China's Quality Control Problems The Result Of Market Pressure

from the no-simple-fix dept

Thu, Jul 26th 2007 4:49pm — Joseph Weisenthal

In recent months, there have been a spate of stories about defective or dangerous products being exported from China. These include everything from toy train sets to toothpaste laced with poison. The conventional thinking is that this poor quality control is the result of a rapidly growing economy outstripping the capabilities of regulators, but that these issues will inevitably correct themselves over time as the economy matures. Writing at Knowledge@Wharton, Paul Midler offers a slightly contrarian stance, arguing that poor quality control, or "quality fade" as he calls it, is actually to be expected from a maturing economy (via Evolving Excellence). Basically, the inattention to quality is a result of cutthroat price competition and the attendant margin pressures faced by exporters. It's well known that Chinese exporters don't enjoy good margins, so for commodity products (like a tube of toothpaste), substituting inferior ingredients may seem like the only way to make a buck. The effects are exacerbated by pressure to demonstrate a fast ROI on new infrastructure investments. The perverse consequence is that companies that have recently expanded their capacity often try to raise prices (or skimp in other areas), so as to rapidly justify the expansion, which turns the concept of economies of scale on its head. Ultimately, China is likely to end up like its neighbors (Japan, Korea, et. al.), which once were known for their inferior goods but eventually got their act together. But this transition won't happen overnight and in the meantime, market demands could get in the way.

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Filed Under: china, manufacturing

22 Comments

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Anonymous Coward, 26 Jul 2007 @ 5:31pm

Our own (USA) history is rife with similar situations - filth in the meat packing industry, for instance.

Effective government regulation - via the USDA, FDA, etc. - eventually came to the rescue, and was the only thing that stopped those bad practices.

Regardless of the theoretical excuses given for using poison in toothpaste and other crimes (yes - crimes), we are at the mercy of unscrupulous suppliers, and have to protect ourselves. If we do not do so, we have only ourselves to blame.

It's shameful that our government has recently been avoiding its duty to protect us from the damage that greedy domestic and foreign corporations can cause.
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Anonymous Coward, 26 Jul 2007 @ 5:38pm

market demands could get in the way?
Market demands?

Let's get real here.

We have to stop beating around the bush with gobbledegook like that if we're discussing poisoning. What we need is clear, blunt, "cut to the heart" of the issue thinking.

It's time to get tough about protecting ourselves!
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brother brown, 26 Jul 2007 @ 5:43pm

Market Pressure otherwise known as greed
I love reading articles about analyzing China and other countries without ever visiting, or living in them for a while.

But of course it is ok when everything you know is from other books. The Chinese problem is that the communist government has kept a population of 1.2 billion in poverty since it took over in 1950. I mean come on China please, that is enough time to get your sh*t together.

The people have realized Communism has brought them nothing and only the ruling elite enjoy Western privileges. Now they can have a taste for themselves and they like it.

They still have a long time before they will be able to have free press and free religion. But sometimes in the West we don't even have that. So it is a tough call.
One thing I learned in my 2 years in the Far East is that there are many, many greedy people. It is not some ethereal force, it is as real as wanting your kids to go to a good school, to buy a car, get a washer and dryer. The same things we care about.
The solution begin with proper regulation and enforcement. This is nothing to say about the devalued Chinese Yuan.
Once they get their sh*t together they will be a force to be dealt with.
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bradley stewart, 26 Jul 2007 @ 5:58pm

WHATS COMING OUT OF CHINA?
FOLKS I AT ONE TIME WORKED FOR A GOOD SIZED RETAIL COMPAMY WHERE IF YOU LOOKED THROUGH ALL THE MERCHINDICE IT WAS TOUGH TO FIND ANYTHING THAT WAS NOT MANUFACTURED IN CHINA.EVERYTHING THEY SOLD LOOKED GREAT. THE PROBLEM IS IF YOU LOOKED CLOSLEY AND YOU DID NOT NEED A SCANNING TUNELING ELECTRON MICROSCOPE TO REALIZE THAT MOST OF THE STUFF WAS PRETTY POORLY MANUFACTURED. MANUFACTURED SO POORLY TO THE POINT THAT IN ALL THE DECADES I WORKED IN RETAIL SALES I NEVER SAW SO MANY RETURNS. IT SOON BECAME CLEAR TO ME IT REALLY WAS NOT THE FAULT OF CHINA. IT WAS THE FAULT OF THE COMPANY I WORKED FOR WHO IM SURE WAS SAYING TO THE PEOPLE WHO WERE MANUFACTURING THESE THINGS MAKE THEM LOOK AS GOOD AS POSSIBLE WHILE MAKING THEM AS COST EFFECTIVE AS POSSIBLE.MY FEELING IS CHINA CAN BUILD THINGS AS WELL AS ANYONE ELSE. ITS THE PEOPLE WHO PURCHASE THINGS FOR RESALE FROM CHINA WHO BEAR A GREAT DEAL OF THE RESPONSIBALITY. BEST REGARDS BRADLEY STEWART
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B in China, 26 Jul 2007 @ 6:05pm

yeah...if everybody else is cheating and getting away with it AND becoming rich within China, then problematic products will continue to show up again and again.

It's not like that exporting companies are not afraid of being caught in the states. They have no choice here: the suppliers that they use who only sell within China will always try send them shady parts -- and cannot be punished. With the RMB price increase, they can hardly afford importing parts/ingredients from respectable sellers either.

In order to save "face", the Chinese government's attitudes is generally more interested in cracking down any publicity of these types of news than solving the problem. And that won't help.
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dorpus, 26 Jul 2007 @ 6:25pm

Country of The Beast
In China, pets are booming in popularity among city slickers. However, they have never heard of rabies vaccinations, so 1136 Chinese have died of rabies in the past year. The Japanese embassy has put out a travel advisory, telling tourists to seek immediate medical attention if they are bitten by dogs or Chinese.

http://news.searchina.ne.jp/disp.cgi?y=2007&d=0725&f=national_0725_002.shtml

Xinhua news agency reports that in Guangzhou, China, the city has started a media campaign telling residents not to eat mice and other wild animals because of the disease risk. The city plans to stop restaurants from selling mice in their dishes, however successful that campaign will be.

http://www.yomiuri.co.jp/world/news/20070720i316.htm

In Zhejiang Province, children ages 5-10 are making a living from poses that seem possible only in anime cartoons.

http://ikketushugi.info/blog/2007/05/post_11.html

In the Tibetan automous district in Szechuan, China, Tibetan savages from neighboring villages got into a brawl over who gets to pick wild mushrooms in the hills, so they brought out guns, knives, and dynamite, resulting in 8 reincarnations. The mushrooms are said to cure AIDS and stop aging, but apparently does not cure human greed.

http://jp.reuters.com/article/oddlyEnoughNews/idJPJAPAN-26959320070719
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Anonymous Coward, 26 Jul 2007 @ 6:53pm

"FOLKS I AT ONE TIME WORKED FOR A GOOD SIZED RETAIL COMPAMY WHERE IF YOU LOOKED THROUGH ALL THE MERCHINDICE IT WAS TOUGH TO FIND ANYTHING THAT WAS NOT MANUFACTURED IN "

Over on the left hand side of your keyboard is this thing called a Caps Lock key. Try pushing it a couple of times while you're typing, you might see some interesting results.
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Mr. Lucas Brice, 26 Jul 2007 @ 8:08pm

Expect the Worst
I agree with Paul Midler. We should expect the Chinese to put poison in toothpaste, put poison in dog food, and put poison in God-knows-what-else. I mean, after all, isn't that what happens to a developing economy? After the economy matures, they'll most likely stop adding posion to their products and we can feel good about buying from them. Then they can take the money that we give them, turn it into weapons, and blow us up.
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cw, 26 Jul 2007 @ 8:13pm

If no one checks the quality, why bother?
If it's going to cost more, why bother?
If people everywhere are throwing money at you, why bother?
If "to get rich is glorious", why bother?
If you used to make $20 a month busting rocks, and now you make $20,000 a month selling poisoned glyceryl, why bother?
If it's cheaper to bribe someone than make it safe, why bother?
If right and wrong isn't in your moral vocabulary, why bother.
If money is your religion, why bother?
If people die outside your own house, why bother?
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General Eskimo, 26 Jul 2007 @ 10:10pm

Um... great, but far from the subject
How is this "techdirt". It is an interesting topic, and both ideas mentioned are to blame for the problems listed, but this isn't really technology news. It doesn't even seem to be tech-related. Please, continue you ramblings, but please try to keep on-topic.
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Overcast, 26 Jul 2007 @ 10:50pm

Well, it's so big corporations can toss the cheapest garbage onto the market and have someone else to blame.

I'm not opposed to buying good from other countries, but they have to carry a reasonible level of safety too..

I used to shop Wal-Mart - because they had 'American' made goods. I'd pay a bit extra, that's no problem - but I refuse to now, since they caved in to the 'bottom line'.

I still lean heavily on goods made in the US, Canada, UK, Japan... always been good quality stuff, mostly - anyway. You do get what you pay for.

I suspect if China loosened their tyrannical grip and let the people of China run their own business, you would start to see some good value come out of the country. It's a shame so much culture and history over there is under a red blanket..
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Anonymous Coward, 27 Jul 2007 @ 5:20pm

CW says why bother
very good post

we have to protect ourselves because "they" won't bother.
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Jenny, 27 Jul 2007 @ 11:44pm

When importing from a place, we don't do it just because the goods are from the place. Instead, we do it because we trust the producer and the quality they could offer.Actually, there are many qulity goods from China imported into U.S.A every year. So far as we know among our customers(members at acb2b.com.), they could handle this very well.
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Jenny, 29 Jul 2007 @ 5:16pm

Judge your partner independently
We are dealing with both American companies and Chinese companies(www.acb2b.com.), and we have the deep understanding that whether a company is trustworthy or not is not decided by its location but by itself, the determination to grow heathily, the willing to get the partnership long, and the capability to provide qualified prodcucts. And we believe once they begin to do international trades, they must be ready to offer the trustworthy quality and service, because nobody would risk to lose their future.
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Jessie Reeves, 8 Aug 2007 @ 8:56am

Organic food from china
Did you ever wonder where a lot of the ORGANIC sprouting seeds come from.They are ORGANIC, There is no way they would grow them with the bad wheat that poisoned our pets.Thank god for the FDA. I FEEL SO SAFE, I think i will start eating the pet food.I bet its safe now. They will never let this happen again. What would we do if the goverment wasnt checking our food.A lot of people might have cancer. Thank god for the FDA
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Organic food lover, 15 Aug 2007 @ 10:52am

Re: Organic food from china
Doesn't sound like you use organic products, so I don't know why you are posting this. It wasn't the wheat that was bad, it was the process from wheat to gluten that went wrong.

The non organic products are more likely to have been tainted by foreign pesticides/chemicals in the processing procedure.

It's the USDA that regulates standards for Organic certification. You should contact those guys if you didn't like your organic produce.
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Leon Davis, 31 Aug 2007 @ 3:42pm

CHINESE QUALITY OR AMERICAN GREED?
China doesn't have a quality problem, we the customer have a greed problem. I've imported and traveled through China for more than a dozen years. I've done the same in most countries throughout the world for more than 20. The plain truth is that U.S. manufacturers like Wal-Mart have beaten down prices so terribly because of purchasing power in the marketplace that the Chinese can't squeeze a profit out of there effort. In China it is not uncommon for a factory to run at 2% profit. The fact is that one of the things you learn early on in the import business if you are smart is the fact that if you drive a Chinese below what he feels is a fair value for his goods, he'll outsmart you in the end. Remember in China we deal in factions of a penny. The reality is we need to learn to be more fair in the distribution of profits with the people who make our lives possible. For those of us in the know, the problem can be easily fixed by the West simply treating the Chinese with more respect for the labor and effort they make. We need to understand that where is enough for all of us. If we want the quality to improve we need to make the Chinese feel they are getting their fair share of the profits. Wal-Mart still buys it for a dollar and sell it for twenty. Don't you think the manufacturer deserves a fair share? If you've been to China lately you can see how much they suffer to give us our creature comforts. Go outside of Hong Kong and you can barely breathe the air.You see the best seafood eateries with dead fish flowing on their back. Some cities are so polluted they never see the sun. I saw the enemy on my last trip and it was me. When the Wal-Mart owners can accumulate billions by "every day low prices" and we encourage it by putting all the competition our of business so the Chinese have no choice but to deal with them, then take a good look backwards and you will see your own face.We don't need more quality control; we need greed control.
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Tony Liu, 16 Sep 2007 @ 6:03am

Re: CHINESE QUALITY OR AMERICAN GREED?
I am local Chinese people in ShenZhen/HK,now I am running the engineering service business and helping the clients from Euro.&Americal to audit/qualify their China supplier.

I understood USA's worry about the quality/safety issue of China goods. I agree that china suppliers need to take the responsibilities of the quality problem ,because they signed the contract to promise they would ensure the supplied products could meet the requirements.

It is easy to talk about the problem,but for us,both buyer and supplier,USA and China, it is important to solve the problem.

For buyer,you need to understand the cost of the product in China,if the quotation was lower than the reasonalble cost,you need to think about the risk caused by this supplier---the quality risk,safety risk,and human rights of worker of the supplier

You still need to care your sourcing agen in China,most of time,they will get the RED MONEY from your supplier and help those supplier to cheat you...

I worked for one of the biggest global electronic companies oveR years,worked for her sourcing and supplier quality business in China.Also I worked in Intertek ,one biggest 3rd quality service company ,then I understood the situation of China sourcing very well.

If you have any questiones about the topic,please feel free to contact me . ( tony.td.liu@hotmail.com)
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v.saravanakumar, 13 Oct 2008 @ 4:57am

quality conrol of tube &pipe detail
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Beijing Girl, 17 Dec 2008 @ 3:04pm

Re: Market Pressure otherwise known as greed
No offense, but you just skipped over some of China's major modern historical events that have kept China's manufacturing system backwards for years. Let's not forget that China modeled Soviet-style heavy industry in the 50's and 60's. It was only after the Cultural Revolution and Mao's death in the late 70's that Deng Xiaoping started reforming China's industry. He actually said, "To become rich is glorious." However, those kind of reforms don't happen overnight, especially when the stability of the regime is still the primary concern. Then let's not forget that, despite the shift to the market economy and opening to the West, many Chinese industries were either state owned operations with little incentive to produce quality products or entrepreneurial endeavors most certainly focused on making money fast, all with very little know-how. I would argue that most Chinese companies are not privy to the same standards for safety and quality control in the West, but that doesn't mean it will last. The Chinese public is learning how to get angry about these things as well (i.e. the recent tainted milk episode), and the government is learning how to flip it into positive propaganda for the party (i.e. news stories on their noble efforts to correct the problem.)
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efsdfs, 1 Nov 2009 @ 5:06pm

Re:
boooringggg
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Annex Asia, 4 May 2015 @ 4:14am

Annex Asia Business Solutions
Solve the problem is good.
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