9/5/07

Despite its plethora of intriguing and prevalent articles, a particular story in today's Financial Times caught my attention. As we all know, Chinese manufacturing companies are under intense scrutiny after several occurrences of potentially fatal product recalls. This article discusses how China is slowly getting to grips with product safety standards as well as the effect of the strong price pressure from the big western groups these Chinese manufacturers supply.

Title of Article: Testing Times
Source: Financial Times (9/5/07)

Whenever 21st century consumers in one country buy products from manufacturing industries working in 19th century conditions in another, there is bound to be problems. Such is the situation between US and UK business tycoons and several Chinese manufacturing industries. These very modern and prosperous countries have moved their production to the place with the lowest level of regulation (China), which has stirred up much controversy and caused great economic turmoil for all countries involved.

Over the recent years, US and UK buyers of Chinese goods have put enormous pressure on these companies to reduce the prices of their goods. This has in turn forced Chinese manufacturers to look for cheaper alternatives as well as cut corners on quality standards in order to win contracts with US and UK companies. On account of these resolutions, everything from dog food to toys and toothpaste have been recalled, and these recalls are the source of the intense attention put on and the tarnished image of China and its manufacturing companies.

The all too common occurrence of recalls has also led to unexpected visits from US and UK safety inspectors. Previously, inspections usually focused more on social compliance, labor conditions and environmental issues within each factory, but now more than ever inspections are mainly concerned with safety issues. These unannounced inspections have caused factory managers a great amount of stress and also disrupted work within the factories.

Before all the blame is put on the Chinese factories, one has to realize the faults within the US and UK companies. Firstly, these companies are demanding lower prices regardless of the conditions the Chinese workers face, and are not realizing the problems caused by making such demands. They are also waiting until the toys are shipped to their respective destinations (either in the US or UK) to test the products' safety and not requiring continual inspection and testing by the suppliers.

In light of these recalls and faults, all companies invovled are vowing to right their wrongs. US companies such as Wal-Mart are pursuing a drive to improve the monitoring of workplace conditions and has recently stepped up the testing of products in response to safety concerns. US and UK companies are also requiring routine safety checks of all products produced. Chinese companies are paying more attention to the manufacturing processes and securing the quality of their goods. Many of them have made needle detectors mandatory to check for any fragments of broken needles in their garments or plush toys and are also testing each of their products to ensure their safety and reliability. For example, one company has developed a "drop test" in which toys are dropped from 90 cm (a child's height), and tested to see if they fracture into shards that are either dangerously small or sharp. The Chinese government is also stepping in, demanding to see safety reports for toy shipments and requiring that the reports not be more than twelve months old. Executives complain that the government is "being more Catholic than the Pope."

Even though Chinese companies are complaining of the unexpected safety inspections and strict Chinese governmental regulations, in order to rid these companies of their bad image, I believe such precautions must be taken. If not, China may lose their reputation of having the world's best toy factories and largest volume of international product exports. If the promises of improvement made by US and UK buyers and Chinese producers do not come to fruition, the economies of all three countries could suffer even more than they already have.