Thursday, September 06, 2007
West must take some blame for tainted Chinese goods
By Stefan Stern
Published: September 3 2007, FT
Boy, this US presidential campaign is really hotting up. Only the other day I heard one of the leading contenders issue this stark warning to America’s great new economic rival.
The citizens of that country, he said, had “better be prepared to sit on the docks of Shanghai in your little cars while you stare at your own little television sets and eat your mandarin oranges, because we’ve had all we’re going to take!”
Oh all right - I admit it. The quote is not new. In fact the remarks date back to 1980, to another presidential campaign, and were spoken by John Connally, the Texan who was famously wounded as he sat in front of John F. Kennedy in the presidential limousine in Dallas on November 22 1963.
The port Connally referred to back then was Yokohama and the little cars he mentioned were made by Datsun and Toyota. But - and this is my point - the sentiment sounds disturbingly familiar today. The recent wave of scandals and product recalls involving Chinese manufactured goods has provoked a new surge of foreigner bashing in the US, only this time it is the Chinese and not the Japanese who are copping it.
Even the usually measured Hillary Clinton was moved to declare while out on the stump recently: "I do not want to eat bad food from China or have my children having toys that are going to get them sick. So let's be tough on China going forward." (Clearly, the pressures of working first at McKinsey and now at a hedge fund have led Chelsea Clinton to seek comfort with her Barbie and Ken dolls.)
OK - so let's all blame the Chinese for the dodgy pet food, the toxic toys, the poisonous toothpaste and the chemical-drenched clothes. Except that this would be to misunderstand how this state of affairs has come about. Mary Teagarden, a professor at the Thunderbird school of global management in Phoenix, Arizona, has been studying Chinese businesses for three decades. In her opinion the sloppiness and corner-cutting now being revealed is down to management failures much nearer the top of the supply chain.
"You have a situation where there is often no incoming inspection of raw materials, and no outgoing inspection of finished goods. This is about business people displaying poor business practice," she says. Of course, low-cost sources of production are attractive. But that price arbitrage has to be handled carefully.
"Wal-Mart squeezes Mattel [the toy maker], Mattel squeezes its supplier, that supplier squeezes its supplier, and at the end of the chain you have a remote business far out in the countryside that takes a different approach. They don't put lead in paint because they are wicked, it's just what works for them. China is so large, and industrialisation has been so rapid, that maintaining any control over multiple sites is extremely difficult," she says.
Mattel has now admitted that some of its trusted Chinese partners, facing rapidly rising costs at home, had used cheaper paint suppliers that were not on the company's approved list.
It is this kind of scenario that has led other business observers to adopt a more extreme view than that offered by Prof Teagarden. Peter Morici, a business professor at the University of Maryland, said recently: "If you put it in your mouth or into the hands of a child, don't buy it from China." But this sort of attitude (and rhetoric) provides a cop-out to western managers who have been asleep on the job. This is as much about us as it is about them.
Business leaders have often evoked a sense of "the other", a great rival or threat, to focus minds and encourage people to work harder. Politicians, first during the cold war and now in the "war on terror", have tried this trick too.
Older readers will remember how, in the wake of the Soviets' Sputnik triumph, many in the west started to believe that they were doomed to be overtaken, economically and militarily, by the all-conquering Russians. Then came the fiendish Japanese with their marvellous photocopiers and cameras and cars. Now it's China.
But to adapt the familiar slogan: it's the management, stupid. Our management, which urgently needs to get a better grip on the supply chain. A more sophisticated understanding of the realities of doing business in the global age has to be developed too. This means forming effective partnerships with low-cost countries, and not seeing every new entrant as a primitive, blood-curdling threat.
Robert Reich, the former US labour secretary, described what sort of mindset the new era would demand back in 1992, before he left academia to serve in the Clinton White House. In an article for the New York Times in February that year, headlined "Is Japan Out To Get Us?", he wrote this: "The central question for America in the post-Soviet world - a diverse America, whose economy and culture are rapidly fusing with the economies and cultures of the rest of the globe - is whether it is possible to rediscover our identity . . . without creating a new enemy."
Business leaders will have to raise their game if they want to pass the Robert Reich test.
Published: September 3 2007, FT
Boy, this US presidential campaign is really hotting up. Only the other day I heard one of the leading contenders issue this stark warning to America’s great new economic rival.
The citizens of that country, he said, had “better be prepared to sit on the docks of Shanghai in your little cars while you stare at your own little television sets and eat your mandarin oranges, because we’ve had all we’re going to take!”
Oh all right - I admit it. The quote is not new. In fact the remarks date back to 1980, to another presidential campaign, and were spoken by John Connally, the Texan who was famously wounded as he sat in front of John F. Kennedy in the presidential limousine in Dallas on November 22 1963.
The port Connally referred to back then was Yokohama and the little cars he mentioned were made by Datsun and Toyota. But - and this is my point - the sentiment sounds disturbingly familiar today. The recent wave of scandals and product recalls involving Chinese manufactured goods has provoked a new surge of foreigner bashing in the US, only this time it is the Chinese and not the Japanese who are copping it.
Even the usually measured Hillary Clinton was moved to declare while out on the stump recently: "I do not want to eat bad food from China or have my children having toys that are going to get them sick. So let's be tough on China going forward." (Clearly, the pressures of working first at McKinsey and now at a hedge fund have led Chelsea Clinton to seek comfort with her Barbie and Ken dolls.)
OK - so let's all blame the Chinese for the dodgy pet food, the toxic toys, the poisonous toothpaste and the chemical-drenched clothes. Except that this would be to misunderstand how this state of affairs has come about. Mary Teagarden, a professor at the Thunderbird school of global management in Phoenix, Arizona, has been studying Chinese businesses for three decades. In her opinion the sloppiness and corner-cutting now being revealed is down to management failures much nearer the top of the supply chain.
"You have a situation where there is often no incoming inspection of raw materials, and no outgoing inspection of finished goods. This is about business people displaying poor business practice," she says. Of course, low-cost sources of production are attractive. But that price arbitrage has to be handled carefully.
"Wal-Mart squeezes Mattel [the toy maker], Mattel squeezes its supplier, that supplier squeezes its supplier, and at the end of the chain you have a remote business far out in the countryside that takes a different approach. They don't put lead in paint because they are wicked, it's just what works for them. China is so large, and industrialisation has been so rapid, that maintaining any control over multiple sites is extremely difficult," she says.
Mattel has now admitted that some of its trusted Chinese partners, facing rapidly rising costs at home, had used cheaper paint suppliers that were not on the company's approved list.
It is this kind of scenario that has led other business observers to adopt a more extreme view than that offered by Prof Teagarden. Peter Morici, a business professor at the University of Maryland, said recently: "If you put it in your mouth or into the hands of a child, don't buy it from China." But this sort of attitude (and rhetoric) provides a cop-out to western managers who have been asleep on the job. This is as much about us as it is about them.
Business leaders have often evoked a sense of "the other", a great rival or threat, to focus minds and encourage people to work harder. Politicians, first during the cold war and now in the "war on terror", have tried this trick too.
Older readers will remember how, in the wake of the Soviets' Sputnik triumph, many in the west started to believe that they were doomed to be overtaken, economically and militarily, by the all-conquering Russians. Then came the fiendish Japanese with their marvellous photocopiers and cameras and cars. Now it's China.
But to adapt the familiar slogan: it's the management, stupid. Our management, which urgently needs to get a better grip on the supply chain. A more sophisticated understanding of the realities of doing business in the global age has to be developed too. This means forming effective partnerships with low-cost countries, and not seeing every new entrant as a primitive, blood-curdling threat.
Robert Reich, the former US labour secretary, described what sort of mindset the new era would demand back in 1992, before he left academia to serve in the Clinton White House. In an article for the New York Times in February that year, headlined "Is Japan Out To Get Us?", he wrote this: "The central question for America in the post-Soviet world - a diverse America, whose economy and culture are rapidly fusing with the economies and cultures of the rest of the globe - is whether it is possible to rediscover our identity . . . without creating a new enemy."
Business leaders will have to raise their game if they want to pass the Robert Reich test.
Labels: China
¶ 12:34 PM
