone to warp/crack or shrink than solid wood.

Another widely used material is particleboard. Particleboard is a mixture of wood shavings and chips, bound together through resin. Although particleboard is not as strong or aesthetically appealing as MDF or plywood, it costs less and therefore makes it more practical for some applications.

One major process these 3 materials share is they are pressed together using a resin adhesive.  It is the level of formaldehyde in the adhesive that will determine if your product is within the boundaries of the law when talking about air quality and emissions, as formaldehyde is considered carcinogenic.

According to International Composite Board Emission Standards (ICBES), there are 3 European formaldehyde classes, namely: E0, E1 and E2. This classification is based on the measurement of formaldehyde emission levels. For instance, E0 is classified as having less than 3 milligrams of formaldehyde out of every 100 grams of the glue used in particleboard and plywood fabrication. E1 and E2, conversely, are classified as having 9 and 30 grams of formaldehyde per 100 grams of glue respectively. All around the world variable certification and labeling schemes are there for such products that can be explicit to formaldehyde release, like that of Californian Air Resources Board (CARB).

Be sure that when working with suppliers that they adhere to these international standards and those specific to your country both to protect your business and the health of your customers.

Is your fire retardant foam really fire retardant?

In the industrial sector and also in daily life, security and safety is of the utmost importance. Fire protection systems are getting more and more sophisticated in all walks of life. As polyurethane foam has numerous applications in daily life, therefore, it needs to comply with the most strict safety requirements; particularly fire resistance.

There are several situations where fire retardant foam is a necessity:

–          Home furniture in certain countries and states

–          Office and hospitality furniture in certain countries and states

–          Building and construction industry

–          Automotive markets

–          Aviation

–          Public transport (railway or metro)

–          Comfort and bedding sector (hospitals and nursery care)

–          Public places (theaters, cinemas or even conference centers)

Mattresses and furniture cushions are in general made of highly flammable polyurethane foam. In order to meet fire safety guidelines, manufacturers treat this foam with a fire-retardant treatment.

To check whether your fire retardant foam is really fire retardant, you should be aware of the different test standards meant for the fire retardant foam, depending on the country in which you live.

Depending on the country of intended use, there are different grades of fire retardant polyurethane foam that comply with the most strict test standards.

Polyether Fire Retardant foams are the most common and meet the requirements of the standard fire safety regulations in most countries and are available in a variety of grades. These foams are expected to have comparatively higher lifetime properties and are based on the formulations of conventional polyether.

So once you have specified your requirement for fire retardant foam, how do you ensure that the factory will use fire retardant foam on an ongoing basis?  To start, using a trustworthy factory is very important.  If the factory is dishonest, has recently been forced to give a price discount, or has financial problems then they might be motivated to use standard foam instead of fire retardant foam as there is a cost savings.  If their production line is disorganized and not paying attention to the requirements of your PO, they could accidentally use standard foam.  Finally if the factory is used to producing lower end furniture that does not require fire retardant foam, then they might just make an honest mistake and not use fire retardant foam on your order.

Fire retardant foam is generally color coded differently from standard foam, so you can visually see a difference.  The fire retardant properties are tested by exposing the foam to fire from a butane torch for few seconds and can be verified by an independent testing lab.  You can request to have foam from the batch of foam intended for use on your order (make sure you get a lot number) to be tested by an independent lab prior to the factory using the foam. Also, exposing the foam to a lighter at the factory is a quick way to do a field test to ensure the foam is indeed fire retardant.

Having someone on your team to check on these things prior to shipping could be the difference between the fire retardant foam performing as it is suppose to in a high risk situation and someone getting hurt and your company being entangled in a lawsuit.

Avoid Cultural Misunderstandings in Your Chinese Business Relations

With more and more Western companies interacting with Chinese business partners, it has become necessary to be aware of the differences between the two cultures. Ignoring the differences in language, culture, business practices, and management styles can cause misunderstandings, failed expectations, and all around disaster. With this in mind, it’s very important to avoid these culture-related misunderstandings by trying to at least learn a bit about Chinese culture before heading out to do business with Chinese companies.

The “Face”

The Chinese are very sensitive about “losing face”. Where businessmen from foreign countries tend to be very direct about problems and concerns, the Chinese can perceive this as an attack and will take it as “losing face”. Conflicts are frowned upon and the Chinese may find such openly critical remarks as aggressive — a potential cause of trouble down the line.  Just as it is important to work to understand your Chinese supplier’s way of thinking, it is important to choose a supplier that has experience with foreign companies or the openness and willingness to cooperate.  Don’t be the ginny pig for a supplier that is just starting to do international business.


Networking is important; it’s the same throughout the world. In China, however, “guanxi” is not just about “connections”. The concept was born in the early years of mercantilism in the country, when there were no contracts to govern business dealings. To have guanxi meant that the businessman was trustworthy enough to have connections willing to vouch for him. A businessman with guanxi is one with honesty and integrity. It’s not about knowing the right people — the usual assumption foreigners make when they first hear of guanxi — it’s about building a reputation solid enough that other people are willing to speak up for you and recommend you.

Gift-giving and lavish dinners

Where Western companies often have strict policies regarding giving and receiving gifts, the Chinese are rather generous when wooing potential business partners. They think nothing of expensive gifts and lavish dinners. In fact, these are part of the company’s expected expenses in pursuit of business deals. To refuse is to be impolite, and if you don’t accept the gifts it might be construed as not “giving face” to your Chinese counterpart, so if our company has a policy about receiving gifts do your best to make this very clear at the very beginning.

Making Sure Your Best China Source is a Good Source

Sourcing from China can be an economically sound decision, but the costs can outweigh the benefits if one picks the wrong companies to work with. It is true that finding a reliable business partner in China can cut costs for your company, but most foreign business people lack knowledge or experience when it comes to Chinese language, culture, and business ethics, so it can be a very difficult and complicated task. Small businesses in particular can suffer big setbacks from working with suppliers who are unreliable and unethical.

It is very important to ensure that the supplier you’ve chosen is a legitimate company that can deliver the goods on time. Plus, it also helps to have business deals with companies that maintain ethical practices in terms of taxation and employee compensation. As the case of Apple has shown, the backlash over perceived employee injustice can reflect poorly on the company and its products.

Here are a few ways to make sure that the sourcing partner you’ve chosen in China is the best possible supplier.

1. The company is registered with the government. All legitimate companies in China are given a unique registration number. A company that cannot provide you with this number is a risk, so it’s best to work only with those who do have a proper registration number. To verify, you will have to get in touch with the Bureau of Industry and Commerce or the local administrative government. It is best to have someone who speaks Mandarin to handle the verification as most officials will be more comfortable speaking in the local tongue.

2. Meet with your potential new supplier face-to-face.  Never place an order with a factory that you have not visited.  Try to meet the owner of the company and get a feel for what kind of person he or she is.

3. Walk the factory floor and pay attention to the cleanliness and organization of the factory.  Look for underage workers.  If you see someone that looks younger than 16, ask your interpreter (not the factory sales person) to ask the person how old they are (in Chinese “Ni duo da le?”).

4. Ask the factory what countries they are shipping to and the names of some of their customers.  The factory will usually tell you the countries and may or may not tell you the names of some of their customers.  The factory telling you customer names is both good and bad.  Good because you know whom they are selling to, but bad because you know they will tell someone else they are selling to you if you become their customer.

5. Walk through their finished good warehouse and look for logos and names of their customers.  This is a good way to verify if they have told you customer names already or a way to find out whom they are really shipping to if they have told you they cannot reveal customer names.  We think it is better when they tell you their customer names are confidential as that means they respect privacy.  Then just by being attentive you can still learn who a few of their customers are.

6. Ask what their total sales are annually.  Then later in the meeting ask them the average number of containers they ship per month.  Then based on your knowledge and quotes you have received from suppliers, you can estimate the average value of a container based on the type of items you are interested in and verify if their annual sales and containers per month are accurate.

7. If payment terms or payment channels are inconsistent with typical practices in that region or industry, then ask more questions or find a new supplier.


As with most things, ask a lot of questions, look people in the eye when they answer, and follow your intuition.


Ensuring Quality Chinese Exports

For many years companies around the world have been turning to China in an effort to cut production costs.  By keeping overhead low, you can sell your product at a lower cost to the consumer while increasing your margins, thus generating repeat business, a high rate of customer satisfaction, and a better bottom line. However, many have fell victim to various quality control issues when switching to a lower cost supplier.

So, how does a company protect itself when switching to a new supplier? Here are a few steps you can take:

Spend a Little More

This is not always the easiest thing to do, but spending a bit of time at your new supplier is a good way to see the day-to-day operations and get a true feel for what is going on.  If possible, asking questions (via a competent translator) to factory supervisors (middle management) is a good way to get straight, honest answers.  They tend to be more inclined to share information that is helpful and not surrounded by “sales talk”. Also buying from the cheapest supplier can be risky.  Understanding why one factory is the cheaper than others will help prevent problems down the road.  Are they cheaper because they have a competitive advantage (i.e. they are buying raw materials at a low cost because of their volume) or because they are using inferior raw materials? These answers can sometimes be hard to find, but spending the time to investigate will save a lot of headaches down the road.

Shop Around

With the Internet one can get a lot of preliminary info when going down the path of looking for new suppliers. “Googling” should never replace sitting down face-to-face with a potential new supplier, but it is a good start to make a short list.  Enough can’t be said about using your instincts when choosing your new suppliers. If a supplier is saying or showing you all the right things, but something does not add up to you, then it is best to follow your instincts and keep looking for a supplier that is a good fit for you.

Another option is to find a project management company that has spent a lot of time and energy vetting suppliers. These project management companies are usually China based and have “tribal knowledge” that will shorten your learning curve and mitigate risk.

Establish Quality Control

It is important to set and establish the quality standards before a Product Order is placed, deposits are paid, or shipments are made. This might sound like common sense, but in the rush to realize savings we have seen both big and small companies sometimes overlook this in one way or another. So making sure that you and the factory have a clear understanding of the quality level that is expected and can be delivered must be determined at the very beginning. Also, establishing a relationship with manufacturers that allow your company’s representatives to inspect and thoroughly test the products before leaving the factory is critical. This applies to both first time and repeat business partners. This kind of accountability ensures that you are getting what you pay for while at the same time providing motivation necessary for continued quality.

With some effort and research, you can greatly improve the quality of your Chinese imports without breaking the bank. By taking the time to investigate products, you will ensure that your customers receive the quality they have come to expect from you.



China Trade to Increase over the Long Run, Despite Recent Slowdown

China’s exports are expected to grow by 12 percent annually from 2013 to 2015, mainly driven by expanding trade with emerging markets, HSBC said in a report.

The report predicts India and Vietnam will be China’s fastest growing export markets in he next three years, with exports to India surging by 20 percent annually and exports to Vietnam growing by 18 percent annually. Exports to the Middle East and North Africa, China’s new export destinations, are expected to grow by 14 percent each year.

China’s trade growth has been sluggish from the outset of 2012 due to the European debt crisis and the United States’ economic downturn, but these trends look set to fade. Recent trade data has shown signs of a stabilizing market. The country will maintain strong trade momentum in the long run backed by increased trade with emerging markets.

China’s efforts to balance trade and expand imports will benefit developed markets such as the US and the EU. Imports from the US will grow 10.4 percent each year in the next three years, and imports from the UK will expand 9.9 percent annually in the next three years and 11.1percent annually from 2016 to 2020.

China customs’ data showed exports climbed in October by 11.6 percent from a year earlier, the fastest pace since May and beating expectations for a 9 percent rise. Shipments to the United States jumped to a four-month high of 9 percent from 5.5 percent in September. Orders to the European Union, China’s biggest export market, also saw a smaller contraction of 8.1 percent, compared to 10.7 percent a month earlier.

All these offset slower exports to Japan, which grew 1.1 percent year on year in October compared to 2.2 percent in September.

Exports are still a crucial component of the Chinese economy, despite the state’s efforts to rebalance the economy towards domestic consumption which have struggled to gain traction. The sector generated about 31 percent of gross domestic product (GDP) in 2011, World Bank data show, and supported an estimated 200 million jobs. Any weakness in exports will therefore weigh on China’s growth, which is on track to grow at 7.5 percent in 2012, thereby slowing the government’s attempts to rebalance the economy.

Protecting Your Intellectual Property in China and Why it’s Getting Easier

It’s no secret that China does not have the best reputation when it comes to protecting intellectual property. In fact, outside of currency issues, IPR could well be the most prevalent issue facing foreign companies and their representative governments when working with China.

At the end of the day, nothing will replace due diligence when it comes to putting in the firewalls necessary to deter IP theft, from registering trademarks and patents, to vetting partners and employees and hiding or breaking up source code. Without these deterrents, companies effectively have no recourse if their IP is ultimately stolen. That said, as the saying goes, “a good offence is the best defense” and while companies may go above and beyond what could be considered effective deterrents, having to litigate in China against a competing Chinese company is rarely going to result in a fair, let alone transparent ruling.

So if the situation is still this dire, why the rosy title, what is changing to that could improve the situation? Put simply: Chinese companies. Almost counter intuitively, as many Chinese companies begin investing in their own IP in a bid to rise up the value chain, fulfilling the goal of the Chinese government to go from “Made in China” to “Designed in China”, they are facing the same issues as foreign companies protecting their R&D investments.

While one might expect local companies to have an easier time protecting their own IP against local competitors, this has not been the case, often seeing local judges side with offending companies based on their influence in the local economy, necessitating a trip to China’s Supreme Court, where rulings will not be based on local influence.

So, while this has yet to come full circle, despite new Patent enforcement laws, there are clear signs that the market is changing for the better, both organically and via the Chinese government in response to calls from local businesses intent on protecting their investments. This doesn’t mean that foreign companies should reduce their IP theft prevention strategies, these will remain very important for the foreseeable future, however, as with many aspects of a changing China, reform, especially where enforcing the rule of law is concerned can only serve to benefit foreign businesses navigating what is too often an opaque and heavily biased system.

Private Investment in China: What Could this Mean for China and the Global Economy?

Following a mandate by China’s State Council, China’s Cabinet, to boost private investment into previously state-controlled industries largely dominated by SOEs (State-Owned Enterprises), China’s NDRC (National Development and Reform Commission) has drafted laws to open several industries, namely, the healthcare, railway and transport industries, to investment by private companies.

While not necessarily a watershed moment on the path to a more open China, reforms were attempted in both 2005 and 2010 respectively, it does mark a significant turnabout for China given the state of the economy, with GDP growth slowing to 7.4% in the third quarter, thereby necessitating action from the government and ensuring that legislation will have the teeth required to push previously monopolized industries into reform. This is in sharp contrast to previous versions of the reforms, where economic growth was rapid and the government was trying to bring the economy under control.

Healthcare, railways and transportation are not the only industries slated to open up, however, with the State Council mandating at the beginning of this year that, in addition to the aforementioned industries, municipal administration, finance, energy, telecommunications, and education markets too, should be opened up for private capital.

Domestically, this offers China several advantages, including providing private investment with a place to go outside of the real estate sector, dubbed “the most important sector in the known universe”, not for its vibrant growth, but due to the systemic risk that it presents should a bubble, fueled largely by private capital, burst. Allowing private money to be invested elsewhere ensures that property prices will come more in line with what average citizens can afford, thereby further ensuring stability. Better still, consumers will ultimately receive products offered by what were once SOE monopolized industries, from private companies competing for their business, improving prices and the quality of end-user experiences.

But growth in China is indeed good for the global economy as well. With growth continuing to evade Europe, and the United States still in a tepid recovery, a recession in China could potentially be the straw that breaks the proverbial “camel’s back”. Moreover, by giving private capital a chance to grow, consumers will ultimately be able to better afford goods, domestic and foreign alike, while tax revenues for the government will increase, reducing the necessity of municipal governments to depend on property development for tax revenues alone and further empowering a middle class able to create wealth and invest it accordingly.

While change will by no means be immediate, indeed, this transition could likely take several years, the potential for both China and the world at large look bright as the country proceeds on its march toward more open markets.

Where are the Chinese Brands?

With China’s 3Q GDP growth falling the 7.4% year-on-year, the case for the county’s rise up the value chain has never been stronger. As stated in several of our previous articles, China needs to rapidly increase the value of the products that they sell. One way to do this, of course, is to increase the value of the products themselves, through innovation, to be better positioned to compete in the global market. While this mandate has indeed begun to bear fruit, the move up the value chain is hardly this one-dimensional; without brands, China’s companies will remain at a decidedly low rung of the value chain.

This is not to say that Chinese companies are in any way doing poorly abroad, indeed, nearly seventy of China’s companies are members of the Fortune 500, but when you negate market capitalization as a measure of success and replace it with brand equity, fewer than ten of those companies can stack up against their global competitors.

The cause of this problem lies predominantly with Chinese consumers, who, for the majority of the past 30 years, have been relatively uninterested in brands that were not international luxury items such as Mercedes or Louis Vuitton at the high end, and more interested in price and quality at the lower end. This prompted companies to invest heavily in their production in order to drive down costs while improving quality to attract domestic consumers, while investing precious little in their brands.

Also notable are Chinese manufacturers fixed to a strictly OEM model, incredibly adept at making products for others, while less interested in developing their own marketing and sales forces. With sluggish growth and a rising RMB eating at already low profit margins, however, some of these companies are having a rethink, with a modest push by the central government to create their own brands.

But how will a brand make a difference to these stagnating business models? Traditionally, brands have commanded 27% gross margins, in sharp contrast to the 19% delivered to OEM manufacturers, making for a potentially lucrative incentive for any company willing to invest in a marketing team and sales force to build a brand and drive distribution.

While many Chinese brands are making the move toward building their own brands, the opportunity for foreign companies to leverage their own, existing brands to tap a potentially massive market still exists for those companies ready to take a risk and invest in their own marketing and sales efforts within China, while local companies continue to find their feet in unfamiliar territory.

Is China Headed for a Slowdown?

In order to counteract what has been bid “the most important sector in the known universe”, China imposed curbs on its property market in order to quell a mountain property bubble that threatened to derail the mounting recovery, a bubble largely a result of the large stimulus set in place to fund infrastructure projects country-wide and give the nation’s economy a “soft landing” ostensibly to prevent a “hard landing”.

The measures were effective in the short term, while questions remain as to just how the stimulus measures were funded, particularly at the local level, China dealt swiftly and deftly applied economic levers to avert what would truly have been a global economic crisis.

Unfortunately, these measures would only function so long as they could be paid for, and those funds would have to come from China’s powerful export industry largely responsible for the country’s rapid economic growth of the past 30 years. With developed nations, indeed, the vast majority of the G20 continuing in their economic woes, those export returns have been slow to reappear and are currently in a state of declining growth.

So much so, that China has now released more funds to further promote domestic growth within her own borders, funding more infrastructure projects while slowly relaxing property curbs to more actively engage the “soft landing” and wait for the economic recoveries of Europe and the United States.

China has just released 1 trillion Yuan in its most recent stimulus package, in a bid to further propel waning economic growth due to a dramatic slowdown in export growth, fueled by the continued economic malaise in the U.S. and particularly Europe. The question will be as to whether or not the Central government will be able to control inflation while continuing to release massive liquidity into the market. But therein lies the problem; China’s economy, no matter how much cash is readily available cannot escape the realities of the global financial climate, and while they may be able to temporarily suspend and economic crisis of their own using their hoards of liquid capital, they risk rising inflation and pricing their own burgeoning lower middle class out of the market, which could endanger stability.

Thus, China is working very hard to improve the plight of the common worker in order to both improve domestic consumption, thereby lifting the boat from within, but more importantly, providing economic security to those that may well be negatively impacted as things sour in the face of a continued global slowdown, thereby ensuring stability and buying time in the wait for the global economy to once more finds its feet.