There is no doubt that pressure on prices and hence on costs is very strong (Pellegrini, 123). However, being able to secure supplier guarantees over product specifications and quality and over the reliability of delivery schedules is also of considerable importance, not least in an emerging market beset with logistics problems. Suppliers risk incurring monetary penalties if they violate these ‘guarantees’ (Keh and Park, 103).
Since China’s accession to the WTO in December 2001 and against a background of slowing world economic growth, exports have grown by 20%, to US$262 billion in the ten months to the end of October 2002, generating a trade surplus of US$24.7 billion; 52.8% of export trade was attributed to foreign invested enterprises. Real GDP growth was 7.3% in 2001 and the indications are that private consumption is continuing to grow. Retail sales grew by 8.4% year on year in the first quarter of 2002, slightly weaker than the 10.1% growth recorded in 2001 and the 9.7% rate achieved in 2000 (EIU, 2002).