All entries for Thursday 09 August 2007

August 09, 2007

on the quality scares over Chinese products

It comes as a surprise to me that media reports haven’t looked closer into the Chinese products scares, conveniently pointing at corruption in Chinese government and content with that serving as the only reason.

The problem with the quality of Chinese goods is by no means new. Russians have developed a nasty dislike for the Chinese people working on Russian markets precisely because of the quality of Chinese products that have been sold in Russia. Made in China has long become a synonym to “fake”, “forged” and “poor quality”.

It is important to go back to the basics and remember why anyone wanted Chinese products in the first place: because of all the cheap labour. But that is all there is. So, if a product does not involve much labour, and is in any way costly because of the nominal costs of the materials, then China, as a manufacturer, can’t compete. Pet food, toothpaste – all involve ingredients that are costly to produce. They also involve standard health and safety checks that should be performed before the product is released. Those checks also form part of the bill.

One of the core issues the Chinese manufacturers have with their foreign counterparts is that in an effort to reduce the cost of production, the company that orders the goods has unreasonably high expectations of how cheap they can buy the products for. In order to fulfill that expectation, some Chinese manufacturers, performing under great pressure of competition, are forced to accept agreements and sign contracts that lead to the manufacturer promising to produce certain goods at inconceivably low prices. This almost inevitably leads to forging materials, replacing parts and generally cutting down on the cost of production at the expense of quality and safety. Any self-respecting big company with a good reputation can afford to reject a business offer that the manufacturer deems impossible to make. It is, therefore, the smaller, struggling provincial factories that agree to take up unreasonable requests and end up producing goods that are faulty or do not match the quality.

So here’s the other end of the stick: quality issues arise not only as a result of corruption in standard setting bodies and are rarely only down to the responsibility of the manufacturer. Nike, H&M, Adidas, just to name a few, also have their factories set up in China and also employ and benefit greatly from the notorious cheap Chinese labour. If the ordering company is not willing to pay for all the quality checks, for better quality materials and other essential parts of production, then whatever safety issues occur on a latter stage would be the responsibility of both parties.

It is crucial to correctly identify the potential of the Chinese manufacturers and not to overestimate it. When safety scares occur, it may seem easy and straightforward to put all the blame on the manufacturers, but there is a cause and effect relationship between the foreign companies not willing to pay for all the necessary quality checks and the subsequent failure of the product to meet the standards.

Olympics over Party

I am a fond lover of the Chinese central news. During my current visit to Beijing I noticed something rather interesting. For the first time in decades the word party is giving way in popularity to another word, “Olympics”. To say that the upcoming Olympics are doing wonders in Beijing is to say nothing. I don’t think there’s ever been such precedent in history that measures in its scale to the efforts the Chinese are putting into this Game. The marketing of the event is much like the marketing of The Simpsons movie, except this one has been going on since Beijing was voted to host the 2008 Olympics.

Starting tomorrow, the Beijing transport authorities will be introducing a testing regime that involves rescheduling the office hours of large companies and offices to try and regulate morning traffic and shortage of public transport. The reported ‘clear sky days’ are nearing 260 days per year (out of the 365)! And this is at a time when major news channels are pessimistically announcing that 7 out of 10 heavily polluted cities in the world are in China. My point is, the Olympics is everywhere now and China, Beijing is transforming before the eyes.

August 2007

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