China Law Blog

It is easy to blame the supplier greed in cutting corner.It is a fact that such behaviour exists in China as much as in any other country.When we look to reality
that they are a lot of factories deliver goods meeting the expectations of the buyers.So I take all these accusations with a grain of salt.

Many people work as third party contracters or in purchasing offices for the companies that can afford having a sourcing office and QC System.
Can we talk about quality fade of products without talking about fading of quality in quality control system?

The first job of any quality control system is to have due diligence.

If we search the description of due diligence:

Due diligence in Supplier Quality (also known as due care) is the effort made by an SQE professional to validate conformance of product provided by the seller to the purchaser. Failure to make this effort may be considered negligence.

The aim of a quality control system is to prevent Quality Fade regardless of the root cause.

If any product reach the destination with quality the responsability of the system to prevent it comes to those who day after day are involved to detect prior to the shipment.

When the control system fails to deliver products in conformity, we can than talk about Investigative due diligence, involving a general obligation to identify true, root cause for non-compliance to meet a standard or contract requirement.

If we are talking about Quality Fade this word can only coexist with Quality Control Fade.

The lesson can be learnt from this events that Quality Control System should function without lowering the awareness, that accidents happens even when there is no bad intention.
If I am paid to control the quality in every stage of production it is my duty to make sure that Quality fade can not pass the door of the producer.

well, I hope that professor mihm, yourself and other people are right.

I think in reality though there are significant differences. The main one is environmental: quite simply, the planet is unable to sustain the kind of economic growth in china that the US has achieved in the 20th Century. This will create resource conflicts (it is already happening) which threaten to overshadow the politics of trade. I doubt the US and the EU are ever going to be in a strong enough negotiating position to try and strong arm the chinese (or anyone else) into accepting our own form of IP regulation, or for that matter, food and drug regulations: China can always sell elsewhere.

THe second reason is the obvious one. The point has often been made that china desperately needs an Upton sinclair. However, with the current restrictions on censorship and the imprisoning of dissidents, its not likely to happen. When I read books like 'will the boat sink the water' I can see the same 'progressive' sentiment in china that existed in the US at the turn of the century. However, instead of embracing these ideas/sentiment, the government sees it as a threat to its own survival, and tries to ban it.

I think that yes, there are similarities, but ultimately china c2007 is a completely different ball game. The comparison is useful, if you are a believer in the power of trade and capitalism to resolve the worlds problems. Although I dont believe in capitalism, I hope that china does improve the way the US did, but I see little evidence that it will.

CLB: Even in the USA today, in select neighborhoods in NYC, LA and elsewhere, where Latino and Chinese sweatshops still operate, you can find garments being made with labels indicating exotic places of origin (and I don't mean the Bronx). 1887 is still with us when the financial conditions are appropriate and the law hasn't yet caught up with the sweatshop owners.

With respect to Prof. Mihm's comments about the similarities of current Chinese development/mind-set and US development over 100 years ago, such observation has been made by others, including me; see my posts dated...oh, must be a senior moment, I just remembered I don't have a website. Joking aside, your excellent site has been a resting place for such observations by this humble country lawyer from Manhattan.

With respect to product safety evolution in China, I opine that change will be driven less by official mandate and more by private financial considerations, in the short-run. The likelihood of losing countless millions of dollars and Euros in foreign orders due to stubbornly consistent inadequacies in producing and delivering "safe" goods, to other locales where factories can manufacture as required, will be a more immediate impetus to compliance with recognized standards.

Guest: The main one is environmental: quite simply, the planet is unable to sustain the kind of economic growth in china that the US has achieved in the 20th Century.

If this is the case then we have a major problem. If the planet can't support another billion people living like Americans because of limited resources, then one has to wonder about the social justice of Americans living like Americans.

And China is just the tip. You still have maybe three billion people in the world that haven't started on the explosive economic development that China has.

My own feeling is that if we can't get the rest of the world to live like Americans, then the rest of the world is going to reject the "American way of life" and this makes it more likely that Al-Qaeda is going to win the long war. If the US wants to keep the "American way of life" then it has to figure out how to share it with the rest of the world.

Also whether the environmental/progressive movement is a threat to the Communist Party's power depends on whether or not environmental progress can be made without threatening the CCP hold on power. Assuming that it absolutely can't makes the life of environmental activists in China harder since it automatically makes them political dissidents, and if this is not essential, it makes fixing the problems much easier.

Societies are complex, and I always treat with skepticism the idea that "something can't be done." Maybe it can. Maybe it can't. However, if you start with the belief that it can't be done, then you are never going to find a way to do it.

twofish:

There is nothing intrinsically unsustainable about 'the american way of life'. In fact a lot of the momentum behind the environmental movement comes from the US, so I would be careful about making generalisations about Americans. You're right about the 'social justice' implications of a lifestyle dependent on resource exploitation, though. Americans are going to have to change, but so is everyone else - including the chinese middle class and the oil sheikhs. Conflict between groups of people for control of a dwindling resource base is pretty much inevitable, if history is any guide to what will happen in the future.

Personally, I just dont see how unregulated capitalism and rampant economic growth is ever going to solve these issues, even if they are accompanied by the enforcement of intellectual property rights. So, assuming that china will follow the same trajectory of growth that the US did is a pretty futile exercise, which hinders our ability to see things clearly.

I think the environmental issue is obviously serious. But there's another one that tends to be overlooked which I think is crucial. By 1887 the USA had a developed democracy and rule of law. Its wild west period of capitalism did not change because the Euros whined about our butter (for heaven's sake). It changed because of intense political struggle and legal actions within a politically stable democracy and legal system. Assuming the free market will be the magic wand that brings these to China is putting the cart before the horse. This ideology has failed so often that assuming this to be true is, at this point, simply shameful. An occasional execution when the international heat is on doesn't indicate anything whatsoever about the development of a rule of law.

Most of the huff and puff asserting that China's development is like the USA's fails the reality test. Iraq showed the mistake of assuming that a country without the political history of democracy and rule of law could absorb these 'natural' institutions. Democracy and the rule of law are not natural at all. Developing such institutions in China would be particularly difficult simply due to the size of the country and the degree to which that makes a consistent impartial rule of law difficult to implement.

I don't believe China's quality problems will go away. I think China's development will be permanently hurt by these problems. And the reason is systemic. Without the rule of law, you have of necessity, rule by the local power elites. When suppliers and contractors are cutting deals, the consumers of far off lands are an abstraction which is not going to shave the profits that everybody, including local govt, gets a share of. There is no way around this problem.

China can't fix its problems because Beijing can't enforce the laws it passes and -| is absolutely right about a Chinese Upton Sinclair, they do exist but either in jail, house arrest or living abroad (those that dare to publish). There were mechanisms in the US that existed in 1887 that do not exist in the CCP today. Remember that labor conditions in the US in 1887 mimicked China today as well (except there was not such a wide variety of chemicals) but Americans had guns. The US gov't backed down from civil war in its cities and the US Army and state militias had been humiliated by coal miner militias in the Appalachian mountains. Chinese laborers have no such means of self defense.

dissent:

Whilst you right on the money about china not having the 'rule of law' and democracy, chinas growth and industrialisation is occuring in a radically different context to USA circa 1887. What is unique about China is its government is strong enough to withstand the deregulating pressure of international finance in a way that other developing (and developed) countries do not.

It is all about belief. If you belive that multinationals running wild without any accountability for their actions is going to lead to human progress, then fair enough. In a lot of ways, MNCs have improved product standads in china because they have to comply with regulations in the countries their products are sold.

But if, on the other hand, you believe that governments should have the power to defend the welfare of their citizens against the exploitative practices of international finance and political power, then china paradoxically offers some hope. Because China has the power to act, to turn back the tide. I think this is why some environmentalists like Johnathan porritt see china as a great hope for the world. Personally I am with nanhe in seeing very little positive coming out of china, but I dont think the solution is to shout louder at it.

Today's NYT contains a lengthy article on environmental pollution in China which indicates that all is not well. 1.3 billion people (who knows what the true number is, or will become, and when?); inadequate water supply; filthy air; inefficient factories, whose number is starting to dwarf the number in most countries; a social and political mentality based on feudalism and Oriental despotism and still not so far from it, with provincial and local administrations swinging in and out of BJ's orbit at will; a legal system whose effect, if not purpose, is to promote the current (and whichever current) set of government policies and find some textual support in statutes; hundreds of millions of people who want improved material lives, and now; and the outside world, all the rest of us in the "developed world," who want lots of goods as inexpensive but as completely safe in design and manufacture as possible, from nations whose workers are as likely not to have soap, toilet paper and hot running water in their lavatories.
All in all, I'd rather be in Philadelphia.

Add to my last post of key features not inspiring me to surrender my U.S. passport in favor of a Chinese passport: A political system which is committed to keeping its entire population informed of all life on Earth on a "need to know" basis, in the interest of social harmony.

1. Stephen Mihm takes as an historical example literary works from England that were copied and sold in the U.S. in the 19th century. A distinction should be made. At the time, the copyright of British authors was not legally recognized in America. As such, no law had been broken. This is not the same as having copyright laws on the books, but seeing them flouted all the same.

2. The author suggests that all developing nations go through a stage where either counterfeit, or inferior, products are taken to market. As far as I can tell, there has never been any such presumption. It is doubtful anyone would have supported free trade if they presumed they would be getting a deficient product.

3. I have problems with the overall message, which is that we should excuse those who behave improperly. What would happen if a defendant went before a judge and asked the judge to cut him some slack because, after all, everyone else is committing the same crime? I do not agree that "a bit of empathy is in order". Anyone working with suppliers in this market expects a product that is delivered according to specifications. To accept anything less is to enable quality problems to persist.

Joe Gariplerden --

I agree with you to the extent that any company having product manufactured in China must act as though it will ultimately be responsible for any defects. But, surely you are not simply excusing everything that goes wrong on the China side, or are you? If you are, then I have to ask why?

anon --

I agree with you that the West will not be able to strong-arm China regarding IP, but what I have been saying for years is that eventually the big Chinese companies will be the ones to strong-arm China regarding IP.

I'm sorry, but I don't even see how the environment plays all that much of a role here. Please explain.

Todd Platek --

Maybe you were thinking of all my Deadwood posts or this one referring to "Who Shot Liberty Valance: http://www.chinalawblog.com/2007/05/how_not_to_do_business_in_chin_1.html

Twofish --

The US does not need to figure out how to share the American way of life with the rest of the world; the rest of the world needs to go out and grab it for themselves.

Anon --

I have very little idea of what the next 100 years will hold, but I am pretty certain most of our predictions on it will be wrong.

dissent --

I agree and I disagree. You are right to point out China's lack of democracy, but I do think you too are underrating the amount of freedom of speech there is there. Not like the US, I know, but not like North Korea either. But I agree with you that this lack will slow things down, no doubt.

I am dead serious when I tell you it took me years to realize Bush was not trying to fool the American people when he talked of bringing democracy to Iraq. I actually respected him more when I thought he was just making that up as an excuse. I truly did not believe anyone could have been so stupid as to think it would be possible to bring democracy to an Arab country, when they have had absolutely no history nor real inclination to it. I am not saying no Arab country will ever be a democracy, but I am saying it will not happen within the next 50 years.

Which is exactly why I do not think we can force democracy on China (as much as I would love to see it there as elsewhere). We can gently prod, but China (and everyone else) can really only accomplish this over time and on their own. Why should size make this any less likely though?

China is slowly but surely developing the rule of law. Law is better there than 30 years ago, than 20 years ago, than 10 years ago, and even than 5 years ago. China has actually made amazing progress. It still has a ways to go, of course, but so long as the trajectory is up....

nanheyangrouchuan --

Of course there are all kinds of differences between the US of the 1880s and China today, but some of those (such as the internet and globalization) actually are a positive force for China today.

I believe both that multinationals will help progress in China AND that "governments should have the power to defend the welfare of their citizens against the exploitative practices of international finance and political power" and I doubt I am all that unusual in this regard. Strange to me that you paint these two things as an either or.

Todd Platek --

The last time I was in Philly was on the last day of a week long garbage strike that happened to correspond with a heat wave. But what is your point, assuming you had one?

Todd Platek (iii) --

I'm guessing your point is that you want to keep your US passport.

Paul Midler --

1. Okay, let's make the distinction, but then which way does it cut? Was it not better for the United States to have laws on the books proclaiming equality even though those laws were violated than to not have them at all? Sometimes it is the job of government to lead with laws even though true enforcement might take time.

2. "The author suggests that all developing nations go through a stage where either counterfeit, or inferior, products are taken to market. As far as I can tell, there has never been any such presumption." I do not think there is this presumption, but with respect to the countries with which I am most familiar, it is most certainly true (Korea, Japan, Russia, Turkey, Poland, and Mexico). You say it "is doubtful anyone would have supported free trade if they presumed they would be getting a deficient product." I don't understand that comment at all. Please explain.

3. "I have problems with the overall message, which is that we should excuse those who behave improperly. What would happen if a defendant went before a judge and asked the judge to cut him some slack because, after all, everyone else is committing the same crime? I do not agree that "a bit of empathy is in order." Anyone working with suppliers in this market expects a product that is delivered according to specifications. To accept anything less is to enable quality problems to persist."

First off, I have never said we should excuse those who behave improperly and I do not think we should. What I am saying is that China is a developing country and we should expect it to behave as such and it is unrealistic to expect otherwise. These issues are not distinctive to China, they are prevelant in every developing country I know. You put the comment that "a bit of empathy is in order" as though I or someone else said it, but I certainly did not nor do I find it anywhere in the comments. I call for patience, not empathy. Again, the trajectory in China is up and that is what matters.

I suggest people read the Korea Law Blog (www.korealawblog) to see how long it really takes a country to get into the first world.

The author I refer to is Stephen Mihm (not original poster). Mihm is the one who suggested that "a bit of empathy is in order". What I believe is in order is the honoring of contractual obligations. He is effectively suggesting that a developing nation should be forgiven its foibles.

Paul Midler (ii) --

Well then I agree wtih you. Empathy is a terrible word to use both because it is condescending and because it is not in order. We have to hold China up to international standards, while at the same time realizing it will not always achieve them. No country does. We should expect its foibles, but no need to forgive.

Dan, Contrast Prof. Mihm's discussion with today's NYTimes article, and the conclusion is that China has one helluva uphill battle, and the similarities between USA of 1887 and China of 2007 are few. In 1887, the USA was young and born out of a struggle for man's inherent free will and goodness and creativity. China in 2007 is still chained to thousands of years of feudalism, and the individual counts for very little. There is no freedom of speech or press. I think I made myself clear in my conclusion that, yes, even Philadelphia on a stinky warm day is preferable, because you can breathe as a free man. Live in China for a few years and you'll take Philadelphia too, at least in 2007. But does that mean I am not optimistic? Of course I am optimistic. But anyone who thinks China will ever become like the USA is deceiving himself and doesn't understand the basic nature of both countries. Facile comparisons are not worthy predictions.

And, by the way, Lee Marvin was the best actor in "The Man Who Shot Liberty Valance."

Todd Platek --

I do not expect China to become "like the US" for a very long time, if ever. That was not my point, at all. I was really only talking about China in terms of product safety and IP rights and all I was (and am still saying) is give it time. Not empathy, but patience.

As for Lee Marvin being the best actor in "The Man Who Shot Liberty Valance," I would put him third, behind both The Duke and Jimmy Stewart. I really did love Marvin though, particularly in his roles as a tough guy. I think The Killers was groundbreaking movie and is underrated. I watch The Dirty Dozen every ten years or so. But if you want to talk actors, damn but Marlon Brando and Robert Duvall are good in The Godfather. Sorry, but I just recently watched The Godfather again.

1) ON why the environment is important.

desertification
overpopulation (particularly outside of china)
loss of farmland to cities
spread of disease
sea level rises
inability to provide clean water
dwindling base of natural resources and energy crisis
Immense and unprecedented change caused by humans to naturally functioning ecosystems

The point that I am trying to make is that China is not going to resolve these problems the way it is going at the moment, and NOR will it if it attempts to follow the same trajectory of growth as the USA. If it attempts to, then it will inevitably fail and we are all f***ed.

2) ON mnc s and governments.

Its not an either/or point. The point is the global situation that china finds itself in is different to the one that the US was in 120 years ago. The US had little pressure and influence from the foreign countries, whereas china has had to deal with immense pressure as a developing country, from western governments and financial institutions that want to curb chinas political influence and maintain it as a cheap manufacturing base. From my perspective one of the positives about China is that its government are able to hold this pressure off, however, it is saddening to see that the Chinese government largely use this power to perpetrate human rights abuses, destroy its natural environment, and obsessively cling to its own power at the expense of developing a functioning civil society.

anon --

I understand why the environment is important. My question really meant to get at why it is relevant to this particular conversation.

Where we fundamentally disagree is that you seem to expect good thinks from the government and I generally expect the opposite.

Dan, Yes, we are all giving China and the USA plenty of time? Why not? Doesn't cost anything to be so generous with a future asset like time, and we look like big shots.

I don't disagree with you about those great actors. Brando and Wayne, quintessential Americans at opposite ends of the spectrum, but both tough, sensitive people. I think that for all my English friends, I must mention that Stanley Baker (anti-hero of back-and-white English crime movies of the 1950's)and ("introducing")Michael Caine in "Zulu" totally turned me around when I was a boy, and depicted the virtues of British organization and discipline that showed me what is possible in this life.

In Philidelphia on a stinking warm day you can still drink the tap water. In China you cannot, if you can get water at all.

The most conservative estimate to clean up China, if Beijing kicked off a nationwide program with international remediation companies, is about $125 billion USD. What is China doing instead?
Building hundreds of Type 99A main battle tanks, continuing work on its submarine program, taking bids for a new fleet of luxury cars for top party officials in Beijing and preparing for a race to the moon and a small space station to compete with Russia and the US.

Priorities.

I agree with much of the Professor's argument when it comes to product quality, but not sure how applicable it is when it comes to counterfeit goods. The Chinese film industry is already pretty strong domestically, but it isn't stemming the tide for counterfeit Hollywood movies. This is not only very difficult to stop, but extremely profitable for out of work farmers in the countryside who, without this industry, would have a major gripe with the government. The worldwide demand for fake LV and Burberry bags isn't going to stop even if China can come up with its own luxury brands.

Things will get better as the years go on and this will get pushed more and more under the carpet (an interesting development in SZ, a store selling counterfeit DVDs on a main shopping street here up until a month ago has suddenly moved that inventory into a private, back room) and raids will become more common, but I don't see IP protection ruling the day anytime during my lifetime. I'm very optimistic about product quality/safety getting cleaned up, about more freedoms being granted to the majority of citizens (but still under CCP), but IP is one area where optimism doesn't seem warranted.

-: So, assuming that china will follow the same trajectory of growth that the US did is a pretty futile exercise, which hinders our ability to see things clearly.

Just to clarify, I had read your original article to say that Chinese growth was inevitably unsustainable. If I misunderstood, and you are arguing that Chinese growth on the same trajectory as the US is unsustainable then that is a different issue. I don't know if I agree with this or not, but it is a different statement.

Something that needs to be pointed out is that Chinese economic GDP production is massively inefficient even by third world standards and there are a lot of things that could be done to make China more energy efficient. The big one is to increase the price of energy inputs and make sure that pollution costs are linked somehow to the polluter.

The other thing is that democracy is not necessarily the same as rule of law. There are some reasonable definitions of democracy in which democracy actually is in opposition to rule of law. The problem with the term democracy is that it means so many different things to different people, that it is nearly impossible to have a conversation about it without defining it first, and once you hear people's definitions, you realize that you have lots of people who really aren't talking about the same thing at all.

Finally, global financial institutions are some of the more powerful supporters of China, which is one big reason I work in one. The other reason I work in an MNC is that MNC's are much nicer to people with "multiple global identities" than national government tend to be, and I've found it refreshing to work in an environment where I don't have to apologize for being a "mongrel."

A word to Nan, I've always gotten the sense that you don't have much experience in countries other than China and the United States, and that you are comparing first hand experiences in China with first hand experiences in the US, and by those comparisons China looks awful. However, I'd argue that by global standards, China doesn't look that bad (and obviously you disagree).

The reason this comes up is that there are relatively few countries in the world in which you *can* safely drink the tap water. So bashing China because you can't drink tap water there seems to be an odd standard of comparison.

The other thing is, to be blunt, I don't think you know what a failed state really looks like, or how bad things can really get. That's sort of the lack of imagination that I think was part of the Bush administration's decision to go to war in Iraq. You had people growing up in suburbia that simply could not imagine how much worse things could get.

I go back to Aristole that pointed out good government is a delicate balance between tyranny and anarchy. The danger in fighting tyranny is that one pushes things to the opposite extreme and you get anarchy. That's a fundamentally different model of government than the one I think you have.

By the way, PRC defense spending last year in current exchange rate terms was $30-40 billion. The space program is a few billion. The biggest new growth items on the budget are education which is being funded by the central government rather than local municipalities and trying to get together a health care system to replace the one that is broken. Both health and education are each about $30-$40 billion items.

I think one can reasonably ask for more environmental spending in the central government budget, but the allocation of money is not nearly as out of whack as nanh seems to imply.

One interesting point of comparison is that China is spending more money on the US military than it is on the Chinese military. In exchange rate terms, China spent $30-$40 billion on the PLA. Last year, China bought about $100 billion in US Treasuries.

t fish:

1) just to clarify; Chinas growth, in its current form is unsustainable whether or not it follows the US example or not, and

2) No need to justify working for an MNC to me.I dont care. I support China as well: I would like it to have a future other than one as a cheap, polluted, manufacturing base with a destroyed natural environment. I also hope that its people stop discriminating against other cultures based on race: especially black people, given the extent of its business in Africe.

After all, we are all on the same, sinking ship.

Paul Midler (ii) --

I met in my work experience such producers and only that person or entity is responsible for substandart production.
Looking to the huge growing exports from China
we can assume a very high percentage of the goods are meeting the customers expectation.
I just wanted to draw attention, to the weakness of QC that allow faulty products to leave the production base.
Joe Gariplerden --

I agree with you to the extent that any company having product manufactured in China must act as though it will ultimately be responsible for any defects. But, surely you are not simply excusing everything that goes wrong on the China side, or are you? If you are, then I have to ask why?

twofish:

Your multiple responses shows that I am on target with my remarks about China.

"By the way, PRC defense spending last year in current exchange rate terms was $30-40 billion. The space program is a few billion"

Uh-huh, except that the PLA does not report any research activities, which are carried out by PLA owned subsidiaries like Legend computers, SMIC microchips or Dong Feng automobiles (PLA vehicles are also Dong Feng brand, including mobile ICBM launchers).

And I said China is approaching failed state status, the only thing that holds China together is the power that flows from the barrel of a gun. Ever heard of Mao?

600 million live without sewage treatment, many in major cities: http://au.news.yahoo.com/070831/2/14bgp.html

China can't control its exporters so it muscles poorer countries to accept shabby products:
http://www.msnbc.msn.com/id/20600252/

The CCP needs Taiwan and Japan as "enemies" to keep people focused on something other than the CCP.

And on top of that, China is becoming unable to feed its people with even basic staples such as rice and wheat, mostly because the water is too contaminated to irrigate with and valuable land is consumed for industrial use.

And pointing to my blog, China receives probably over $10 billion in remittances from family and friends living in developed countries.

And social order is getting worse due to the peoples' anger with pollution and the gender imbalance.

What kind of successful state is that?

The fact that US went through these process of counterfeiting products before becoming getting a their stage today should not be a yardstick to encourage or turn a blind eye to poor quality products coming out of China. Neither should the effects of US consumers be a supportive factor. Dont forget that in the eighteens when US was in the act modern day technology was at its low ebb. China should take advantage of the modern day technological developments to improve fast,
Are we going to wait until all our children die from poisonous lead in toys, and that in electronics?
Quality Control laws should be enforced, and necessary sactions rolled out to defaulting nations.
We need to safe world.