Why China’s industry is dominating

My group is on business travel this week in Guangdong Province, sourcing factory goods, stainless steel and safe house, and luxury furniture that we ship to property developers and distributors across the world.

In the past 3 days, we're in Foshan at the Louvre. It's a giant wholesale mall for high-end furniture. The reason we brought our cameras in this time is that the Louvre is a strong example, albeit an extreme one of Chinese economic planning and policies and industrial clustering and top-down organization of all its supply chains.

Foshan is a city of 9 million people and half of all the furniture in the world comes from here, from over 7,000 manufacturing companies that are all within a short drive of each other.

Over 90% of materials used by these furniture makers come from suppliers in Guangdong. And those short distances from suppliers to factories, an hour or less, mean that these manufacturers employ just-in-time supply chain management, which drives down inventory costs.

Local transportation expenses are also far lower, inbound and out.

Another advantage is global logistics.

Raw materials come in and finished goods go out via some of the biggest ports in the world, which are also close by.

This is southeast Guangdong Province, with Foshan in the upper left, just southwest of Guangzhou.

Shenzhen and Hong Kong are on the other side of the Pearl River Delta. Shenzhen and Guangzhou are the fourth- and fifth-busiest ports in the world.

Hong Kong is at number eight.

And so this particular industrial cluster in this particular area of China is the global center of furniture production.

Shenzhen to the south is the world capital for electronics. Zhengzhou and Hunan are farm machinery and man-made diamonds.

Dozens and dozens of major clusters and hundreds of smaller ones across China.

Another important feature of these industrial clusters are these hyper malls, these enormous wholesale markets.

Some of them are world famous, like the ones in Yiwu.

Shenzhen again for electronics, and this one, the Louvre, for high-end furniture. The furniture mall area of Foshan, just for product showrooms and wholesale shopping, is 10 kilometres long.

Most of the visitors and buyers to this district are foreigners or their Chinese sourcing agents buying for foreign companies or brands.

Think of all the furniture stores across the world, the international retailers who source their products here. They're all here. The furniture brands that use Foshan factories for OEM and private labelling, they're all here. Then we have the hotel chains and resort properties, hospital groups, school districts, movie theater companies, restaurant chains, sports bars, gymnasiums, libraries, even builders of football stadiums. They all come here.

The Louvre, then, is just one of many furniture malls on the strip, but it is an outlier. It's an official tourist attraction. You can see for yourself why. It's a major arts and cultural showcase with a dozen or so private exhibition halls. There are organized tourist groups and live streamers walking around everywhere.

This is all in addition to the hundreds of showrooms for luxury furniture brands from local factories and suppliers across the city.

Pulling back a bit, if we are honest with ourselves, Foshan is a city most of us had never heard of. And yet now they build half the furniture in the whole world. Many Chinese families didn't have furniture to speak of at all 40 years ago. Still fewer had high-end sofas or wine cellars or stainless steel kitchens. But here we are. And how it happened in the home furnishings industry, and how fast, is typical of every single other industry in the world.

National and local government-level support down to the neighbourhood level. The construction of giant warehouse and factory zones, the localization of all the industry-specific supply chains, world-class logistics to and from friendly countries in Africa and South America and other countries here in Asia, even the building of universities.

Then come the banking and financing and branding activities, shipping services, which are all bundled together at these wholesale markets like the Louvre here, which attract business buyers from across the world, who are met at the airport and brought to one of the hundred or so hotels right nearby in this neighbourhood.

This is how Foshan took over the world's furniture industry. And no matter what industry you're in, that is the same formula China is using in some other city to take over yours.