Product Safety Is China’s Achilles’ Heel

Toxic and otherwise unsafe Chinese exports could derail the country’s economic miracle. Pro or con?

Pro: An International Hazard

We launched a national public-awareness project last year called the Toxic Trade Campaign, involving thousands of union activists who sponsored "Get the Lead Out" testing kits for American families to screen China-made toys for lead paint.

Growing public outrage drove Congress to pass the Consumer Product Safety Commission Reform Act of 2008. It’s a good first step toward holding Chinese manufacturers accountable when they introduce products that risk public health and safety.

China exports of toxic toys, filthy seafood, unsafe steel and tires, poisoned milk and pet food have jolted the Asian nation’s remarkable economic growth. It was built on a strategy of flooding America and the world with cheap, government-subsidized, unfairly traded, and often unregulated exports.

The axiom "Cheap goods carry a high price" rings truer each day as Chinese manufacturers issue recall after recall of low-cost, toxic goods.

As buyers became more wary, demand weakened, and now the world’s financial crisis has hit China. Scores of factories have closed across the Asian country, including half of its toy exporters. The 3 million U.S. manufacturing jobs that have been offshored to China since 2001 make for an economics lesson the congressional act alone cannot fix.

The United Steelworkers fight—joined by environmental allies and some industrial employers against failed trade policies—deserves immediate attention.

What was cheap yesterday in U.S. retail box stores now bears the true price of the China economic miracle for us all.

Con: China Has Solutions Under Way

Like the U.S. in the late 19th and early 20th centuries, China is learning some hard lessons about the responsibilities that come along with a booming industrial economy. Those lessons are being taught by its own people, as well as the responses of its export partners when a product fails to meet acceptable standards.

The good news is that China’s leaders have been working with U.S. officials and companies to improve standards and step up enforcement. The question now is whether China can implement those changes. All the regulations in the world cannot make a difference without proper enforcement.

U.S. consumers and companies have a big stake in the outcome. American consumers obviously want safe products, and U.S. companies want a strong Chinese economy to consume our products. China is now the third-largest customer for American exports—and growing far faster than our other major markets.

We have more allies in China on this issue than opponents. Chinese consumers want safe products, too. Legitimate Chinese producers don’t want to be tainted by the bad actors. China’s government is concerned about the "Made in China" brand.

The Chinese are learning a tough lesson in the marketplace. They have more to do—just as we do here in the U.S.—but we should work with them to ensure the safety of both Chinese and American consumers.

Opinions and conclusions expressed in the BusinessWeek Debate Room do not necessarily reflect the views of BusinessWeek, BusinessWeek.com, or The McGraw-Hill Companies.

Reader Comments

BOB

"China's leaders have been working with U.S. officials and companies to improve standards and step up enforcement."

Let's put this bluntly once and for all, Mr.Frisbie. American companies use overseas labor to cut costs and boost there profits.

They don't really care about the quality or safety of those products. No one in business really thinks they are getting the same quality from China (the cheap products) as they would from anywhere else. And I don't think they care. Want to put lead in paint to make the product cheaper? Go ahead. That gets profits up and the stock price up. And if it all goes to hell and the CEO gets bounced, he gets a big buyout and he is on his way.

So please, don't patronize us with your Kool-Aid talk about one big happy world. American companies like China because they know they can get products cheap and they workers can't complain. They are abused. That gives some American CEOs warm fuzzies because they wish they could inflict that on their American counterparts.

Dante

I have been harping on the dangers of Chinese-produced consumables for over a decade now. Before it was fashionable. That was right after I had observed a bottling plant cleaning out the equipment with gasoline and than immediately using it in production. But think it through, and you won't find this kind of behavior shocking. In a Communist regime, people are used to just doing as told. If they don't, they get "re-educated." With the folks in charge now having only one goal--get as much money now as possible--there is every incentive to cut corners and substitute cheaper poisons. And with a state suppression of religion over the generations, there's no moral right and wrong for these folks anymore. No threat of an afterlife punishment. Why shouldn't they go for it? All these "solutions" on the way is nothing more than a pipe dream. Corruption is too rampant for the solutions to mean anything but politically correct catch phrases. Solution will only occur when Communist party officials' children start getting sick.

random

"The question now is whether China can implement those changes. All the regulations in the world cannot make a difference without proper enforcement."

And that's the big issue. In China, there are simply too many incentives to turn a blind eye to abuses and violations. From kickbacks, to quasi-criminal groups, to powerful tycoons who rely on cheap, government subsidized good to keep their money flowing, there's just too much at stake to suddenly start spending the time and money on making sure products are truly safe.

This is not to mention the rampant intellectual theft that has been tolerated from China for well over a decade, not just by the U.S., but by Japan, South Korea, Germany, and France. China's economic miracle comes at a price. Everything from fake goods to toxic toys and polluted ecosystems will eventually backfire when cheap is no longer the only thing everyone cares about and companies are willing to bring suits against Chinese thieves who blatantly rip off their designs.

Rick

If all we had done is rant and rave when Chicago's stockyards were cesspools and Pittsburgh's steel mills were hellholes, nothing would have happened. It took angry consumers to goad government into action here, and that's what it will take in China. In the meantime, they'll keep exporting--and don't assume they won't. Frisbie is right. More will happen if we work with them instead of just railing against them.

Laura

The focus of the product safety scare on China is misleading. U.S. companies also produce and market unsafe products--only you wouldn't realize it from the media coverage. Witness the Washington Post, which routinely publishes product recall items and always notes when the product was made in China, but is silent on its origin when it was not made in China (or another foreign country). Many of those products were made in the U.S. Also, it is unfair to blame Chinese companies (or any other company for that matter) for safety flaw that are design-related, not production-related. And more often than not, that design was done in the United States.

Willie

Mr. Frisbie is correct in his analysis of the situation. We cannot let our personal feelings blind us from the facts at hand. China is a developing nation, and unsafe products are unfortunate possibilities in the development process.

The Chinese people certainly do not want to be known for producing poor quality products. As a culture that gives high regard to how they are viewed by others, China will continue to improve the world's view of the "China Brand." The U.S. should engage China to help them avoid the kinds of mistakes we made during our development process. What is the point of having wisdom from experience if you do not use it to help others?

Furthermore, Bob's comment on the heartlessness of CEOs is a bit extreme. CEOs, like every other group of humans, are composed of both ethical and unethical people. To simply cast all American companies doing business abroad as bad entities is a logical fallacy that applies the characteristics of some to the group at large. Companies care about the quality and safety of their product just like anyone else cares about how their actions will affect others. Furthermore, just because the Chinese do not have an official religion does not mean they are incapable of understanding the difference between right and wrong. Religious morality is a product of human ethics, not the other way around.

maggie

Another fascinating article, thank you. I will be using it in my coursework and also referencing http://www.thefinanceowl.com/ analysis. Please keep up the great work.
Maggie

Dante

I love the people here who like to point out that other countries (the U.S. in particular) also have product problems. But then they didn't point out the obvious differences between other countries and China. In the rest of the world, poisoned food tends to be accidental contamination from natural sources. In the U.S., producers do not deliberately inject large quantities of artificial poisonous materials into a product to kill little babies. In the U.S. politicians avoid aiding murderous companies in cover-ups, because there's something called the "free press" and opposing politicians. These things tends to be exposed fast. Unlike corruption-prone one-party China and their state-controlled press. In fact, it's all the rage in the U.S. to muckrake and uncover even the slightest egregious behavior.

Just a hint: If you have to grab at straws to make comparisons to make your point, then maybe, just maybe, you have no point. And people see through that. Unless you're in China. After eating all that MSG to make you smarter (à la Communist slogan as the Red Army owned the MSG factories in China) you might actually be "smart" enough to fall for it.

joe

Regarding food you eat, the best way to ensure what you ingest is to either buy local or read labels to know where your food is coming from. I myself buy organic when eating vegetables and only buy meats that are raised humanely and without the use of hormones and antibiotics and select fish that is wild caught. There are many choices like these expanding in all our markets. It is up to us, the consumers, to demand that more responsible, safe, and ethical products be made available.

John

I am getting so tired of this kind of discussion; it is obvious that not many Americans do understand how things work (or don't work) in China

sam

To me, "Made in China" now means "Can't be trusted." I no longer eat in Chinese restaurants.

Rudy

Everyone get off the high horse about how corporations want to source products in China to extend their profits. This is pure and utter bull. The real reason our vaunted North American corporations source products in China is that the consumer simply would not pay for the same goods were they to be produced in the good ole' US of A or Canada. Plain and simple: We are hooked on the Wal-Mart promise of lower prices every day, and we as consumers vote with our pocketbooks every day. Don't pass the buck on blame to the big corporations folks. Think about your own actions and how they affect the choices and decisions of others on your behalf.

Jose Angel de Monterrey

So not only do the Chinese compete unfairly with cheap products produced by the cheapest and most disenfranchised labor force in the world, they also cheat on the quality and safety of the products.

While plant managers in America and other parts of the world worry about the quality of the products, about complying to very burdensome regulations and all these in addition to paying the highest salaries in the world, we have people saying there are pros and cons to this whole situation.

There are no cons and pros--the whole thing is wrong, a huge distortion of the economy. What we need is a real world trade organization to punish labor exploitation by imposing bans and tariffs on the Chinese and other nations that try to compete in the global market under very unfair conditions to the rest of the world.

Bianca

I think that just because one person in China makes a mistake, you can't blame everyone, but when the majority makes unsafe things and things that can't be trusted, then they have really messed up. But I'm thinking that maybe they are trying to get back at us, because we owe them so much money as a country.

rrrrright

These discussions are both sad and pathetic. Not really because of Chinese products, whose (sometimes) shoddy standards are the result of bad quality control standards and relentless cost-cutting endemic to poorer developing nations. These conversations are pathetic because people actually believe bad products are the result of some cultural or political flaw. If some of these boneheads read up on economic history, they'd see that product safety has, and to an extent still is, an issue even in wealthy developed countries. Blame our need to extract the absolute highest yield on investment. When the Chinese do it, we can say it's due to their culture or political system. When we do it (American design flaws leading to problems with Chinese manufactured toys), we ignore it or choose to find the scapegoat of the moment. We need cross-border legislation and enforcement. Then there are idiots like Sam. And remember, at least the other nations are still producing things, and their quality of production is going up (you might not believe it, but I've seen it), whereas we're still hollowing out and sustaining ourselves with debt.

rrrrright

I wonder if the debates about wildly stereotyped "inferior" Chinese products really does obfuscate us Americans about our own economic issues? Just as we ridiculed Japanese cars two generations ago as junk and the products of cheap labor and weak environmental standards, will our present smug derision with China come back to haunt us one day? They're still building and improving on their manufacturing base. We're...well, we've dismantled ours and we're concentrating on wars and selling debt to each other now.

Endeavour

Not just "hazardous "Made-in-China" products, but rampant fake Chinese products are probably humanity's most dangerous cancer; they must be eradicated through the force of truth and the power of information.

According to the EU's statistics agency, more than 9% of all pirated products/softwares around the globe come from the (so-called) piracy capitals of the world (China, Taiwan, and Hong Kong).

don

Not only are many Chinese products unsafe, most are poorly manufactured. My luck with Chinese tools and electronics has been dismal. Only one Chinese product I have bought has been really good--an Aurora FN1000 calculator.

I try to buy "not made in China" regardless of price differential. If nobody supports the American manufacturer and worker, our future is going to be very bleak.

Don

avalon

U.S. companies attempt to avoid being responsible about their products, and mislead customers to blame other facts. U.S. companies import the low-quality products from other countries, and then release them on the market. In other word, U.S. companies purchase low-quality products, and resell them to people in U.S. Some company claims that they got cheated by Chinese malefactors, and that's a really cheap excuse. If a customer purchases a low-quality product, he or she can say it's not his or her responsibility, because he or she knows nothing about the product. However, if a business company imports a huge amount of low-quality problem merchandise, it doesn't make sense that the company knows nothing about the quality of the product. (Because, every businessman knows exactly how to reduce the risk of getting cheated.) Obviously, U.S. companies should take the blame for the overflow of low-quality Chinese products, because these malicious companies accept inferior Chinese low-quality products at first place, and these companies do have the right to refuse buying these trouble products. After all, it's an issue about American businessmen cheating American customers.

Bob

My comment about heartless CEOs is not meant as a general statement to be painted with a broad brush-stroke. We are witnessing (and I am a conservative pro-capitalism guy) the degeneration of our society to the structure we had in the beginning of the 20th century. Witness the fact that billions--let me say that again, billions--of our tax dollars that have gone out to recapitalize U.S. banks are now going (by the banks' own admissions) to pay for CEO and other executives bonuses and compensation, rather then into the pool of liquidity for loans to business and people. What more proof do you need?

Second, if I see or hear one more person echo the total self-serving argument that Rudy utters that we won't pay for higher price goods made in the U.S., I am going to hurl. Rudy, we have to buy from Wal-Mart, because our wages have gone down in the last 20 years. We make less than people did in the 1980s and a lot less than in the 1950s. Also, it's like saying "People love bacon, that is why we serve it. What else is on your menu? Only bacon." It seems that the companies only bring in overseas good, so we don't really have a choice.

Finally, when the hell are people going to realize that people like Rush on the right and Mr. Moore on the left don't really have any one's best interests at heart but their own and how to keep people up in arms over perceived injustices. I only bring this up because I see these men and others being quoted quite a bit. Remember, in this day, your elected officials, the heads of business, and pundits don't care at all about you or your needs. We need to take care of each other. No one else will.

Kent

I am afraid that we all have short memories about an industrial nation's ability to learn lessons. Remember when Made in Japan meant junk and Made in Taiwan was worse?

David

Just back from China, I completely agree that China deserves all it's getting now for the tainted milk,eggs, candies, foods.
Thankfully, their government is taking it quite seriously since they know that their export economy will go to the toilet if they don't fix all this fast.

And don't think the people over there aren't mad as hell about this more than we are over here since they have 60,000 infants (and counting) suffering with kidney stones, etc.

One thing that I must say is that there are a heck of a lot of high quality products over there (that don't get exported over here), not to mention American/Japanese licensed manufacturing of stuff for export, that is as good as here. Organic/non-dyed children's clothes, major appliances (Haier). They are improving, not unlike Japanese junk exports that became the high quality products we know of now.

Last thing: Of course, it's best to produce all we can in U.S. I'm all for that.

Consequence of no press freedom

The product safety problem is the consequence of not having freedom of the press. Without press freedom and freedom of speech, the problem will never go away. Rather it will blossom like we see now. Government alone cannot regulate it.

Dante

A lot of people here like to grasp at straws to make comparisons so that their shaky opinion can be supported. First they try to say all the other countries have contamination problems--conveniently ignoring that other countries do not deliberately inject large quantities of poisonous materials into their consumables. Now they're trying to point out that Japan and Taiwan used to be considered makers of inferior products. Conveniently ignoring the fact that Japan and Taiwan has something call democracy and free press. All such shoddy products were quickly exposed, and they got better. Try doing that with a Communist regime like China. And, oh yeah, another conveniently ignored point by these dingdongs: Japan and Taiwan may have made inferior products in the past, but they have never deliberately injected poisons into the consumables.

rrrrright

Taiwan, and S. Korea for that matter, sure as hell did not possess democracy or a free press when their worst industrial excesses were committed. Japan's labor movement was viciously suppressed under the guise of a theoretically "free" government during its developing stage. Just search the big four pollution diseases of Japan. This isn't excusing the problems of China, but unlike the (sometimes willfully) ignorant commenters, a rational person should not single out one place when these same issues have occurred in every developing nation.

Dante

So, "rrrright": Please clue me into my "ignorance." When did Taiwan, Korea, or Japan deliberately pour industrial poisons into their food products? (Oh, and please do not conveniently confuse natural contamination with industrial man-made chemicals.)

Dante

Some people are just born stupid. They can't possibly be working that hard at being that stupid. It's just too much work.

S. Crewed

One mode of inquiry into this problem and the way it has and hasn't been dealt with has to do with understanding fundamental differences between notions of ethical behavior between cultures.

Western ethical behavior tends to be rooted in intrinsic concepts of right and wrong. The questions the Western actor tends to ask adhere more to the construction, "Is this right?" or "Is this wrong?" Quantitative and contextual analyses may be made but are considered in conjunction with this basic evaluation--and for the majority of actors, acting against principle results in guilt.

Chinese ethical behavior, on the other hand, is typified more by contextual evaluations of situations. The questions asked by the Chinese actor have more to do with the environment the action takes place in and the other actors involved. Ultimately decisions are made based on these perceptions rather than any notion of intrinsic "right" or "wrong" of the actions themselves. "Right" or "wrong" is something usually assessed in retrospect by authoritative or regulatory figures (e.g. Party members, local authorities, and government) and for the majority of actors, acting against policy results in shame.

This is not to say Western "actors" always act from ethical sensibilities or that Chinese are incapable of guilt. Far from it! These are just general constructs that try to indicate how the majority of people in each cultural group have viewed and continue to view decisions.

I've spent decades trying to understand the Chinese cultural decision-making paradigm. Personally I've come round to the conclusion that in today's world, much of the time actual decisions (both by Chinese and Western actors) are mostly rooted in circumstance and shorter-term considerations rather than intrinsic value and longer-term considerations. I believe that this is ultimately harmful and more costly. For my part, I am increasingly concerned with buying my products and services from people who possess ethical considerations similar to my own.

rrrrright

Wow Dante, smooth comeback. You obviously don't know economic history or history in general. The fact that American vassal states (never mind America itself) had their own share of scandals. Quick, read up on the tainted rice scandal in Japan a few months ago.

http://www.telegraph.co.uk/news/worldnews/asia/japan/2989436/Japans-farm-minister-resigns-over-contaminated-rice-scandal.html

That took maybe 10 seconds?

R. S.

This cannot be fixed by words whether you think this is wrong or right. Just like reasons for accusing Greenspan--that's a moment when the man is looking at his heart directly.

Sigma

Anybody who understands East Asian culture and history will tell you how they are drastically different from each other. Just because something happened in one location at one time doesn't mean it will repeat at another location at another time. You only need to see the history of Hong Kong, Singapore, and Taiwan to tell that global brands like Toyota, Sony, Samsung, and Hyundai won't emerge from China. Why is that? Because of Chinese tendency to pursue short term profits in exchange for a long term growth, and the government's failure to establish an economic plan with a long term vision.

You cannot compare Chinese with the Japanese/Koreans for following reasons.

1. Japanese/Koreans had tiny domestic markets and were forced to crack U.S. and EU markets just to survive from the beginning. China's domestic market is rather large. In fact, engineering cars to be U.S./EU regulation-compliant could be fatal in a market condition where there is zero regard for safety and quality, and consumers shop only based on pricing alone. Make your car better than your competitor and raise your price; your competitor undercuts your price with an inferior but cheaper (and poisonous) product and you are dead in China, where the prices drop every quarter.

2. Chinese consumers themselves no longer consider Chinese brand vehicles when the intended price budget is more than $5,000. Accordingly, almost all Chinese brand vehicles are priced below $5,000. This heavy focus on low-price vehicles prohibits Chinese makers from producing higher priced and higher quality vehicles suitable for the U.S. and EU markets.

Dante

Ah, "rrrright." I see you continue to conveniently confuse disparate actions to make your "point." You must be a good Communist. Only a good Communist thinks other people are stupid enough to fall for your misinformation. The tainted rice in Japan is over moldy rice that was washed--not rice mixed with toxic industrial chemicals.

rrrrright

Oh Dante, both your grasp of history and your sense of logic are so tragically flawed. It's especially ironic when you accuse others of stupidity. "Communism" as a concept is as dead as base 6 mathematics. Dante, what about unscrupulous vintners adding antifreeze to wine?

Dante

Antifreeze? Please point to a case--besides Communist Russia or North Korea.

Chinese officials clearly condoned the toxic waste additives. Any other mismatch logic or just plain rambling to add "rrrright"? Hint: Try to point to some real facts.

Squeezebox

What China really needs is two things: intellectual property protection and product liability laws. As long as there are no consequences, people will continue to copy good brands with poison fakes in order to make a quick buck. China should jail the counterfeiters and hold the real brand holders responsible for injuries resulting from reasonable use of legitimate products.

Paul Ciccotelli

I don't think anyone would be talking about an economic slowdown in China if the global economy were booming instead of heading into a deep recession.

Bob

From Japan, Singapore, Taiwan, South Korea, every emerging economy has gone through a phase when the main feature of their products was price. China is in very well-charted waters here. And well-tested solutions, processes, and institutions will allow them to progress past this phase of their country's development to a higher, more value-added level of products. By then, Chinese products will be safer and more expansive, and the baton of low-quality, dirt cheap manufacturing will be passed on to other emerging economies that now compete to follow China's foot steps. So if American unions really want to keep their members' jobs, they should stop this wishful thinking that their is somehow an Achilles' heel that they can exploit, and get earnest about improving their own skills and productivity.

Mike

The rush to fling open the trade doors, mainly to help big box stores to crush their competition, has made losers of nearly all. American consumers can't trust the toys on the store shelves, and Chinese factory work is spastic. On top of that, the few American toy manufacturers left now have to pay the price for increased product testing costs, through no fault of their own. Given the smaller, less commoditized nature of many domestic firms, the new regulations can hit especially hard, not to mention the testing costs themselves are double in the U.S. versus the same work in China.

We don't need to be isolationists to be careful to protect ourselves and manage what comes across our borders. The economists have blown both the housing bubble and international trade. Are we going to learn? When it comes to trade, they totally ignore the value of dollars spent recirculating within our own economy.

buyer

Not all Chinese factories are bad. There are some very cutting-edge ones. However, I've been working with quite a few of them for the past few years, and most of them fight so hard not to improve the quality (even when you offer to pay more to cover the improvements). When products break they give you endless excuses (our other customers don't have this problem, it must be your fault, the customer's fault, etc.). The factories will continue to act this way unless they see a financial cost, i.e., customers stop buying. Personally I still buy some products from China, but am moving production of some key products away from China.

Breanna

To tell the truth I don't know what we should do, I mean, we get trillions of products from the "Made in China" brand, but on the other hand it's really not worth it to die or get sick from something we've been warned about.

samuel welsh

International boycot of China's goods.

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