Chinese Junk ( Attention, Mao-Mart Customers! )

National Review ^ | May 28, 2009 | John Derbyshire

[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.

[WVKayaker]

If you did your research, you would realize that WalMart and the other mass retailers are almost the sole cause of the demise of domestic manufacturing.

Yeah, we should have stayed in the "good old days" of the company store. Then, there was the little Mom and Pop store's with their keystone markups. That means 100% for those not "in the know".

Then stupid people decided to sell for less and "penalize" those locals that wanted to maintain their profit margins. It's so easy to blame China for smart business practices. We paid them with our dollars, duh! They are now buying resources and selling off their USAbucks.

yeah, it is really about reality, and history is real!

[GingisK]

You can't blame WalMart...

Oh, I can indeed blame WalMart, Sears, Penny's, Radio Shack, etc.

It is the retailers who choose to buy from China. We as customers were not clamoring for poorly manufactured products just so retailers could have a higher margin.

You can't fool me, sonny. I used to buy and use the products made here in the 1960s and on. They were made very well. I can show you tools I bought in the 1970s that would make you cry with envy. I can show you the same tool made today that makes me cry over the loss of quality and functionality.

I can clearly remember the disappearance of quality products without me asking for the cheap shit. I can clearly remember having been left with no choice over quality. Furthermore, I used to work for a company that supplied WalMart with product. We knew the register price and we certainly knew our costs. I can assure that WalMart's margin is obscene. I can also assure you that their erosion of our margin killed my company. It is easy to extrapolate that to all of the other companies that went out of business.

Are you the latest WalMart shill, come to defend their, ahem, honor?

[GingisK]

That means 100% for those not "in the know".

WalMart shill, your company goes with a 1000% markup routinely.

History is on my side, not yours. I used to work for a WalMart supplier. I could visit the closest store to observe the register price.

[kellynla]

And your ignorance isn’t. LMAO

[GingisK]

We paid them with our dollars, duh!

YES! WalMart paid the Chinese with dollars that earned by Americans, and were once paid to Americans.

Americans never put poisons in the foods, or poisons in the toys, or bubbles in the castings. Americans made quality products. WalMart business buddies screwed the American people, and yet WalMart keept right on buying from them. Doen't that ultimately reflect on WalMart. Who is to blame, shill? It isn't the Chinese. Its the WalMart buyers.

[GingisK]

I guess ignorance is bliss...

If so, you must be really blissful.

[WVKayaker]

WalMart shill shopper! I guess 1000% is reasonable, if they can sell at their prices! But, I know their profit margins are actually very slim. But, hey, don't let facts get in your way. You really seem to know everything... (do I need to /sarcasm?)

BTW, how many employees does the average school have, that actually teach? How many "administrate"? How many people are watching all of those "traffic cams"? That is a much greater concern to me!

[GingisK]

But, I know their profit margins are actually very slim. But, hey, don't let facts get in your way.

It is very obvious to me that you are the one who doesn't know the facts. Once again you are overlooking the fact that I have first-hand experience in this. You are reading from a script that has been prepared by your American-hating masters.

SHILL!!

You are obviously a biased WalMart employee. Who else would have a battery of WalMart photographs ready to post on such a thread? Those photographs don't add any merit to your argument, they are merely the "Banner that you Wave".

Do you live in India?

[investigateworld]

I agree with that post somewhat, but we've created the monster with our lack of tariffs.... free trade, race to the bottom, whatever you want to call it.

Now we are in a strange situation; we're asking China to buy our national debt and rein in the Chiapet Korean.

The once most powerful nation on earth ... look now, begging the Chicoms to finace one more spree.

I suspect our grandchildren will curse us.

[raybbr]

You misread WVKayaker's posts. He does blame the unions.

Oh, I blamed them too. Till about ten years ago. In 1978 I worked at U.S. Steel and the unions just about ran them out of business. Even as foreign competitors were beating domestic producers the unions demanded more.

Fast forward to today and unions, except for auto manufacturers and some printers, are not even a player in the demise of manufacturing. It's more taxation and regulation than anything else that drives companies off shore.

[GingisK]

It's more taxation and regulation than anything else that drives companies off shore.

That is certainly a major component. I have witnessed that the profit margins of the manufacturers eroded completely away at the hands of the retail outlets. Their downward price pressure first made American labor too expensive, making it necessary for manufacturing to be sent overseas. Continued price pressure was next relieved by outsourcing routine IT support. Continued downward pressure next caused engineering to be outsourced. This will continue until the American companies entirely relocate.

Already Indian companies are appearing to design, manufacture, and market high technology items. Most cellular modems originate in India, with American firms merely serving the role of "manufacture representative".

It is my observation that high levels of retail greed and naivety on the part of the American consumer is what destroyed the economy.

[WVKayaker]

I'm sorry you have such a bad life due to evillllll Wally World. Your facts don't add up.

Your mileage may vary!

BTW, Google will give you a wide assortment of images for anything. for example, I Googled "village idiot", and got this:

Which one is you?

[GingisK]

Find a photo of the local WalMart shill, that would definitely be you.

Only one vested in WalMart in some fashion would need to be so passionate as you, complete with photographs.

Perhaps you could demonstrate how my "facts don't add up". I'm working from true life. You are working from a script, complete with approved company images. You are woefully transparent.

Let us see how your facts add up: I am posting from the standpoint of identifying those "things" that destroyed an economy that was working quite well. I do this in hopes that people will "wise up" and return to buying products of quality, or maybe even to coax WalMart purchasing agents to return to purchasing quality products for resale to the customers they allegedly hold so dear. You, on the other hand, seem to be fine with the destruction of a quality manufacturing base, and are happy to see Americans get taken for products that can't even survive being removed from the bubble package.

It should be obvious to anyone reading this thread that I'm cheering for America, American jobs, and American quality. It should be equally obvious that you are supporting a junk reseller with uncharacteristic zeal. You are a paid WalMart shill.

[WVKayaker]

I support WalMart by shopping there for stuff I use. I do have that right, don'tI?

I started in retail in the furniture business in NC. In short order, I was management and buyer. I made trips to High Point and Atlanta to but for 2, then 3 stores, with diverse customers. I was good at what I did. I even got a design degree while I was doing it.

I bought some case goods from Pulaski (VA) Furniture, in the 70's. It was great design, with plastic components. They finished them like wood, and looked great. Their competition was folk like Pennsylvania House and Drexel-Heritage.

The "high end"stuff used solids and veneers to construct their designs, and finished them beautifully. Pulaski bit into them with great designs at 70% of the "big boys". People gladly bought the plastics. Veneer trees cost upwards of $5000 a log.

Armstrong (the floor people) began a printed case business back then. With offset presses, they "imitated" wood patterns, and sprayed a hard finish. Tons were sold by the week. Price was cheap, and people looked for storage, over aesthetic.

I have started a number of businesses. I am not good at running them . I am good at starting them. I have found it best to turn them over to others after they are up, then take a piece of the results. It has worked well.

Most competition is within ourselves...

I am not vested in WalMart. Most furniture made today, comes from outside the USA. NC was once the center for 75% of it. China produces a lot, but so does Taiwan, and Malaysia.

It's easy to look elsewhere, and blame "boogymen". It is nothing but business as usual. There is nothing new about it, FRiend, so get your panties untwisted with me...

...by Pulaski

[GingisK]

Most furniture made today, comes from outside the USA.

This is due to the extreme downward price pressure that retailers subjected manufacturers to. WalMart isn't the only one doing that. All of the chains did it without mercy. Customers are also to blame, for selecting price over quality. Customers, retailers, and manufacturers are to blame for failure to place "America First" in all that they do. I would pay a much higher price to buy furniture made in NC, but nobody left me that option.

In essence, usurious GREED destroyed us. The WalMart-types with their 1000% to 10000% markup policies were the most damaging to the consumer. The Wall Street equals gutted our financial health using similar tactics.

[GingisK]

...so get your panties untwisted with me...

You are the one who resorted to "idiot" name calling and casting disparity upon my living conditions because, gasp, I dare disagree with what you mistake for facts. I've merely called you a shill, for nobody I know would defend WalMart with such devotion and intensity and merely be a customer.

[Freedom2specul8]

PlaceMarker

[Freedom2specul8]

Walmart has destroyed entire towns, I’ve seen the local economy crumble of one in particular...it was sad to see mom and pop businesses go under. I avoid it as much as I’m able, depends on the grocery budget for the month. I can’t stand their meat products, and the cost of meat there is outrageous I buy meat elsewhere.

[GingisK]

...I avoid it as much as I’m able...

I do the same. Since WalMart has destroyed almost every other retail outlet I do most of my hard goods shopping on the internet.

Thanks for throwing your hat into the ring....

[WVKayaker]

You are the one who resorted to "idiot" name calling and casting disparity...

...You can't fool me, sonny.

...Are you the latest WalMart shill, come to defend their, ahem, honor?

...WalMart shill, your company goes with a 1000% markup routinely....

...You are reading from a script that has been prepared by your American-hating masters.

SHILL!!

You are obviously a biased WalMart employee. Who else would have a battery of WalMart photographs ready to post on such a thread? Those photographs don't add any merit to your argument, they are merely the "Banner that you Wave".

Do you live in India?

Find a photo of the local WalMart shill, that would definitely be you.

Only one vested in WalMart in some fashion would need to be so passionate as you, complete with photographs.

Perhaps you could demonstrate how my "facts don't add up". I'm working from true life. You are working from a script, complete with approved company images. You are woefully transparent.

Let us see how your facts add up: I am posting from the standpoint of identifying those "things" that destroyed an economy that was working quite well. I do this in hopes that people will "wise up" and return to buying products of quality, or maybe even to coax WalMart purchasing agents to return to purchasing quality products for resale to the customers they allegedly hold so dear. You, on the other hand, seem to be fine with the destruction of a quality manufacturing base, and are happy to see Americans get taken for products that can't even survive being removed from the bubble package.

It should be obvious to anyone reading this thread that I'm cheering for America, American jobs, and American quality. It should be equally obvious that you are supporting a junk reseller with uncharacteristic zeal. You are a paid WalMart shill.

I would pay a much higher price to buy furniture made in NC, but nobody left me that option.

Lots of furniture is still being made in North Carolina and Virginia, but I doubt you would really spend for it!

I have one of these from Harden. It hides my TV and stereo. They were made in Japan! It currently sells for about $12k with the flanking bookcases. My bedroom stuff is from Ikea... with a Beautyrest Pillowtop King to spend my nights. My mattress is worth twice that of the furniture beside it. I like platform beds.

RUSTIC COUNTRY with a touch of sophistication defines Harden’s Bristol Channel Collection. Blending and simplifying European Traditional styles, this solid Adirondack maple group draws from history to satisfy today’s desire for casual elegance. The result is a collection that creates a relaxed, confident atmosphere.* Harden