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An Investigation of the Relationship Between Chinese Exporters and U.S. Importers From China’s Perspective

Dong Shen 1

Abstract In marketing relationship literature, the buyer–supplier relationship is often studied from the buyers’ perspective in Western countries. In order to address these two gaps, this study investigated the relationship between Chinese exporters/suppliers and U.S. importers/buyers from the Chinese suppliers’ perspective. Fourteen in-depth interviews were conducted in 2008 and two themes were identified. The first theme, surviving, presented a negative and pessimistic perception between the two parties. The second theme, thriving, presented a positive and optimistic percep- tion. Three conclusions were drawn. First, an x–y diagram presented the overall perceptions of Chinese suppliers on their business relationship with U.S. buyers. Second, this study supported the transition from a power-dominating supplier–buyer relationship to a commitment–trust sup- plier–buyer relationship in the United States–China trading business. Last, what business partners either side needs to look for when they want to do business with each other was stated. Contri- butions and limitations were discussed as well.

Keywords buyer–supplier, relationship, China, US

Introduction

With an estimated population in excess of 1.3 billion, and a continually growing economy, The

People’s Republic of China (referred to hereafter as China) is one of the world’s largest and most

promising markets. Considered the best international manufacturing base by many countries, includ-

ing the United States, billions of dollars of foreign investment continue to pour into China. In 2007,

China ranked second with 8.8% of the world’s exports, jumping from 9.8 billion U.S. dollars of

1Family and Consumer Sciences, California State University–Sacramento, Sacramento, CA, USA

Corresponding Author:

Dong Shen, Family and Consumer Sciences, California State University–Sacramento, Sacramento, CA 95819, USA

Email: [email protected]

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exports in 1978 to 1,218 billion U.S. dollars in 2007 (China ranks 2nd with 8.8% of world’s exports by 2007, 2008). However, under those promising and exciting numbers, the reality of conducting

business with Chinese suppliers/exporters has been complicated, difficult, confusing, and time-

consuming. Due to the unfamiliar social, political, economic, legal, and cultural environment in

China, many U.S. companies have encountered numerous unpredictable problems and difficulties

in importing products from China (Lavin, 1994; Yuan, 2004).

In addition, trading policies between the United States and China in recent years have undergone

dramatic changes, introducing further volatility in business relationships between Chinese suppliers/

exporters and U.S. buyers/importers. Since 1986, when China began the process of seeking mem-

bership in General Agreement on Tariffs and Trade (GATT), the former international trading orga-

nization of the World Trade Organization (WTO), both sides have continually struggled with a lack

of quotas, which has caused many uncertainties for logistics, shipping, and deliveries (Informed

Trade, 2004). Finally, when China became a member of the WTO in 2001, the entry did not grant

a quota-free trading environment in all sectors. Instead, a new 3-year agreement was established in

2005 to guard the textile sector, which set new restrictions for imports from China to the United

States (D’Andrea, 2009).

In recent years, as more and more U.S. businesses see potential opportunities in China along

with a multitude of problems, many American scholars (Campbell, 1997; Jap, 2001; Johnston,

McCutcheon, Stuart, & Kerwood, 2004; Kannan & Tan, 2006) have turned their attention to

buyer–supplier business problems of doing business in China. While most studies examined the

business relationships from the United States, or other Western countries’ perspectives (Hoetker,

Swaminathan, & Mitchell, 2007; Hsu, Kannan, Tan, & Leong, 2008; McHugh, Humphreys, &

McIvor, 2003), there was an obvious lack of literature on the buyer–supplier relationship from

China’s perspective; the first gap in the current literature.

Meanwhile, the buyer–supplier relationship literature shows that the buyers’ side has often

become the focus of studies rather than the suppliers’ side (Cannon & Peneault, 1999; Sternquist,

Ogawa, & Cooper, 2002; Terpend, Tyler, Krause, & Handfield, 2008), which leads to another gap

in the literature. The understanding of the relationship between a buyer and a supplier will vary

depending on which point of view is examined. What is sought in terms of benefits may be different

for buyers versus suppliers since each side has very different roles and functions. When Campbell

(1997) studied different types of buyer–supplier relationships, he found that answers from the buyers

showed differences from those of the suppliers. In order to fill these two gaps, this study intended to

examine the textiles and apparel business relationship between these two complementary groups

from the Chinese supplier/exporters’ perspective in order to reveal a dynamic portrayal of the

U.S. and China trade situation.

The textile and clothing sector was selected as the focus of this study. This choice was not

only based on the fact that China is the No. 1 supplier of textiles and apparel products to the United

States (Martin, 2007) but because the United States has been the principal buyer of China’s textiles

and apparel products. The United States–China textiles and apparel business has been hampered by

conflicts and problems as well as the constant intervention of trade policy in the last three decades.

Therefore, a study of the buyer–supplier relationship between the United States and China in the tex-

tile and apparel sector can potentially generate valuable and representative insight and information.

This study focused on the business relationship between Chinese textile/clothing (T & C)

suppliers/exporters and U.S. T & C buyers/importers. Specifically, it investigated the perceptions

and evaluations of Chinese T & C suppliers/exporters regarding their relationship with their

U.S. buyers/importers, in order to provide new information and analysis of the U.S. and China

trading system. This previously unexplored perspective allows for a more balanced understand-

ing of the buyer–supplier relationship in international business for academic scholars and busi-

ness practitioners.

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Literature Review

International Trade Between the United States and China

When China embarked on the open-door policy and economic reforms in 1978, the import and

export business between the United States and China expanded rapidly. Between 1979 and 2002,

the average yearly increase in total trading volume between China and United States was 25%. In 1988, the total trading volume between China and United States had reached 10 billion U.S. dollars,

a 10-fold increase over 1979. By 2004, the total trading volume had increased 72 times that of 1978

(CENN, 2008). In the United States, China has been the single largest source of imports in textiles

and apparel over the past decade. China supplied 14% of all U.S. textile imports in 2002. In 2005, China exported a total value of U.S. $22.4 billion T & C products to the United States, followed by

another U.S. $27.8 billion in 2006 (Zhou, Mehta, & Sinha, 2007).

With the dramatic increase of trading volume between China and the United States, Chinese

suppliers/exporters have gone through major changes as well. In the early 1980s, when the

central-controlled economic system started the slow transition to a market-oriented system, the cen-

tral government still made most of the decisions including the total control of distribution of

quotas. The government granted annual quotas to a very limited number of state-owned companies,

allowing only those companies to export products directly. In later years, when the central govern-

ment further decentralized the rights to foreign trade and granted import–export rights to more

companies—including not only more state-owned companies but joint-ventures and private enter-

prises—the export market became fiercely competitive (Hong Kong Trade Development Council,

1999). Currently, in the textile and clothing industries, 70% of quota distribution is no longer con- trolled by the government but has been replaced by more market-driven methods. This has enabled

companies who want to trade with foreign partners to buy quotas through bidding (Shen, 2008).

With more and more Chinese suppliers/exporters emerging each year along with the continuous

increase of trading volume between the United States and China, studying Chinese supplier/expor-

ters’ perceptions and evaluation of their relationship with their U.S. business partners is becoming

more critical and timely not only for the academic world but for the business community as well.

Buyer–Supplier Relationships

The literature of business relationships shows that researchers often categorize the nature of buyer–

supplier relationships into two general groups: competitive versus cooperative (Cannon & Peneault,

1999; Choi & Wu, 2008, 2009; Heide & John, 1990). In a competitive relationship, due to the lack of

mutual benefit and common goals, a buyer and a supplier often struggle for their own profit, which

leads to a win–lose context. Wagner (2006) found that companies in primary industries or process

industries, such as textiles/clothing, pulp/paper, and plastic/rubber, frequently rely on competitive bid-

ding and arm’s-length buyer–supplier relationships rather than long-term cooperative buyer–supplier

relationships. A buyer might take advantage of his purchasing power by demanding price reductions

without adequately compensating the suppliers, while the suppliers may reduce resources invested in

the buyer’s business to balance its effort and gains (Rossetti & Choi, 2005, 2008).

In a cooperative relationship, however, a buyer and a supplier are committed to work together to

develop a long-term relationship along with common goals and mutual benefit. In this win–win con-

text, there are no unexpected surprises because the two firms spend time together and really get to

know each other’s business in order to solve problems jointly and share risk and benefits together

(Balakrishnan & Geunes, 2004; Penone, Zaheer, & McEvily, 2003). From a theoretical perspective,

Lau and Moon’s study (2008) took on a pioneering role by exploring the buyer–supplier cooperative

relationship among Hong Kong clothing manufacturers and found that long-term relationships

enable effective business transactions and help to develop mutual trust. Comparing these two types

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of buyer–supplier relationships, the competitive relationship was dominant prior to the 1980s. One

of the most commonly used theories in this buyer–supplier relationship is the Theory of Power, first

introduced in the political science literature (Gaski, 1984). Power in the marketing channel has gen-

erally been defined as one channel member’s (e.g., a buyer’s) ability to control the decision variables

in the marketing strategy of another member (e.g., a supplier) of the channel at a different level of

distribution (Gaski, 1984). The more successful one channel member is in getting its partner to go

along with its wishes by definition, the more power that member has over its partner.

Beginning in the 1980s, when more and more companies that had power over their partners failed

to develop and maintain a successful long-term business relationship with their partners (Sherman,

1992), U.S. companies started to adopt a more cooperative approach to manage the relationship with

their suppliers (Monczka, Peterson, Handheld, & Ragatz, 1998; Sherman, 1992). In a study done by

Campbell, four types of buyer–supplier relationships were identified: self-centered (characterized by

a focus on firms’ needs), personal loyalty (mutual responsibility and commitment), mutual invest-

ment (long-term commitment for strategic advantage), and political control (mutual dependence and

high levels of integration; Campbell, 1997). Aside from the first one, the remaining three all involve

a great deal of mutual trust, cooperation, and commitment.

Morgan and Hunt (1994) started to develop the commitment–trust theory of marketing relation-

ships because they found that commitment and trust, instead of power, are keys to encouraging com-

panies to resist attractive short-term alternatives and maintain long-term relationships. The

combination of trust and commitment promotes efficiency, productivity, and effectiveness and even-

tually leads to relationship marketing success with a ‘‘win–win’’ outcome (Morgan & Hunt, 1994).

Trust has long been considered a critical contributor to business success (Williams, 2001), espe-

cially in marketing relationships. This allows the partners to work together to achieve joint outcomes

in the long run rather than pursue individual profit (Dirks, 1999). Trust refers to the belief in a partner’s

trustworthiness and integrity (Morgan & Hunt, 1994). In a high-trust relationship, the two companies

communicate openly by expressing their opinions and ideas freely as they expect each other to be

working toward helping each other and accept and bear risk jointly (Chu & Fang, 2006). As a primary

antecedent of intangible benefits, trust can enhance the overall performance of business (Beccerra &

Gupta, 1999).

Commitment is the expression of one’s willingness to increasingly invest effort in maintaining a

relationship with another (Chu & Fang, 2006). This enduring desire to maintain a cooperative rela-

tionship between a company and its partner can lead to long-term benefits and a successful business

relationship.

The commitment–trust theory of business relationships served as a theoretical framework for this

study. Specifically, an overview of China’s current T & C exporters’ relationships with their U.S.

buyers was explored, which provides an overall framework in which the individual buyer–supplier

relationships exist. Then a closer investigation of Chinese suppliers/exporters’ perceptions of their

relationships with their U.S. buyers/importers was conducted.

Method

The choice of research methodology should depend on the research purpose. Since quantitative

research methods are more appropriate for validating theories, and qualitative methods are more

suitable for grounded theory building (Creswell, 2003), a qualitative method, namely, interviews,

was chosen for this study over a quantitative method. The current literature shows a lack of empirical

research of China’s market and reveals that most theories, including the commitment–trust theory,

were developed and applied almost exclusively in Western societies. Thus, since exploring the

dynamic reality and seeking in-depth description of Chinese perceptions was the goal for this par-

ticular study, a qualitative method was clearly appropriate. Furthermore, the non-stop changing and

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unpredictable trading regulations and rules between China and the United States in the last two

decades made it difficult to allow for sustained predictability, a central requisite for identifying uni-

versal principles in a quantitative study.

In general, a qualitative study follows an inductive process (Creswell, 2003) that includes data

collection, organization, and analysis. This process was adopted for this study: (a) researcher gathers

information; (b) researcher asks open-ended questions of participants; (c) researcher analyzes data to

form themes or categories; (d) researcher looks for broad patterns, generalizations, or theories from

themes or categories; and (e) researcher explores possible generalizations to existing theories.

Sample

Conducting empirical research in China is uniquely challenging, due to its size, culture, history, and

recent economic and social changes (Zhao, Flynn, & Roth, 2006). Locating a group of interviewees

representing various types (size, product type, length of exporting history, and geographic location)

of T & C suppliers/exporters is very difficult. The interviewees for this study needed to meet the

following criteria: (a) having the required legal exporting license; (b) being actively involved in

exporting T & C products; and (c) exporting products to the United States.

A list of potential interviewees was developed in the following two ways: (a) through a business

directory and (b) through personal contacts. In the end, all the interviewees were obtained through

personal contacts. The reason why the business directory proved ineffective was because T & C has

always been a fast-changing sector and the companies in this sector come in and out of business at a

fast pace. So a good number of companies included in the business directory were no longer in exis-

tence and the newcomers were not included on the list yet. Meanwhile, it is not surprising that a per-

sonal network and personal contacts play key roles in China’s business world.

Finally, a convenience sample of 14 interviewees in three main regions was finalized: the greater

Beijing region that represented Northern China, the greater Shanghai region represented Central

China, and Fujian province represented Southern China. Beijing is the center of China’s politics and

business. Being located in or very close to the capital has made businesses there a distinctive group.

The greater Shanghai region was chosen due to the long history of T & C production since the begin-

ning of the last century. Currently, that area is also the center of China’s T & C production and

imports/exports. Southern China has been developing extremely fast in the last decade mainly rely-

ing on soft-goods industries, including T & C. The businesses there are newer and more competitive

than those in other regions, and Fujian province is a good representative of this region.

Interviews

One of the common strategies of conducting a qualitative study is to develop two types of research

questions: central questions and associated subquestions. A central question is the broadest question

that can be asked in the study. An associated subquestion can be a topic specifically explored in

interviews. Normally, a qualitative study can have one or two central questions followed by no more

than five to seven subquestions (Creswell, 2003). By following this particular strategy, this study

developed the following central questions and associated subquestions. The central questions were

worded according to the purpose of this study and the associated subquestions were developed with a

goal of finding more detailed and richer information on a more micro scale.

The central questions are as follows: (a) What are your overall perceptions and evaluations of

your relationships with your U.S. business partners? And (b) Why do you hold such perceptions

toward your U.S. business partners?

The associated subquestions are as follows: (a) What do you enjoy the most when you do business

with your U.S. partners? (b) What frustrates you the most when you do business with your U.S.

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partners? (c) Do your perceptions of different U.S. partners vary? How? Why? (d) Has doing

business with your U.S. partners been a good experience for you? Why? And (e) What kind of future

do you think doing business with your U.S. partners holds for you? Why?

After the central questions and associated subsquestions were developed, an outline of the semistruc-

tured interview was designed in English. After that, one Chinese–English speaker translated the English

outline to Chinese and another Chinese–English speaker translated the Chinese outline back to English.

After consistency of the two versions of the outline was reached, the interview outline was finalized.

Generally, an interview can be done in three different ways: structured interview, semistructured

interview, and nonstructured interview. Based on the advantages and disadvantages of them, a semi-

structured interview was selected for this study. Thus, the core questions deemed central to the

objectives of the study were asked of all respondents; however, some flexibility was allowed when

it appeared that the respondent was likely to offer unexpected information relevant to the study but

not covered by the core questions.

Data Analysis and Results

Fourteen interviews were conducted and ranged from 1 hr to 2and one-half hours. Among them, three

were from the Beijing area, another three were in the Fuzhou area in Fujian province, and the last eight

were from the areas near Shanghai. The sample (see Table 1) showed a good variety of companies rang-

ing from private companies to joint-ventures to government-owned enterprises and ranging from long-

time apparel exporters to relative newcomers. The companies interviewed represented exporters of the

following apparel categories: women’s lingerie, men’s suits, casual wear, sportswear, professional

uniforms, and knit casual wear. Their U.S. buyers/importers included discount stores such as Kmart,

Wal-Mart, and Target; department stores such as Macy’s, Kohl’s, JCPenney, and May; and specialty

brands such as the Gap, Calvin Klein, Reebok, Ann Taylor, Talbot, Tommy Bahama, Banana Republic,

Levi’s, Liz Claiborne, Tommy Hilfiger, Polo Ralph Lauren, Rugby, and Phillips-Van Heusen.

All the interview notes were translated from Chinese to English and then back translated to Chi-

nese by two Chinese–English speakers in order to reach consistency. After that, the same two

researchers read through all the data in order to reach its overall meaning. Then detailed analysis

started with the coding process in which the data were organized into categories and then labeled

with a term (Creswell, 2003). The categories/terms included (a) the characteristics of exported prod-

ucts and the corresponding exporting strategies; (b) the disagreement areas; (c) the business relation-

ship with the U.S. importers/buyers; and (d) the attitude toward the overall relationship with U.S.

importers/buyers. Based on the list of the terms (codes), two themes emerged and there were distinct

differences between them across all the above four categories. According to its characteristics, the

first theme was named surviving, whereas the second theme was called thriving (Table 2).

According to Creswell (2003), validity is viewed as a strength of qualitative studies. One way to

increase validity is to identify and discuss one or more strategies available to check the accuracy of

the findings. Among different strategies, this study chose to use the rich and thick description to con-

vey the findings in order to transport readers to the setting and give the discussion an element of

shared experiences.

Surviving

The interviewees in this theme portrayed an overall feeling of struggling in the business relationship

with their U.S. partners. Both sides lacked a spirit of collaboration, trust, and a long-term plan of

commitment. The Chinese suppliers were in constant threat of business failure. This surviving theme

is discussed in four categories as follows:

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The characteristics of exported products and the corresponding exporting strategies. Currently, China is switching from being a major assembly base for the United States in basic clothing categories

to producing and exporting clothing items that have more requirements on technology and

design. Only 4 of the 14 interviewees were still exporting plain cotton pants or basic cotton or

blend shirts to large discount stores, such as Wal-Mart and Kmart. All four of them fell into the

surviving theme. In their exported product lines, there was very little trend involved. Besides a lower

design and trend component in their lines, the technology component was relatively low as well. As a

result, the product requirements on equipment, machinery, and employees’ skills were very basic.

Interviewee 8: We do not have a design team. So we don’t get involved in product development

with our customers. Most of our U.S. customers just order plain cotton pants and cotton or blend

shirts from us. As a result, our products are at the low end.

Since basic product lines were the focus of this type of Chinese suppliers, they could not rely on

new product development to keep their customers loyal and happy. Instead, their main exporting

strategies were to rely on a low price and large volume purchase orders to survive.

Interviewee 11: Our margin used to be around 5%. Currently, it is even hard for us to have a 2% margin because the U.S. customers have kept pushing the prices down. Since we need the business to

survive, we have to keep lowering our prices.

The disagreement areas. Between a Chinese supplier/exporter and a U.S. importer, there can be many different disagreements, such as disagreements on packaging, on shipping, or on insurance.

The main disagreement between the Chinese suppliers/exporters and U.S. buyers/importers in this

surviving theme was on price.

Interviewee 10: The biggest problem between our U.S. customers and us is the constant disagree-

ment on price. Sometimes, what our U.S. customers ask for is even lower than our production cost.

In those cases, we have to turn down the business. Because of the price conflict, we are always very

sensitive to and vulnerable of any cost-related change.

Since basic merchandise is the main exported product for the Chinese exporters in this group,

price becomes one of the few key negotiating weapons for both sides. U.S. buyers do not look for

a supplier who can provide them the best quality products with excellent workmanship and latest

designs. Instead, they want to find someone who can offer them products with the lowest cost and

acceptable quality. In order to be competitive, the Chinese suppliers in this group have to rely on low

price to get business from U.S. buyers. However, China has slowly started to lose its competitive

cheap labor cost to other countries, such as Vietnam, Cambodia, and the Philippines. Therefore, con-

tinually lowering the price has become harder for Chinese exporters, especially for those who can

only rely on low price to keep their business running.

Table 2. Summary of the Findings

Themes Categories Surviving Thriving

Characteristics of Exported Products and the Corresponding Exporting Strategies

Basic merchandise; the exports focus on price and big purchase orders

Fashion merchandise; the exports focus on quality and design

Disagreement Areas Price Style and technical details Business Relationship with the U.S.

Importers/Buyers Short-term competitive

relationship Long-term cooperative

relationship Attitude toward the Overall Relationship

with the U.S. Importers/Buyers Negative and pessimistic Positive and optimistic

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The business relationship with the U.S. importers/buyers. The companies coded in this surviving theme evaluated their business relationships with their U.S. importers/buyers and showed an overall

negative perception since China lost its competitive low labor cost to other developing countries. More

and more U.S. buyers have outsourced their orders to Southeast Asian countries and African countries

instead of China. Chinese suppliers in this category continually experience pressure from their U.S.

customers for further price reduction. In many cases, Chinese suppliers have been so passive that they

could barely make enough profit to cover all the expenses. There exists an obvious lack of trust

between both sides and a lack of willingness to work together through tough times. As a result, an

order-by-order short-term relationship is very common for the companies that were coded in this sur-

viving theme in terms of their business relationships with their U.S. customers. This nature of a buyer–

supplier relationship fits into the competitive relationship developed prior to the 1980s in the United

States because in a competitive relationship, due to the lack of mutual benefit and common goals, a

buyer and a supplier often struggle for their own profit, which leads to a win–lose context.

Interviewee 8: Even though our U.S. customers are professional, we have never established a

trustworthy close relationship with them. We have experienced the constant uncertainty and we can

never rely on each other at tough times.

The attitude toward the overall relationship with U.S. importers/buyers. The overall perceptions and attitudes the Chinese suppliers hold toward their relationship with U.S. importers coded in this sur-

viving theme are very negative. Any external changes, such as the currency exchange rate, cost of

raw materials, and policy changes, are viewed as a serious threat to their business viability. In this

fragile and bumpy ride, the Chinese suppliers have many doubts and uncertainties in terms of their

business with their U.S. customers along with many problems and complaints. However, it seems

that both sides need each other as well, at least in the short term. For this group of Chinese suppliers,

before they have all the resources to establish a more design-oriented and technologically advanced

team, they must rely on U.S. customers who can offer them volume to survive. On the other side,

U.S. buyers are still drawn to such Chinese suppliers, because even though labor cost in China has

become higher than that in countries such as Cambodia, the quality of products is generally better.

Interviewee 11: Our business relationship with our U.S. customers is very troublesome and we are

not optimistic about the future at all. There have been so many disagreements between us and we can

never work together to address them.

Interviewee 12: Our U.S. customers have much more power than we do. They keep pushing for

lower price. If we don’t agree, we will face the possibility of losing the business. Very often, in this

circumstance, the U.S. importers have very big purchase orders, and we can’t afford to lose them.

Thriving

Compared to the surviving theme, the overall feeling of the thriving theme is much more positive.

The interviewees in this group present a more trusting and collaborative spirit throughout their busi-

ness experiences with their U.S. customers, because they believe they share common goals and

mutual benefits. The interview data show a completely different picture in the following four cate-

gories than the surviving theme.

The characteristics of exported products and the corresponding exporting strategies. Instead of making basic merchandise, the interviewees in this theme start to show more involvement in the design pro-

cess in a good variety of product lines. Such products include suits, lingerie, casual wear, and sports-

wear. The method of involvement in the product development varies considerably. Some Chinese

suppliers design their preliminary clothing lines and their U.S. customers select the styles for final

production. Instead of designing clothing items, some suppliers develop their fabric lines and their

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U.S. customers choose the fabrics and develop clothing lines using the chosen fabrics. Not only does

the design component play a more important role in this theme, technology has become much more

critical as well. Several interviewees won their U.S. customers’ business because of the technology

they could offer, such as special finishing treatments required by some specific sportswear. The data

also show that the group of U.S. customers in the thriving theme was different from the ones in the

surviving theme. Instead of mega-discount retailers, such as Wal-Mart and Kmart, the Chinese sup-

pliers were doing more business with specialty brands, such as Reebok, Tommy Bahama, Banana

Republic, Levi’s, Tommy Hilfiger, Polo Ralph Lauren, and Phillips-Van Heusen.

Interviewee 1: We are involved in the design process with the U.S. companies. For example, with

Liz Claiborne, we design fabrics and provide the fabrics to them and Liz designs their clothing lines

based on our fabric design.

Interviewee 5: We have our own design team. So we do design and our customers pick the styles

they like. Our products include casual wear and sportswear.

Because the group of interviewees in this thriving theme has developed a strong design team with

more technology involved in their production, they win the majority of their U.S. business by their

capability of making fashion and trendy merchandise with complex technical requirements instead

of just offering the lowest price. As a result, they rely on those strengths to develop their exporting

strategies and seek U.S. customers who value quality over price.

Because the interviewees coded in this thriving theme focus on product lines with more design

and technology requirements rather than low price, their average margin tends to be higher than the

average margin of 5% in the current Chinese clothing industry. The interviewees demonstrate that the higher the content of technology and design involvement, the higher their profit margin.

Interviewee 4: Our main product line is men’s suits, mainly jackets. Our U.S. customers send their

orders of jackets to us and orders of pants to their suppliers in Vietnam. Since jackets are more com-

plicated and require employees who have more experience and better skills, our margin has been

pretty good.

Interviewee 7: Our main product lines are women’s knit casual wear. The main customers include

Macy’s, CK and Reebok. Our orders are small, but with high margin. Our profit can reach 20% sometimes.

The disagreement areas. Disagreements on technical details or design details between the Chinese suppliers and their U.S. customers tend to happen more often in this theme than do disagreements on

price. In order to achieve the best design with the best quality products, both sides often work

together as a team until they reach a consensus. It is very clear that the resources and energy of both

sides are focused primarily on improvement and adjustments of design and technical details.

Interviewee 7: Our main product lines are women’s knit casual wear. The main difference

between us and our customers is often related to design details. In terms of quality, price, and turn-

around time, our U.S. customers and we agree with each other most of the time.

Interviewee 13: We make men’s casual wear and formal wear. The main customers are Liz

Claiborne, and CK. The main difference between us and our customers is related to technical details

and quality. There is not too much difference in terms of price.

The business relationship with U.S. importers/buyers. Whereas the surviving theme portrays an over- all struggling and unbalanced business relationship between the Chinese suppliers and their U.S.

customers, the data show a completely different description of the relationship between the compa-

nies that were coded in the thriving theme and their U.S importers/buyers under the thriving theme.

The Chinese suppliers in this group have established a long-term, trusting, and balanced relationship

with their U.S. buyers. Compromises are not unilateral. Instead, whenever new challenges occur, the

suppliers in this category are able to approach their U.S. partners and work closely together to try to

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resolve the problems. This is exactly the same as the cooperative relationship explained in the review

of the literature. A buyer and a supplier are committed to working together to develop a long-term

relationship along with common goals and mutual benefit. In this win–win context, the two firms

solve problems jointly and share risk and benefits together (Balakrishnan & Geunes, 2004).

The interviewees in the thriving theme state that their disagreements are often related to design and

technical details. They work together with their U.S. buyers to find best solutions in order to keep pro-

duction running smoothly. Even if price disagreements occur, the strategies to tackle the price differ-

ences are still different from those in the surviving theme. In companies coded in the thriving theme,

both sides work together to find out how to lower production costs or to meet in the middle to share the

difference. On the contrary, for companies coded in the surviving theme, if the Chinese supplier cannot

meet their U.S. customers’ price, the contracts are often canceled by the U.S. buyers.

Interviewee 7: If our products cannot meet the original design of our U.S. customers, they are not

stubborn. They work with us and make some adjustment. Because we offer good products and ser-

vice, we are one of their best suppliers. When problems occur, they often protect us first. We trust

each other and support each other.

The attitude toward the overall relationship with U.S. importers/buyers. Companies coded in the thriv- ing theme show a more positive overall picture than those coded in the surviving theme. Most inter-

viewees in this group express a very optimistic attitude toward the overall relationship with their

U.S. customers. For them, the future is bright and more hurdles down the road can potentially bring

their U.S. customers even closer to them, further strengthening the business relationship. Several

interviewees in this group stated that it was hard for them to make any profit in the year of 2008

due to the increasing cost of raw materials, energy, and labor; the double pressure caused by the

change of the Yuan’s value; and constantly changing policies. However, even without any profit,

they would still keep doing business with their U.S. customers, because they were hoping that they

would be able to make a profit in the following year. The long-term commitment in this mutual and

trusting relationship between Chinese suppliers and U.S. buyers produced very positive overall per-

ceptions from this group of Chinese suppliers toward their U.S. buyers. Several suppliers mentioned

that their U.S. customers were trustworthy, reliable, responsible, and supportive. They were easy to

communicate with and they were professional and efficient.

Interviewee 1: Since we have established a long-term business relationship with our U.S. custom-

ers, we rely on each other a lot. Even though there are small disagreements going on, overall we have

a good and successful relationship.

Conclusions and Discussion

The purpose of this research was to study the buyer–supplier business relationship between the U.S.

and China in the textile and clothing sector not only to provide the latest information and analysis to

the United States and China trading system but to bring a better understanding of the buyer–supplier

relationship in international business to both academic scholars and business practitioners.

Fourteen in-depth interviews were conducted in China. During the data analysis, four categories/

terms emerged including (a) the characteristics of exported products and the corresponding export-

ing strategies; (b) the disagreement areas; (c) the business relationship with U.S. importers/buyers;

and (d) the attitude toward the overall relationship with U.S. importers/buyers. Two themes emerged

from the above four terms. The first theme, surviving, portrayed an overall struggling feeling lacking

the spirit of collaboration, trust, and long-term commitment. The second theme, thriving, presented a

more positive and optimistic perception when both sides shared common goals and mutual benefits.

Based on the above findings, three major conclusions were formed in this study. First, an x–y

diagram was identified to present the overall perceptions of Chinese suppliers on their business

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relationship with U.S. buyers. In this x–y diagram, the x-horizontal direction represents the

exporting strategies of the Chinese suppliers varying between price and design/quality/technology,

and the y-vertical direction represents the business relationship between the Chinese suppliers and

their U.S. buyers ranging from short term to long term. The Chinese suppliers who are in the upper-

right quadrant tend to have the most positive perceptions of their business relationship with U.S.

buyers, whereas those who are in the lower-left quadrant tend to have the most negative perceptions.

The suppliers who are in the upper-left quadrant are somewhere in between the above two scenarios.

None of the interviewees fell into the lower-right quadrant; presumably because if a supplier wants

to focus on design/tech by getting involved in the design/tech development process, they have to do

business with a U.S. customer who has a long-term plan. Among the 14 Chinese suppliers inter-

viewed, 8 of them (Interviewees 1, 3, 5, 6, 7, 11, 13, and 14) fell into the upper-right quadrant,

whereas only 4 of them (Interviewees 8, 9, 10, and 12) were in the lower-left quadrant. It is clear

that the long-term relationship between the Chinese suppliers who focus their exporting strategies

on good design, quality, and technical details and their U.S. customers is more dominant in this

group of respondents than the short-term relationship between the Chinese suppliers who focus their

business strategies on price and their U.S. customers. The Chinese suppliers in the lower-left quad-

rant have been struggling and trying to survive in a competitive relationship with their U.S. buyers.

Instead of developing common goals and building mutual benefit, these Chinese suppliers and their

U.S. customers were struggling for their own profit and fighting for more power. In contrast, the

Chinese suppliers in the upper-right quadrant have successfully developed a cooperative relationship

with their U.S. buyers in which both sides were committed to work together because they found out

that commitment and trust, instead of power, were keys to long-term success (Figure 1).

The second conclusion is related to the contribution of this study to the academic world. The

findings from this study showed that among the companies represented, there is a shift from the

lower-left quadrant to the upper-right quadrant in China–U.S. trading business, because the business

relationship between Chinese suppliers and U.S. buyers is the smoothest, most promising, and

positive in this quadrant. This study supported the transition from a power-dominating marketing

relationship to a commitment–trust supplier–buyer relationship in the U.S.–China trading business.

While the U.S. market went through this transition in the 1980s, China is experiencing the same shift

three decades later. This similar shift/pattern of distribution relationship might raise further ques-

tions regarding the distribution relationship literature, such as (a) is a power-dominating/competitive

marketing relationship more common in a new business relationship? (b) is a cooperative/trusting

business relationship the norm during the latter, more mature phase of a business relationship? And

(c) can this developing pattern of business relationships be generalized across a broader range of

international trade? Future research will be needed to answer these questions.

The third conclusion relates to the contribution to business practices. During the process of find-

ing a good match, a U.S. importer should look for a Chinese exporter who focuses more on design/

quality/technology than price. On the other side, Chinese exporters should look for U.S. importers

who (a) have more requirements on design and technical details and quality rather than low price and

(b) have a long-term plan to work with Chinese suppliers rather than just a one-time deal. In addition,

both sides should look for business partners who are willing to develop and maintain a committed,

trusting, and cooperative business relationship instead of seeking a counterpart who constantly fights

for power without a cooperative long-term plan.

Limitations, Implications, and Contributions

There are two limitations in this research. First, only Chinese suppliers’ perceptions were examined

in this study. Understanding each side’s perceptions is important since when firms understand and

appreciate each other’s viewpoints, they are able to arrive at a working consensus and manage their

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partnership more effectively. As a result, studying U.S. buyers’ perceptions of their business relationship

with those Chinese suppliers is also necessary. By comparing their perceptions, a better communication

framework can possibly be established and a complete picture showing the buyer–supplier relationship

in the U.S. and China trading business can be portrayed. One might argue that studying the U.S. buyers’

side is not necessary since this side has been the main focus of the current distribution relationship lit-

erature. In the study of a distribution relationship, exploring only one side at the exclusion of the other

side provides only half of the information. A more efficient and effective way to study a distribution

relationship is to have both sides investigated without ignoring either one. Therefore, one of the future

studies could focus on the other side of the relationship—from the U.S. buyers’ perspective.

The second limitation of this study is that only the textile and clothing sector was investigated.

Hence, the results may not necessarily apply to other industries. In order to gain a more generalized

understanding, more sectors need to be examined, which could be another topic of future study.

In spite of these limitations, the findings of this study brought contributions to different aspects.

From the perspective of business practitioners, the findings from this study brought U.S. importers

first-hand information on how Chinese suppliers perceive and feel about doing business with their

U.S. customers. Results from this study could help U.S. importers better understand their Chinese busi-

ness partners, such as how to do business with them, what their strengths and weaknesses are, and more

importantly, how to develop a long-term reliable business relationship with them.

This study can also make a contribution to the business relationship literature. Research examining

relationships has been mainly conducted in Western markets—the United States and Europe. As a con-

sequence, understanding business relationships in predominantly Western cultures does little to further

Long-term relationship

Interviewee 2 and 4 Interviewee 1, 3, 5, 6, 7, 11, 13, and 14

In the Middle Most Positive

Focus on Price Focus on Design/Quality/Tech

Interviewee 8, 9, 10, and12

Most Negative Doesn’t exist

Short-term relationship

Figure 1. A diagram of the overall perceptions of Chinese suppliers on their business relationship with U.S. buyers.

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our understanding of supplier–buyer relationship in other countries, such as China. By investigating the

relationship between Chinese suppliers and U.S. buyers from the Chinese perspective, this study

enriched this part of the literature. In addition, this study examined the business relationship theories

in the China–U.S. trading relationship and further supported the applicability of those theories.

Declaration of Conflicting Interests

The author declared no potential conflicts of interests with respect to the authorship and/or publication of this

article.

Funding

This study is funded by 2007–2008 Research and Creative Activity Grant from California State University–

Sacramento.

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Bio

Dong Shen, PhD, is an associate professor in the Department of Family and Consumer Sciences at California

State University–Sacramento. Her research interests include international trade and cross-cultural studies in

consumer behavior.

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