China Manufacturers Learning About Trust. Well Sort Of.
Just read a very long, thoughtful post over at Stephen F. DeAngelis's Enterprise Resilence Management Blog on the value of trust in business and on how China is just starting to appreciate the need to be trusted. The post is entitled, "China Learning About Resiliency and Trust" and Relence and it starts out by stating that executing China's head of its FDA did not really do a thing to engender increased trust in China products. I agree.
It then notes that China is so far from having a strong safety regulatory system in place that in the meantime, it will be up to U.S. regulators and U.S. companies to assure safety. Again, I agree.
The post concludes, -- as all good posts should -- by both quoting me and agreeing with me:
Cha's article [in the Washington Post on July 14] concludes with comments from a Dan Harris, an occasional reader of this blog:"Dan Harris, a U.S.-based attorney who runs a popular China law blog and represents small to mid-sized companies doing business with China, said the shift in the government's public relations strategy 'is definitely smart on their part. They are not going to convince Americans that everything is okay just by denials.' He predicted it would take years, if not decades, to undo the damage done to the reputation of Chinese manufacturers in recent months. 'My view is that no matter what they say they are going to do and no matter how much they want to do it, the problem is so massive and so deep-seated that I think it's going to take huge amounts of money and a very long time for it to be cleaned up,' he said."Dan is right. Trust must be earned and that takes years. Trust is developed more by actions than by words. China will likely continue its PR campaign -- because perceptions do matter -- but eventually PR must be replaced by action that fosters genuine trust. China will get there, but, as Dan says, it's going to take a very long time.
In the meantime, American companies must protect themselves. For more on that, check out this post, entitled, "How To Protect Your Company From Bad China Product."
Comments
I read your blog a lot that I put it on the top of my blpgrolls of China.
I agree most of your perspectives,but not this one when you say it will take years for China to clean up the food security problem.
My two cent is that if CCP is serious about the trouble it will take very short time and stunning effeciacy to crack the problem.It has the advantage to do the things that it might take another goverments years to finish:its ditatorship rule.After SARS scandal CCP very quickly brought out tough,big-brother-style but efficent fiat.
Is CCP serious this time. Sure ,because 90% percent GDP and a lot of jobs depend on export industry.The stake is high that could bring harm to its rule base.
Could it solve all the problem? No. To my experience and prediction,CCP will put out strict control regulations on export goods but not goods consumed domesticly.
Posted by: Steven | July 19, 2007 11:57 PM
Trust begins from internal controls which work outward. Chinese enterprises need to establish health standards which they impose on their own management and laborers. Health standards are low, and anyone who has worked with Chinese factories knows this. Latrines are unclean (a polite understatement), toilet paper is sparse, and handsoap is a rarity. Running water can even be a problem. Hospitals are not so terribly different, as I experienced on occasion. Should the Chinese Gov't, at the highest levels, issue decrees requiring the use of such basic sanitary products in every latrine in China? When such sanitary products flow in overabundance at hotels because guests (both domestic and foreign) will not tolerate otherwise, is there any reason why foreign and domestic buyers of Chinese factories' massive production demand any less? Too often foreign buyers shudder when they see these conditions, but shrug it off and say, "well, that's the factory's affair." Maybe it's time to reverse that situation, and demand an overhaul of sanitation. It might spark an overall change of attitude toward health and quality in production in the factories, thereby enhancing foreign confidence.
Posted by: Law Office of Todd L. Platek | July 20, 2007 7:10 AM
Steven --
I hope you are right, but I just do not see this as one of those things that will get better by government fiat. I see it as one of those things that will change over time as China continues climbing up the product value chain.
Posted by: China Law Blog | July 21, 2007 8:20 AM
Todd Platek --
You've nailed it. It is every bit as much of the responsibility of the US company to make sure of quality.
Posted by: China Law Blog | July 21, 2007 8:22 AM
Chris D-E --
Rather than the US looking at its own standards, US (and other foreign) companies must look at their own quality control.
Posted by: China Law Blog | July 21, 2007 8:24 AM
I fully support US companies and their executives being publicly flogged and having their cash drained as punishment for deliberately selling toxic products to US consumers in the name of greater profit margins. It just goes to show that since companies can't innovate a product that people will want to buy in large quantities, they must cut every corner possible to ensure maximum quarterly profits and CEO compensation.
I say rack 'em all!
Posted by: nanheyangrouchuan | July 21, 2007 3:26 PM
my point is that these scandals will have a very intresting output:the stricter quality of export goods and at the same time no iota change to food consumed for his own citizens.
Posted by: Steven | July 21, 2007 9:57 PM
I don't think the head of Chinese FDA was executed to protect the image of Chinese export. Americans have already gone behind the point of no return on its dependency on Made in China products and the corporations are totally hooked on the profits of paddling the Made in China products.
A newly published little book call A Year Without "Made in China" is an interesting read. http://www.npr.org/templates/story/story.php?storyId=12056295
The execution of the FDA head has more to do with domestic politics. If Chinese were to develop a bill of rights, "Food Comes First" gotta be at the top. How long can a government maintain its legitimacy in China if it was unable to fulfill that?
Posted by: David Li | July 22, 2007 9:37 PM
Yes,but the problem is the CCP dont care a fig about the little people, whether you are being poinsoned by food or evicted from your houses.
How can they held on the power?Just turn your glance to North Korea.It's a easier job for CCP to govern the country NK style than the current style.For if you need to excert much your energy just to survive you could not have time to think about pseky thoughs of freedom.
Posted by: steven | July 23, 2007 3:56 PM
The flip side is I've hear from time to time stories about Taiwanese and American buyers not paying their suppliers. For example a factory I used to deal with went under because some Taiwanese-American guy took the goods and slipped out of China, leaving an empty office behind.
Any idea how manufacturers in China can minimize the risk of not getting paid? As you know most are not familiar with even moderately sophisticated banking instruments.
Posted by: Charles Liu | July 30, 2007 2:32 PM