Share Your Expertise: David Anderson on the China Granite Industry

In a follow up to Dylan Blankenship’s article Let’s Talk Granite - Pre-fabricated Granite Import Guide, we attempt here to help readers better understand the structure and makeup of China’s granite industry. We explain where China’s main granite suppliers are located, the types of granite found in these locations, and give a brief introduction to the uniform numbering system used in the country.

Whether you are looking to purchase high quality, finished granite countertops (slabs or prefabricated), granite tile, dimension stone or granite sinks, they can all be found in China at competitive prices. According to the General Administration of Customs, China exported over 1 million tons of granite in the first 10 months of 2007 at a value of approximately $157 million US dollars. It is estimated that Chinese granite accounts for around 17-20% of the world’s granite production.

The main production centers are located in the provinces of Fujian, Guangdong and Shandong. These three provinces account for 85% of China’s stone production. Smaller production centers can be found inland in Sichuan, Shanxi, Anhui, Hebei, Guangxi, Inner Mongolia and Xinjiang. Have a look at the map below for a more visual look at China’s granite production areas.

With over 80 varieties of granite, Fujian is China’s largest granite producing province. It employs 15,000 manufacturers and is home to over 5,000 granite quarries and as many importers and exporters. Shuitou is the largest production base in the province with over 3,000 manufacturing facilities operating, including the majority of Chinas top granite suppliers.

Guangdong is a large province in the south east of China. It has more than 700 granite quarries scattered throughout the province in the cities of Lianling, Xinyi, Chaoyang, Jieyang, Gaozhou, Yangjiang, Taishan, Huizhou, Zengcheng and on the outskirts of Shenzhen. There are around 4,000 manufacturers mining some 30 varieties of granite.

In Shandong, the cities of Rong Cheng, Laizhou and Linyi are responsible for the majority of the 40+ varities of granite found in the region. Shandong’s most famous granites are Jinan Green which is very dark and also called Jinan black G3701, Isle Red, also called Peninsula red G3786, General Hung, also called Piyi General red G3752, Liu Ports Red, also called Laizhou oriental cherry red G3767 and China ash, or Laoshan grey G3706.

Have a look at the table below for a clear overview of the types of granite found in China, by province:

Types of Granite Located in China

Granite found in Fujian	Granite found in Shandong	Granite found in Guangdong
Jinjiang Bacuo white G3503	Laizhou sesame white G3765	Puning big white flower G4439
Quanzhou white G3506	Wendeng white G3760	Guangning east white sesame G4422
Haicang white G3523	Pingdu white G3755	Guangning rosy spots G4421
Xiaocuo white G3516	Zhaoyuan pearl G3783	Xinyi thin twists G4419
Hongtang white G3514	Mengyin pink G3778	Xinyi black stars and clouds G4416
Nanan snow plum G3508	Shanyuan flower G3757	Xinyi spindrift G4418
Jinjiang white in black G3516	Mengyin spindrift G3777	Guangning dark blue stars G4420
Luoyuan oriental cherry red G3563	Laizhou oriental cherry red G3767	Xinyi black G4417
Zhangpu red G3548	Piyi General red G3752
Anxi red G3535	Zeshan red G3764
Wuyi red G3528	Rongcheng Jingrun red G3784
Nanping Minjiang red G3559	Laoshan grey G3706
Nanping black G3539	Jinan black G3701
Pucheng Baizhang black G3577	Wulian leopard-skin G3742
Fuding black G3518	Rushan black G3770
Dayang black (A) G3538	Mengshan flower G3776
Shaowu green G3599	Pingyi peacock green G3791

In order to help buyers and sellers more accurately identify and trade different types of granite and other stone, in 1998 the China State Administration of the Building Materials Industry devised a uniform numbering. The system gives each variety of stone a letter and 4-digit number. For example, Fuding Black is denoted as G3518. The letter represents the type of stone, G for granite, M for marble, etc. the 4-digit number consists of 3 parts. The first 2 numbers specify the province or municipality the stone originated from, for example, Fujian is 35, Guangdong is 44 and Shandong is 37. The 3rd digit relates to the colour, characteristics and patterns on the stone and the final digit associates the stone with the specific quarry from which it originated.

Here is an extensive list of Chinese granites and marbles and conversions for the updated and original numbers. When dealing with Chinese granite suppliers, be sure to use this numbering system in all documentation and correspondence. it will save trouble down the road and can help ensure you get what you ordered.

Granite and Natural Stone Tradeshows in China

If you’re interested in starting or expanding your granite or other natural stone business, here are some of the largest trade shows for you to attend:

STONETECH SHANGHAI
Date: April 8-11, 2008 (every two years)
Location: Shanghai New International Expo Centre
Description: This exhibition takes place every two years and includes exhibitors from international stone processing, machinery and equipment and stone products.

CHINA STONE
Date: October 21-23, 2008
Location: Yunfu International Stone Materials Centre, China
Description: This fair is promoted as an international stone materials science and technology fair.

XIAMEN STONE FAIR 2008
Date: March 6-9, 2009
Location: Xiamen International Conference & Exhibition Center, Xiamen, China
Description: A fair exhibiting stone and stone machinery

ABOUT THE CONTRIBUTOR

David Anderson is Managing Director of GMC Group Ltd, a China-based
business services firm specializing in business and market development
programs for international companies seeking new or revitalized growth
in global markets.

Share Your Expertise: Cameron Adair on Purchase Order Financing

Purchase Order Gap Financing as applies to U. S. Manufacturers sourcing Contract Manufacturing at Facilities in China.
By: Cameron Adair

Many small manufacturing operations in the U. S. have sought “gap” financing from private (non-bank) “factoring” firms and asset-based lending firms in order to complete and ship a contracted order to a customer. Such “gaps” in the working capital necessary to pay for the materials and labor involved in producing the “finished goods” often occur because a small manufacturer has already exhausted existing bank lines and does not have other capital availability, or because it has been “swamped” with more orders than it can handle with its existing credit lines.

When faced with a temporary liquidity “crunch”, the first call such companies make is to traditional factoring firms and asset-based lenders only to be told that, “We can lend against your receivables from your customers, but you must first finish and ship the order, and create the receivable. We can’t help you with the funds you need to complete the manufacturing process; we can only help you after the goods are finished and shipped.”

This is the prevailing “norm” as most factoring firms and similar asset-based lenders can only lend against receivables, and they are looking at the creditworthiness of the customer as their collateral, and not to the manufacturer. They cannot lend against “work in progress” or “purchase orders” for goods that have not been finished and shipped. This, of course, does not help the small manufacturer who still needs temporary cash availability to complete the purchase order and ship the goods to the customer.

There are a number of commercial financing firms that specialize in the high-risk arena of providing “gap” financing to small manufacturing companies to help them fulfill purchase orders. These “purchase order factoring” operations range from a handful of firms with a national footprint, to various regional firms and some finally to some very localized operations. There is no easily-defined industry group of such firms, and most small manufacturing companies have a difficult time finding out who to call, and what few firms there are that may even take a look at their “gap” financing needs in order to complete purchase orders.

Typically, “gap” financing firms will advance funds for raw materials and direct labor to get a set of goods covered under a purchase order completed and shipped. In general, most such lenders will only advance a portion of the funds needed, and the manufacturing company must have as much of its own working capital employed as possible (rarely can 100% of the cost of materials and labor be financed). These lenders will usually disburse directly to the materials suppliers, and wire funds to the payroll account on payday, in order to minimize risk, and will take a lien on the “work in progress” and finished products until the goods are shipped. At the point of “shipment”, when an invoice is sent to the customer and a “receivable” is created, the “gap” lender is typically paid (and the lien released) by an advance from the factoring firm that will “kick in” and lend against the newly-created “receivable” from the manufacturer’s customer.

“Gap” financing is expensive, usually 50% higher (on an annualized APR comparative basis) than the costs imposed by “receivables” factoring firms. It should only be used to the minimum extent necessary to complete and ship an order, and only be “drawn” upon for the least amount of time while the “interest meter” is ticking. A manufacturing company must have sufficient margins in the goods being produced to be able to “afford” such gap financing, and it can only be viewed as a temporary “means to an end”. Nevertheless, purchase order “gap” financing can make the difference between a company completing and shipping an order, and thereby keeping a good customer, as opposed to losing the order entirely. It can also provide temporary “relief” during periods of increased demand by customers when a manufacturer is unexpectedly “swamped” with orders and does not have the bank lines to meet these needs.

The need for purchase order financing gets more complicated for small U. S. manufacturers who, more and more in recent years, wish to contract to have their goods (or components of their finished goods) manufactured for them in China. Chinese manufacturing plants require advance deposits and payment in full prior to shipping. The cost of shipping from China and landing the goods in the U. S. must also be paid “up front”. For a U. S. company that has the capital, this process can tie up funds for a significant period time. But, for the U. S. company that must borrow some of these funds, the interest costs can become very expensive, especially while the meter is “ticking” during the overseas shipping process. Chinese manufacturing firms and shipping lines do not extend credit to smaller, “foreign” companies, and for a U. S. company, final payments are due when the goods are delivered “FOB” at the shipping port.

There is no easy answer to this dilemma. Larger, credit-worthy U. S. companies can arrange bank lines and letters of credit to handle their contract manufacturing and shipping costs in and from China. But for the smaller U. S. manufacturer with a limited capital base and bank credit facilities, the “mission” may be very difficult to achieve if not impossible.

Our affiliated commercial lending firms have provided “gap” financing to some smaller U. S. manufacturers in recent years to help fund contract manufacturing in China. This has been done on a case-by-case basis, and whereas our results have been favorable (i.e., as a lender, we have gotten repaid with the interest due), the costs to the borrower have often exceeded what was originally expected due to unforeseen delays and other “snags” in the process.

To be of help where possible, our affiliated lenders have recently organized a central “clearing house” to “field inquiries” from small U. S. manufacturers who need “gap” financing for contract manufacturing in China in order to “vet” each inquiry and see if we can match the manufacturer with a gap financing source that can meet their needs. To date, our affiliates have been able to work with only about one-third of the companies that have inquired; however, this still provided a source of much needed financial help to some companies who otherwise may not have been able to source such financing elsewhere.

ABOUT THE CONTRIBUTOR

Cameron Adair is Chairman of ADG Group in Atlanta, a merchant banking firm with interests in specialized commercial financing companies and consumer financing companies.

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Sourcejuice is not paid or affiliated with Cameron Adair or the ADG Group, but is assisting readers to navigate the possible necessity of contacting or inquiring such a firm for their respective services.