Posted on 05/28/2009 5:49:24 AM PDT by kellynla
Is China really a modern country? Can China be a modern country? Paul Midler’s book leaves you wondering.
After studying Chinese at college, Midler lived and worked in mainland China through the 1990s before returning to the U.S.A. to take a business degree. In 2001 he went back to China, setting himself up as a consultant to American importers dealing with Chinese manufacturers. This has given him profound insights into the Chinese way of doing business. In Poorly Made in China he shares those insights. After reading his book, you will find yourself thinking carefully before putting Made in China items into your shopping cart.
Midler identifies the features of China’s production environment that make a joke of all the free-trade slogans. There is, for example, “quality fade.” You cut a deal with a Chinese manufacturer to import beauty lotions in plastic bottles. You give precise specifications for the product and container. The first shipments are fine. Then customers begin to complain that the plastic of the bottles is too thin. You squeeze a bottle, it collapses. It turns out that your manufacturer has quietly adjusted the molds so that less plastic goes into making each bottle. Neither the importer nor his customers has been told of the change.
The reason for this:
Factories did not see an attention to quality as something that would improve their business prospects, but merely as a barrier to increased profitability. Working to achieve higher levels of quality did not make me a friend of the factory, but a pariah.
In this, as in much else, the Chinese are great testers of limits. Just how much “quality fade” can a supplier get away with before the business relationship breaks down? You can be sure they will find out, and stop short a millimeter before the electric fence.
Then there is intellectual-property arbitrage. Under pressure from the advanced nations, the flagrant disregard for intellectual-property rights that was on display in China through the 1980s and 1990s has been brought under some measure of control, but much of it has just gone underground. As Midler writes, “Americans somehow imagined that Chinese factories existed to manufacture merchandise only for the United States, but this was not the view from China at all.”
From the point of view of a Chinese manufacturer, the world is divided into “first” and “second” markets. In the first market — North America, Western Europe, Japan, Australia, and some lesser outposts of legal order — new product designs originate, and the designs are protected by patent, trademark, and copyright laws. By all means go along with that: Get business relationships going with customers in those places. Manufacture according to their designs, observe their laws, give them good deals — even sell to them below cost. Then sell knock-offs of their designs to Latin America and the Middle East, where intellectual-property protection is not so valued. This arbitrage game explains the curious fact that Chinese-made products are often more expensive in the developing world than in the U.S.A. That’s where the profits are made.
The most vexing game to Midler was the one in which Chinese manufacturers relentlessly play off importers against buyers. Everyone is trying to make a profit, of course: the manufacturer from the importer, the importer from the U.S. store chain’s buyers, the store chain from the retail customer. The importer is at the Chinese end of this linkage, negotiating with the Chinese manufacturer, and must bear the brunt of Chinese gamesmanship.
Manufacturers are highly skilled at shifting profit margins from the importers to themselves. If a Chinese factory boss knows any English at all, Midler tells us, it is likely to be the phrase: “Price go up!” Whether the manufacturer’s costs actually have gone up is impossible to ascertain, accounting standards in China being, well, Chinese. Since the importer-buyer deal is fixed under American law, the importer must swallow the manufacturer’s price increases, which happened under Chinese law — which is to say, no law at all.
PAGE But then the importer can switch to another manufacturer, right? Not necessarily:
The health and beauty care industry was one that existed in a tight network. Some manufacturers in the industry were even related to one another. Others shared an educational background. . . . Others shared a kinship that was based in part on membership in the Communist Party. And then some had suppliers in common.
How skillful are Chinese manufacturers at gaming the free-trade system? Think three-card monte. One of Midler’s key import contacts in the U.S.A. is a man he calls Bernie. We learn in Chapter 4 that Bernie belongs to the Syrian-Jewish community, the most capable and exclusive of all the world’s “market-dominant minorities.” (They refer to ordinary Jews like Paul Midler rather dismissively as “jay-dubs,” from the consonants in “Jew.”)
Yet with all his savvy and connections, Bernie is outfoxed time and again by the Chinese. He turns the tables on them just once, in Chapter 21, but his advantage is merely temporary. The worldly and confident Jewish diamond dealer in Chapter 15 fares even worse. This would be a mighty King Kong vs. Godzilla clash of market-dominant minorities, except that the Chinese are on their home turf — actually a majority. Outsiders stand no chance.
With his strong background in Chinese history and culture, Midler is able to identify some of the underlying problems. Many of his vexations echo those voiced by foreigners in China for half a millennium or more: a love of excuse and pretense, the elevation of appearance over substance, admiration for unprincipled cleverness, shame a much stronger sanction than guilt. The old stereotype of the Chinese as chronic gamblers has some foundation in the Chinese psyche, too, as Midler notes:
The impression I got at some of the factories that engaged in quality manipulation schemes is that they did so after growing bored with their more conventional successes. . . . There was a great deal of excitement that came with getting a new business off the ground. These manufacturers were thrilled when they signed up their first major customer, and they got another kick from orders that were especially large. When deal flow leveled out, factory owners looked for other ways in which they could capture that hint of thrill.
All these quirks of national character would be harmlessly amusing in a business environment constrained by impartial law and rational politics, as indeed is the case in Hong Kong and Singapore, and increasingly in Taiwan. In mainland China’s barbarously low level of political and legal development, they express as poisonous pathologies — metaphorically poisonous to a healthy capitalist mentality, but sometimes literally poisonous to the unwary consumer, as we have seen in the recent scandals over toys, baby food, and pet food.
None of this will come right until the current odious dictatorship falls and the Chinese have a system of government worthy of their great talents and civilizational glories. Can we do anything to help? We might have, once. Paul Midler:
During the Clinton administration, when Most Favored Nation status for China was debated in Congress, there was a chance for the United States to hold out for political and economic reform in China, but the opportunity was lost. . . . Improved structural conditions made possible then might have more appropriately set the stage for stability going forward. Instead, American politicians and business leaders rushed headlong into greater levels of interdependency with China, a nation whose reliability is questionable.
Poorly Made in China manages to be both instructive and entertaining, with lessons not only for businesspeople looking to China for profits, but also for our politicians seeking to promote honest trade and U.S. national interests. I wish I could believe that the latter, some of them at least, might pay attention. On past experience, though, that is too much to hope for.
The reason for this:
Factories did not see an attention to quality as something that would improve their business prospects, but merely as a barrier to increased profitability. Working to achieve higher levels of quality did not make me a friend of the factory, but a pariah.
In this, as in much else, the Chinese are great testers of limits."
And just as we are funding the War on Terror on BOTH ENDS every time we fill up at the gas pumps...we borrow money from the Chicoms so that we can continue to buy their products...how dumb are we?
How do you say “SUCKERS” in Chinese?
I would rather buy cheap Chinese junk than expensive union made junk..
Great post.
I would prefer to continue having the choice to buy either.
The California DOT has found this out the hard way. A lot of the iron and steel work for the new San Francisco Bay Bridge is being made in China, and CALTRANS has had one hell of a time monitoring quality of welds for this job.
That is precisely why our economy is now it the present condition.
“a love of excuse and pretense, the elevation of appearance over substance, admiration for unprincipled cleverness, shame a much stronger sanction than guilt”
Sounds like liberals.
That is precisely why our economy is now it the present condition.
No, not precisely. Unions bear a large responsibility for this as well and we've already seen that Smoot-Hawley type of legislation creates far too much misery to make it feasible. However, blaming the guy who wants to save a buck instead of spending it on union benefits is not the answer either.
ping
“I would rather buy cheap Chinese junk than expensive union made junk..”
-
Translation:
“AMERICA LAST”.
Get a clue.
That was my first thought -
the Chinese are less destructive to our way of life than unions are.
It’s not a matter of ‘Chicoms’ as you state. As long as China has had arbitrary authority, this behavior has been going on. It was like that well before the Communists took over.
The reason other countries with ethnic Chinese have progressed is the development of and adherence to contract law.
Too many Americans show outrage about Chinese products but do very little. I was in a bar three years ago when a fellow stopped by. After a few minutes, he started railing against China. When I bet him that his leather jacket was made in China, he took the bet because his brother bought the jacket and he would never buy anything from China. We examined the jacket together and I found the “Made in China” label. Unfortunately, he left immediately and I never got my Balvenie.
China is the world’s biggest labor union! Why are “free traders” so blind?
And why in the world is the GOP supporting this foolishness?
GOP free trade campaign slogan:
“You’re all fired. Vote for us”.
Great. We can all work for the Communist Chinese making crap.
Think that one through!
Our manufacturing base left this country because of WalMart and that model. I used to work for a company that supplied goods to WalMart. They would dictate our selling price until it became impractical to make the product. All the while, WalMart's margin for the product in their store was 1000%. I can assure you, "buy cheap" killed us.
I think I will go get Midler’s book. But the short blurb above does not surprise me. Read Tuchman’s “Stilwell and the American Experience in China.” What Midler deals with in international business today is exactly what Stilwell went through in dealing with the Kuomintang. This short blurb does not mention something Tuchman spent some time discussing: The Chinese are racists. They have always detested “the foreigner.” Chaing Kai Shek insisted on opening all the windows after meeting with Stilwell to “rid the room of the odor of the foreigner.” One of their favorite phrases is “we can always fool the foreigner.” I doubt any of this has changed.
Face it; the Chinese detest us, and when dealing with foreign companies they are double-dealing lying sacks of poop unwilling to honor any contract they sign. Anyone who does business with them is a fool, begging to get ripped off.
“China is the world’s biggest labor union!”
BINGO!
We have a winner!
And why in the world is the GOP supporting this foolishness?
Pinging John McCain, Pinging John McCain, Question for you at post 14.
What if they stole your idea or infringed on your patent and sold your item for 1/2 of what your were selling it for?
Sorry, I would take the union made items anyday..especially with the chicoms.
A major refinery in the Midwest prohibits the purchase of valves and piping materials from Mainland China. Quality problems, as in casting being very questionable, where the risk would be prohibitive. BTW, the management of the company is quite libertarian.
One major pharmaceutical company tried moving production to China, and found the exact kind of quality fade cited in this article.
Very few of the factories that were shut down in the US and moved to china were union. In manufacturing, unions comprise a small number. Union membership today is mostly made up of gov't employees, teachers, service workers etc
China has been arming Iran and giving them technological info, they hamper our efforts with the Norks, make deals with Chavez and other enemies of the US, prop up dictators in Africa and who knows what else.
History is not yet written on what damage our "friends" the chinese will do to the US in the long term.
Agreed and these are the unions (along with the UAW) that I personally have the biggest problems with. However I recall when all the shoe manufacturers and other manufacturing packed up and left the unionized Northeast for greener non-union pastures in the sun-belt. I don't remember too many tears coming from the sun-belt. How is what Chinese manufacturing has done to Amnerican manufacturing much different than what Southern and Western manufacturing did to Northeastern manufacturing? Capitalism is like that, no?
I have a serious problem with our manufcaturing plants going to a communist country that plays war games against us and hacks into the pentagon sometimes 10,000 times per day.
How you can compare the migration of plants from the North to the South with the migration of plants from the US to communist China is beyond me.
But non-communist places are OK with you?
I think the reason so many chuck a booters from CA (particularly in the Smogland Empire) are "conservative" is because so many worked in the defense industry back when CA had a defense industry.
Great post Kelly.
Apparently, you did not understand part of the text nor my statement which stated that this has been going on long before Communism. It was apparent under the nationalists as well.
Yes, to a degree. Those non communist countries would also have to respect our patents and technological rights and not hamper exports from the US to their country like China does on a regular basis. I'm not against free trade but want fair free trade.
Also, the point i was trying to make with the guy in the bar was that he was being hypocritical for blasting China then buying Chinese products. Sorry if you didn’t understand that as well.
I think we can both agree with the “fair free trade” talking point but like all things it comes down to picking your battles.
“a love of excuse and pretense, the elevation of appearance over substance, admiration for unprincipled cleverness, shame a much stronger sanction than guilt.”
Ok, which came first. did these traits come from china to the US or the other way around.
Because when it comes to making excuses and having style over substnce, I find it difficult to believe, anyone has it over the US.
Yeah, those chinese agents infiltrated wall street, and the banking industry. They blackmailed Madoff and Stanford into multibillion ponzi schemes. Ditto for Worldcom, Enron, Adelphia, Global Crossing. The got gettlefinger and the UAW to bankrupt our auto business so they could take over. They got Lehman, Countrywide, Merrill Lynch, WAMU to overleverage by trillions of dollars. They did the same with Freddie and Fannie.
Yep, I agree 100%, the chinese caused the US financial meltdown. Oh, the also put a drug in the US water supply to make us think Medicare, Medicaid, and Social Security are sound too.
I can assure you that if you actually read my posts, you would not be claiming that I said any such thing.
My implication is that people who buy cheap junk that is made in China instead of quality merchandise made in America are the ones who brought on this financial melt-down. This was entirely inflicted upon America by Americans.
you were wrong on your assessment and the authors proved you so...
“attention mao-mart customer”
the coolest wal-mart i have ever seen was in china. 3 stories with escalators made for shopping carts, it was so neat, but the produce department stank something awful.
For one thing, the expertise in whatever was being made stayed in this country. For another, the wages and taxes paid here were spent here.
We've gone from making things (creating wealth) to running tanning salons and pet boutiques (spending wealth) - not a good base for a national economy.
Agreed but I don't see that changing now that we have a regulate everything mentality. When you sign up to wear the Government pampers you end up with low-paid foreigners wiping your butt.
He used to say, "The definition of a Chinese merchant was one who could buy from a Scotsman, sell to a jew, and make a profit."
Chinese merchants have been cheating each other for so long that it is hardly a challenge to cheat westerners.
Garde la Foi, mes amis! Nous nous sommes les sauveurs de la République! Maintenant et Toujours!
(Keep the Faith, my friends! We are the saviors of the Republic! Now and Forever!)
LonePalm, le Républicain du verre cassé (The Broken Glass Republican)
>>>Union membership today is mostly made up of gov’t employees, teachers, service workers etc
And too many of them are more about being political cartels than employee rights.
Try the fish section at my local "Signature" Kroger's ! Botulism city !
>>China has been arming Iran and giving them technological info, they hamper our efforts with the Norks, make deals with Chavez and other enemies of the US, prop up dictators in Africa and who knows what else. <<<
Former Presidential Candidate Duncan Hunter Interview with Hugh Hewitt:
2008
Excerpt:
Duncan Hunter: You know this last report on China actually received lots of criticism from the State Department because it was very candid about assessing this enormous growing military strength of China. The assessment of the Pentagon was they are doing so much more then they have to do for self defense. They are building an offensive capability. When they shot that satellite out of space on January 11th, because America’s military eyes are largely in space, that really hurdled a new era of military competition between the U.S. and China in space. Like it or not, if you have to rely on satellites for movement of special forces or army brigades or marine corps divisions, you have to rely on satellites for that, and your satellites are in danger, you are in trouble. So we have our eyes, our military eyes [on China]. Plus a lot of our economic capabilities are reflected through our space apparatus. You have to protect that. We are going to have to spend a lot of money now and take a lot of effort to neutralize what is an aggressive Chinese policy in regard to space.
Hugh Hewitt: Let’s talk about the media and China. I asked you about this on the radio yesterday, how many questions have you had about China in the course of the Campaign. You have been on the trail for how long?
Duncan Hunter: We have had 4 congressional debates now and we have been out campaigning hard this entire year. We had one great question, I think it came from either Brit Hume or one of his team, during the Fox debate in the South Carolina, last question of the debate to me on China. I was able to give, you only have one minute answer, I try to be a master on the compact answers, I laid out that we have this cheating on trade which is stacking up billions to China and they are using this money to arm. This presents a long term challenge to the United States. Maybe not a direct threat; but a military threat is comprised of two things, capability and intent. They certainly are building a capability to cause us a lot of harm. And the intent of China is always difficult to understand.
Those tough old communists that ran the Politburo are still running things. We see these generals make wild statements like, “We hope you value L.A. more than you do Taiwan”. That is a thinly veiled threat to nuke L.A. Then there will be a flurry of newspaper statements by people saying well, ‘general so and so didn’t mean it’. Well I hope general so and so is pretty far away from that nuclear trigger. Because that is a wild statement. You see those wild statements that came out of Yunnan Island where the American plane was shot down or was forced down, and the wild statements that came out of there diplomacy core after that were tempered by their trade people. But it shows us there is a element of leadership that is embedded in the Chinese hierarchy that is very aggressive, very anti American and very war like. It is difficult to know which element of the Chinese leadership is going to dominate the government in 5 years.
(snip)
This is exactly the point I was trying to make with Kelly but somehow that person didn’t seem to understand. If you read Kelly’s post to me, apparently it all has to do with Communism. The point I was making was that this has been going on for years.
Not too sure why Kelly ignores one of Midler’s observations, as well as that of others, that this has been a constant trait in China. As a person of Chinese descent, I can say that it happened when I was living in Taiwan under one-party Kuomintang (KMT or Nationalist) rule. In fact, many of the products were copied and made substandard on a regular basis. Only in the past 25 years has Taiwan gotten on the contract law bandwagon.
shezzzzzzzzzzz...Newbies...
Interesting article, thanks.
bttt
U S A !
USA!
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