Why “Made in China” Still Suggests Low Quality

Why “Made in China” Still Suggests Low Quality – Economic Observer Online –

By Huang Ming (黄鸣), vice president of the International Solar Energy Society and president of Himin Solar Energy.
Issue 635 , Sept 2, 2013 
Due to a low industrial entry threshold and a lack of compulsory safety standards, China’s rising solar energy industry is now showing signs of chaos and disorder. There are between 5,000 and 6,000 manufacturers in this industry, but the top 20 combined have a market share of less than 30% of the total. Thousands of these enterprises either collapse or change hands every few years, leaving their clients without service — and solar panels rotting on roofs.Meanwhile, many solar energy factories continue to flock to China’s rural areas. They compete to the bitter end, and don’t hesitate to sacrifice product and quality standards as a means to reduce costs.
In other words, dark clouds hover over an industry that once seemed destined for a bright future. Only 53.9 percent of customers are satisfied with their solar water heaters, and “poor quality” has become synonymous with this sector.
Unfortunately, solar energy is but a microcosm of manufacturing in China. At present, virtually all “Made in China” products have a reputation for poor quality.
According to one European Union survey, customs officials in EU member countries seized 1.3 billion euros worth of counterfeit products in 2011 — 73 percent of them were from China.
Food and pharmaceutical industry scandals involving melamine-tainted milk, poisonous medicine capsules, clenbuterol-fed pork, and plasticizing agents totally shatter the reputation of Chinese goods. These days, “Made in China” is an almost notorious label.
Chinese enterprises tend to have a soft spot for scale. They habitually think “big is beautiful.” This kind of blind pursuit of market share results in increasingly fierce competition. Some companies focus only on immediate interests, and a price war is regarded as the primary marketing strategy. It leaves them without the energy for making the proper technical and technological efforts. This is especially true for those small companies at the bottom of the pyramid that don’t possess technical advantages. They can reduce their costs only one way: by cutting corners at the expense of quality.
From a long-term point of view, this is a dead end. As the Irish management guru Charles Handy once said: “Obtaining short-term benefits by sacrificing quality leads to a short-life enterprise. Quality is like truth. Nobody and no enterprise can live too long in lies.”
Indeed, the problem with Chinese enterprises today is quality. Whether it’s solar energy or some other product, they can innovate and guarantee sustainable development only if they stick to the pursuit of quality. Companies are, of course, profit driven. But to be devoid of conscience and earn dirty money is immoral and illegal.
In the northeast city of Baoding (保定) in Hebei Province, one man selling fried dough sticks attracted hordes of clients because he promised that they were cooked in fresh oil. This shouldn’t have been an effective sales strategy, but when integrity is rare, a moral conscience becomes a selling point. This illustrates how business ethics are seriously missing in China.
Some believe that honest people tend to lose out, that they are more likely to be squeezed out. And that’s how companies rationalize their dishonesty and inattention to quality. Once a businessman subscribes to such a mentality, he commits vile acts with a clear conscience. Chinese businesses are so scandal-stricken precisely because of the accumulation of this idea that “one small vice won’t matter.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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