Chinese Products: Buy at your own risk

[GTA1]

Outplaying your partner
Poorly Made in China by Paul Midler

Reviewed by Muhammad Cohen

When you buy for US$2 in New York an umbrella that's made in China, you have to wonder how they do it. After all, the umbrella components have to cost something, there's shipping, and there's profit for numerous middlemen and the retailer. Among the economic miracles unfolding in China over the past two decades, the most mysterious may be how a country that skipped the Industrial Revolution, substituting the Cultural Revolution, became the low-cost factory floor to the world.

Poorly Made in China: An Insider's Account of the Tactics Behind China's Production Game provides fascinating and disturbing answers. Chinese manufacturers cut corners wherever they can, from product quality to factory equipment and maintenance. They unilaterally change product and packaging specifications to trim costs. They raise prices after the deal is signed, leaving the importer to absorb the added cost. They reproduce their customers' products for sale at higher margins in other markets. With support from government, bankers, and networks of fellow manufacturers, they conduct manufacturing and customer relations as a game, treating the other party as a patsy not a partner, playing for the short term of making an extra penny at the risk of product quality but also taking a long-term, multidimensional outlook that outflanks the hapless customer.

Paul Midler, a self-styled version of Raymond Chandler's detective Philip Marlowe investigating on behalf of importers, shows readers the dark side of Chinese manufacturing. A Chinese-speaking American with more than a decade of experience in China and a Wharton MBA, Midler himself seems to have followed the relationship curve he describes for Chinese manufacturers and importers. It begins with infatuation and satisfaction beyond expectation, but turns into a source of constant frustration at a situation in which the Chinese manufacturer has the upper hand, taking advantage because the bond is now too difficult to sever.

Poorly Made in China provides ample evidence supporting the Hong Kong adage that once you sign a contract in China, that's when the real negotiations begin.

To Midler, lead paint in toys and melamine in baby milk formula are not surprises but predictable outcomes from a manufacturing culture that takes customers for granted and assumes no responsibility for its outputs.

'All we need is your sample'

Despite that approach, China for nearly a decade has been phenomenally attractive to importers, particularly Americans. Even though other countries can undersell it, China remains the top choice for contract manufacturing. China has better infrastructure and internal stability than low-cost producers such as Vietnam or India, so shipping channels are more reliable. It has a wide range of manufacturers, eager to make anything importers want, offering the equivalent of "no money down" deals, driven by the mantra, "All we need is your sample".

Intangibles also boost the Middle Kingdom's appeal to Westerners. China is exotic without being bizarre, romantically foreign yet as familiar as the local Chinatown. People may speak a different language and use that weird writing, but they wear familiar clothes, not robes or headdresses. Chinese don't pray five times a day, sacrifice animals, or insist visitors adopt odd gestures such as bowing. While this 4,000-year-old civilization insists on its cultural uniqueness, modern China has also made conscious efforts to accommodate Western business. For example, Midler cites the widespread use of English names, in sharp contrast to Japan or India, where cultural barriers for foreigners begin with local names.

As more United States companies turned to China for contract manufacturing and Chinese goods became ubiquitous in the US, it became trendy to use China for production (just as Western exporters have felt compelled to have a China strategy to penetrate its market). Doing business in China is the sign of a savvy 21st century company.

Midler frames his tale around US importer Johnson Carter, supplying large chain stores with house-brand shampoo and soaps, run by a sharp salesman called Bernie. Midler finds it odd to manufacture products that are mostly water in China and ship them halfway around the world, but that's not his business. The Chinese manufacturer is King Chemical, located outside Guangzhou, the trading center once known as Canton, owned by Sister and her husband A-Min. (Names in the book are altered, according to Midler, but the stories are genuine.)

Who's fooling who?

Bernie first called Midler to examine King Chemical's factory. Midler reported to Bernie his suspicion that the production line had been arranged for his benefit and that the factory wasn't actually making anything. Bernie said he suspected the same thing on his earlier visit. Rather than disqualifying King Chemicals, the charade made Bernie more anxious to do business with them. "They're desperate for my business," he observed. Bernie was a Syrian Jew, a group with a long, proud commercial history, and he thought he knew all the tricks of the trade. He was about to learn new tricks: even when making soap in China, one hand doesn't wash the other.

Chinese manufacturers are dismal at marketing their products but are masters at winning deals then playing their importer customers. King Chemical's initial ruse illustrates the lengths that Chinese factories go to capture business. Even Bernie found himself wondering how King Chemicals could make money selling him a bottle of shampoo for US$0.30, including the pump, label and contents.

One answer emerged when Midler accidentally heard about King's "other factory". That facility was making Bernie's products but for an Australia importer paying a higher price than Bernie. The practice was common; factories took on clients for little or no profit to learn product formulas and designs that they could recycle into "second markets" such as Africa at higher margins. This model helps explain why many products cost less in rich countries where people can afford to pay more, and why Africans find bargains shopping in New York and London.

Non-profit business

For Chinese manufacturers, a deal with an importer can be desirable even if it doesn't appear profitable. Reasons range from domestic counterfeiting opportunities to status to customer contacts (for disintermediation - cutting out the importer to deal direct with retailers) - to cash flow or capital (secured by an enlarged plant) for other investments. While most small importers are playing checkers, focusing on profit on each contract, Chinese manufacturers are playing chess - and playing to win - Midler says.

Midler recounts how manufacturers outplay importers across the board, sometimes to shave costs, sometimes to save trouble, sometimes for the fun of the game. One explanation of Mattel's lead paint debacle in 2007 was that the toy giant's supplier's supplier switched the paint as part of routine gamesmanship.

On Johnson Carter orders, without consulting Midler or Bernie, King Chemical switched to thinner bottles, flimsier packing cartons, different fragrances (because Sister said she didn't like one soap's smell), and new product formulas, one that caused itching and another that clotted at temperatures below 15 degrees Celsius (60 degrees Fahrenheit). Sister gave away the clotting problem by asking about the weather in the shipment's destination city, Chicago, but she wouldn't reveal the ingredients of the altered formula when Johnson Carter tried to find a way to fix it.

King Chemical also tried to ship improperly filled and mislabeled bottles. In each instance, the factory suggested the importer take the shipment and deal with the fallout from customers, King Chemical only offering assurances to do better next time.

Doesn't wash anymore

Midler points how these games can turn dangerous. At King Chemical, poor factory oversight and lax employee discipline put people with skin infections on the production line, risking product contamination. Factories slap on quality-control stickers but they're meaningless. Midler laughs at "No Animal Testing" labels on Johnson Carter products - because there's no testing at all. Laboratories can only check for a specific substance in each costly test, and there's no limit to the harmful substances that might have been introduced to a product, either accidentally or by changes to the product formula without the importer's knowledge, so most importers just cross their fingers. While working with Johnson Carter, Midler became so paranoid that he stopped using soap.

Manufacturers get away with these stunts, including arbitrary price increases, because once an importer starts a contract manufacturing relationship with a supplier, it's usually stuck. As with a marriage, it's often generally better to try to work things out than break up. The cost and effort of finding another manufacturer - and networking between manufacturers to discourage poaching clients - mean that importers have few options, unless they're ready to forego supply for several months. The longer the relationship, the more the factory takes the upper hand, according to Midler. Manufacturers expertly play importers' anxieties, and the customer often winds up begging the factory to deliver the product.

For the factory, an established relationship becomes a one-way street, not a partnership. According to Midler, the Chinese side simply looks for all the advantage it can, using every tool at its disposal. The author sees that as a cautionary tale beyond the world of manufacturers and importers to the heart of US diplomacy with China. The prospect of the US being drawn into that kind of a relationship with a nuclear armed, numerically superior China holding trillions in US Treasury securities is a lot scarier than questionable body scrub. Midler has written a fascinating, funny and important book.

Poorly Made in China: An Insider's Account of the Tactics Behind China's Production Game by Paul Midler. Hoboken, New Jersey, USA, John Wiley & Sons, April 2009. ISBN: 978-0-470-40558-1. Price: US$24.95, 242 pages.

Former broadcast news producer Muhammad Cohen told America’s story to the world as a US diplomat and is author of Hong Kong On Air (http://www.hongkongonair.com), a novel set during the 1997 handover about television news, love, betrayal, financial crisis, and cheap lingerie. Follow Muhammad Cohen’s blog <http://muhammadcohen.wordpress.com> for more on media and Asia, his adopted home.

 

[michaelplogue]

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..... And let's not forget: 'Safety' costs money.....




[youtube]RJjeDfZW1yc[/youtube]

 

[louispower]

it's hard to image to buy a good quality umbrella at 2 dollars even in China, as I know the manufacturers have differnt quality level for same kind product, the difference between this is the raw materials quality level. You pay good price, you get good quality products, otherwise rubbish. In China people says "one cent, one cent quality", so only to contribute the bad quality to Chinese manufacturers is not fair, see the example of umbrella @ 2 dollars, I think this importer may only pay 1 dollar for one umbrella actually.

 

[spinningmagnets]

I think this is one of the top 3 reasons many potential consumers are hesitant about Light EV's such as bikes, scooters and motorcycles. It is also why customers are willing to pay a little more to purchase from a local dealer (if possible). It sets up a "what came first the chicken or the egg" situation.

Nobody will put down a deposit to become the only dealer in a 3-state region unless they feel there is a reasonable customer base. Customers are reluctant to order a light EV thats delivered direct to their home from China. If its the wrong color, or some part is missing or broken, possibly the charger or controller doesn't work...the fine print that says their warrantee will replace the part if the customer pays the (inflated) shipping. Plus you have to wait a month to get the replacement part.

For those who do make the plunge to become an early adopter, whether it is a Japanese product with a 1-out-of-100 problem, or a Chinese with 1-out-of-4 problem, many hope they will be the lucky one that bought a cheaper Chinese product, but got a "good" one (I won! I won!)

I was just reading about the GPR-S E-Motorcycle (I assumed it was from China due to its low $8,000 price) and found the frame is made in Thailand, so I am hopeful they will take the long view and try to establish a reputation for reliable longevity. The light EV market needs someone to become the "Toyota" in the pack, there are already too many Mercedes's and Yugo's.

 

[GTA1]

Unless you buy from a reputable and established importer who will stand behind their products, Chinese made stuff are getting to the point where they are more trouble than they are worth.

Why should we invest real time (at US/Europe rates) to shop for, set up, and maintain their products ?

It is cheaper to buy top quality stuff if your time is worth anything more than minimum wage.

 

[Lock]

..... And let's not forget: 'Safety' costs money.....

Hehe... from a 2004 article:

Injury incidents have a common thread. Usually, migrant workers arrive in one of China's coastal industrial zones. They take any job offered, no matter the conditions. With no safety training, the worker is assigned to an unfamiliar machine.

Compensation for each cut-off finger is 500 yuan, or about $60, roughly a month's salary.

Some workers would prefer to die because their parents would get a larger one-time compensation, said Luo Yun, professor of workplace safety at Beijing's University of Geology. "There's a popular saying now: 'We can afford to die, but we can't afford to be injured'," Luo said.


tks
loKc

 

[julesa]

[youtube]ETO3-MxMe2Q[/youtube]

 

[louispower]

I think this is one of the top 3 reasons many potential consumers are hesitant about Light EV's such as bikes, scooters and motorcycles. It is also why customers are willing to pay a little more to purchase from a local dealer (if possible). It sets up a "what came first the chicken or the egg" situation.

Nobody will put down a deposit to become the only dealer in a 3-state region unless they feel there is a reasonable customer base. Customers are reluctant to order a light EV thats delivered direct to their home from China. If its the wrong color, or some part is missing or broken, possibly the charger or controller doesn't work...the fine print that says their warrantee will replace the part if the customer pays the (inflated) shipping. Plus you have to wait a month to get the replacement part.

For those who do make the plunge to become an early adopter, whether it is a Japanese product with a 1-out-of-100 problem, or a Chinese with 1-out-of-4 problem, many hope they will be the lucky one that bought a cheaper Chinese product, but got a "good" one (I won! I won!)

I was just reading about the GPR-S E-Motorcycle (I assumed it was from China due to its low $8,000 price) and found the frame is made in Thailand, so I am hopeful they will take the long view and try to establish a reputation for reliable longevity. The light EV market needs someone to become the "Toyota" in the pack, there are already too many Mercedes's and Yugo's.

Absoutely I agree with you, for final customers to buy from local dealers is wise choice for ever, especially for the light EV products. We could receive requests almost everyday to buy from us directly, and there are also some requirements of "Drop shippment" business, for areas where we have dealers there we always ask customers to buy from dealers for effictive back up service.

 

[louispower]

Unless you buy from a reputable and established importer who will stand behind their products, Chinese made stuff are getting to the point where they are more trouble than they are worth.

Why should we invest real time (at US/Europe rates) to shop for, set up, and maintain their products ?

It is cheaper to buy top quality stuff if your time is worth anything more than minimum wage.

Although a Chinese made product with good quality will cost less money than similar products made in USA ( except for the petrol :lol: ), so there will be motivation of import to make money. Basic rule of econimics, hard to disobey it by any one.

 

[louispower]

..... And let's not forget: 'Safety' costs money.....

Hehe... from a 2004 article:

Injury incidents have a common thread. Usually, migrant workers arrive in one of China's coastal industrial zones. They take any job offered, no matter the conditions. With no safety training, the worker is assigned to an unfamiliar machine.

Compensation for each cut-off finger is 500 yuan, or about $60, roughly a month's salary.

Some workers would prefer to die because their parents would get a larger one-time compensation, said Luo Yun, professor of workplace safety at Beijing's University of Geology. "There's a popular saying now: 'We can afford to die, but we can't afford to be injured'," Luo said.


tks
loKc

there are even worse cases than what you posted here, hard to comment on this, has been related with politics.

 

[Lock]

...there are even worse cases than what you posted here, harm to comment on this, has been related with politics.

So, cultural mindset and "politics" are two different things?
Just curious!
tks
lok

 

[louispower]

...there are even worse cases than what you posted here, harm to comment on this, has been related with politics.

So, cultural mindset and "politics" are two different things?
Just curious!
tks
lok

does this has any relation with cultural mindset? think if a US manufacturer does same thing is US and how they will be treated by US law? But in China if this manufacturer has good relation with local officials they might be not punished. Good relation means to pay money and to avoid "trouble". Some joint ventures in China invested by companies from developed countries object to setting up labour union in their "Chinese company", does this mean their "cultural mindset" change?

 

[Lock]

...does this mean their "cultural mindset" change?

Only that I read (year after year) that palms are more easily greased in China...
tks
locc

 

[mikefish]

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..... And let's not forget: 'Safety' costs money.....

speaking of safety:
(starts slow, but is worth the wait! not for kiddies)


[youtube]Tqd4aPs5WTA[/youtube]

 

[Anonymous]

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[docnjoj]

Being an old guy I'm gunna bring this up! Anyone remember the 1950's when "Made in Japan" meant the worst possible quality? I have noticed a constant ability for Chinese products to improve, and they do improve them as they go. Unless we in the USA get our act together, we are the ones who wil ultimately end up either making cheep inferior products or living like other 3rd world countries. I doubt I will see this in my lifetime, but the handwriting is truly on the wall. We are on notice that we REALLY need to compete! The Chinese are coming and they are good at it!
otherDoc

 

[DahonElectric]

It's all about the central bankers trying to control inflation and which meant, our wages are mostly static except to those who cheat on Wall Street. China was our way to control inflation and we use them as though they are hoars for sex, because it's cheaper to get love from a prostitute without the need of wine and dining your girlfriend or wife to try and get it. There are really no labor rights in China, so US and other multinational companies come in, set up shop and hope for the best. Sure, they will steal formula and designs but that is to be expected from a country with questionable business practices, but there are also firms in China that do a great job in delivering quality. The problem is with those state-controlled or party officials that are the worst! Quality control is a hit and miss. Like having sex with a prostitute wearing rubber, you are playing Russian Roulette everything you do it. What happens if the rubber breaks or what happens if you make contact with the infected skin? Do you think US and multinational companies don't know this as they enter into a relationship with Chinese firms? Total B.S, because I used to work for a multinational company myself and knew this full well. Like the John that had sex with a hoar, you take your chances, but the lure to this risky venture was the chance to have cheap uncomplicated sex. To a multinational corporation, it's a chance to make big profits so they get kudos from their share holders and of course their yearly bonuses. Do you think they care about their products? No. Do you think banks cared what happens when subprime mortgages blew up and to the normal Joe and Jane that worked hard to try to get the mortgage thing happening. Nope!

I felt extremely sad that people seemed to point fingers at the Chinese for making lousy products. But what do you expect when you pay so cheap? Who was the instigator of all this? We all did! Good quality?!? And what do you expect a prostitute will do with you after both of you consummate? She just treats you as a customer, no more than you treat her like product unless you watch re-runs of "Pretty Woman" all the time.
Good Chinese firms do make excellent products, but unfortunately, they are way too many bad ones that bring the good ones to shame.

DE.

 

[spinningmagnets]

I do remember as a child "Made in Japan" meant a cheap copy of someone elses product. Japan has a group culture like a beehive. They like to model themselves after England by their own admission. Both are a small island nation with few natural resources.

In the 1800's England became a world power based on international trade and Imperialistic colonialism. Japan consciously chose to become an international engineering and manufacturing leader. Toyotas that are designed in Japan and manufactured in the USA are just as well-regarded as those made in Japan.

Compared to China...the Chinese have a fairly independent domestic resource base, with multiple land-connected neighbors that they have also negotiated resource contracts with. Their long history of socialism has put power in the hands of a few, and their recent embrace of capitalism has made the corporate leaders fabulously wealthy, and there is a corrupt "robber baron" mentality there reminiscent of the old west.

Factories can spring up in a week, with slave-driver conditions and low wages. After a few months, if customers complaints become a problem, or workers begin organizing, the corporation is gutted and the company closes down (to be re-opened a mile away under a new name). The politicians are not elected (where there ARE so-called elections, they are fixed), so they are unconcerned about "the people".

The judges are for sale and are currently owned by the only people with big money. Big business owners are making huge profits under the current system, and have no incentive to improve the quality of life for workers. If a group of workers wanted to sue someone, China has no constitution, bill of rights, or supreme court. The banks are on a short leash to the centralized government.

Its part of the downward spiral in this vicious cycle that when our economy is bad, we are more likely to accept poor quality in exchange for a cheaper price. However, if I developed a totally new product right now, I would be very hesitant to open a factory in the US. Sounds selfish, but the truth is, China is no respecter of copyrights and patents. If my new product is popular it WILL be copied by someone who DOES open a factory in China.

To the US consumer, the lowest price with "adequate" quality is worth more than the "Made in the USA" label.

 

[Anonymous]

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[jag]

Reading the anecdotal stories of westerners experience in China (or anywhere else foreign to them) is interesting and often contains funny events when in interactions or deals there is a gulf in understanding between the sides. We should remember that anything written by a westerner is a story seen through the coloured glasses of our culture and expectations.

Those who are interested in a balanced account have to dig deeper and read stories from both sides about longer interaction or living in the country. Some pointers are in the previous thread http://endless-sphere.com/forums/viewtopic.php?f=7&t=11217#p172974. Or do as thousands of young people: travel, work or volunteer in other countries.

There is no absolute truth in Chinese products being of low quality. I have four different Bosch 24V NiCd tools (drill, tiger saw, circular saw, 10" mitre saw). While Bosch is a German brand these tools are actually made in Switzerland, Mexico and China. They have all worked well for 5-8 years now, and there is no noticeable difference in quality. I've had many other brands of tools made in various countries including China that failed quickly. As we notice on this forum the same goes for eBike parts; there are good quality Chinese products, and not so good ones. If one looks carefully at the products we buy in stores a surprising number of what we consider to be high quality western brands have (at least parts) of their products made in China.

All of these products made in low wage countries has allowed westerners to achieve a high material living standard. Gadgets we pick off the shelves in department stores without thinking much about it would have cost maybe 5 times more if they had not been produced in a low wage country. Look back 20 or 30 years. The amount of non-essential products people in North America and Europe bought then was a small fraction of today. What makes our level of consumption possible is that we can trade one hour of work at western wages to buy products taking 10 hours of work to produce at eastern wages. Capitalists call it efficient economics. Socialists call it hegemony. The majority take it for granted and don't scratch beneath the surface.

 

[JS Tyro]

"Made in Japan" used to mean crap, then the Japanese made better and better products.

South Korean cars were crap at first (remember the Pony?) and other SK products like home appliances were mediocre. Now they are as good as that from any other country (comparing comparable prices ranges, of course).

Chinese stuff is ok to crap today. Will it get better? - yes.

The Koreans took a little less time to go from crap to very good than did the Japanese. I assume that's because they learned from the lessons the Japanese went through. I suspect that at least some of the Chinese companies will do the same and it may take the Chinese less time than it took the Koreans. They only have two choices - get better or fail. I don't think they want to fail.

 

[John in CR]

Something to keep in mind is that it's very likely that much of the ebike stuff sent overseas has been bottom of the line crap stuff that they couldn't sell in China and/or the buyer searched around for the lowest priced stuff. With 20 million 2 wheel EV's a year being sold in China, I've gotta believe there must be some really good stuff too. With all those foreign educated engineers I'm surprised that a 2 mechanical speed drive hasn't been developed there. It's gotta be that all those ebikes and escooters are being used in the flatlands of China.

My experience dealing with China, and we're talking very small scale but direct with factory reps, has been quite good. I got five 60V motorcycle hub motor units including motor, controller, DC/DC converter, motorcycle rim and spokes for a total of under $1K. That's including sea shipping and the steep import duties here. The little motorcycles these go on claim 70kph and with my fat ass on a lighter weight e-bike, I've been up to 93kph with a tail wind, and 70-80kph is common with a good straightaway. The build quality and durability has been excellent, and exceeded my expectations.

The other Chinese company I dealt with delivered a sound product, backed up by good service too.

I got ripped off 100% by someone in Indonesia on the other had, so any members could earn a significant commission by helping me get my products or otherwise see that justice is served to the thieves.

I went 2 for 3 dealing sight unseen with the orient, and feel that I came out way ahead, because what I lost on the one bad deal was maybe 20-30% of what an trip in person would have cost. I doubt that a visit would have decreased my risk by very much.

John

 

[Dee Jay]

If one looks carefully at the products we buy in stores a surprising number of what we consider to be high quality western brands have (at least parts) of their products made in China.

Apple products iPod. iPhone. Mac Book. Powerbook. etc all failed. Do a search! Currently over 5000 Powerbooks worldwide failed, most just after the warranty. Apple loyalists vow to drop Apple computers

Either companies are designing products guaranteed to fail like Ford does with their vehicles

or

industrial sabotage by disgruntled "low-wage" workers (slave laborers)

Both?

 

[Takemehome]

Apple products iPod. iPhone. Mac Book. Powerbook. etc all failed. Do a search! Currently over 5000 Powerbooks worldwide failed, most just after the warranty. Apple loyalists vow to drop Apple computers

Either companies are designing products guaranteed to fail like Ford does with their vehicles

or

industrial sabotage by disgruntled "low-wage" workers (slave laborers)

Both?

"Cut the middle man." (Apple) :lol: ( Sony, Nike, Samsung, LG, etc...)
Buy directly from China. Same product without the "brand name"
"Buy American", what a joke.
The only true American product remaining is pollution, and even that we try to reduce it. :lol:

 

[Anonymous]

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