Silk Road International Blog

Rejoice!  Crisis averted.  Once again the Nanny State has saved us all from ourselves and the evil capitalist pigs.  Thank all that’s holy; we’re safe!

I am relieved to report that the Chinese government confirms that there are no more substandard toys or food in China.  None.  The campaign was a “complete success.”  To quote one official in the article: “”The overall quality of Chinese-made toys will be further improved and safety will be fully guaranteed,” he said.”

This quality guarantee is great news.  Not only do I not have to hire any more QC guys but I can now pass this guarantee on to my clients—won’t they be relieved.  My wife will be thrilled too, that she doesn’t have to go to Hong Kong to buy baby formula any more—our kids are completely safe.  Whew.

Of course this may put a few lawyers and 3PQC companies out of business.

I wonder how this guarantee compares to the State guarantee of absolutely no illegal CD’s or DVD’s in China that I first saw in 1995.  Hmmmm….OK, maybe we’ll keep going to Hong Kong for formula.

Tags: Business, Politics by david
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Like I said yesterday in my post about the stories promoting fear, I don’t like this kind of “reporting.” And today’s Guardian article, Made in China, Recalled in Britain, is a prime example why.

Now remember, I get more business when the media back home bashes China like this—fear promotes the need for my services in China. So my agenda is clear—just tell the truth about working in China, I try too. But of course that’s more or less impossible for the majority of “journalist” back home the majority of whom have never been to China or may have been here on a 10 day whirlwind trip to a few factories, the Great Wall and a couple of East Coast cities.

So the article in the Guardian claims that there was a 22% increase in consumer product recalls in GB this last year. Then they quote unions saying that it’s because of imports. Of course, the other opinion (local product recalls) wasn’t printed nor did the “journalist” who wrote the piece look up all of the recalled products to see where they came from—didn’t even look them up! The “journalist” didn’t bother running any statistical analysis either—could the total number of imported products be more than 22% higher than the previous years thus having recalls as a percentage of imports going down. Nope none of this was done.

Now, I don’t know about the % of recalls in GB. And frankly I don’t care. And two of the three people who read my blog don’t care either (I know because I called my parents to ask). But if you have a “journalist” making claims and speaking as a “expert” then they should be required to back it up—hell, just do a little research before you go to press. Is that too much to ask?

What’s the point of the article? Well, since unions are quoted, you can guess that it’s about keeping low-wage labor-intensive jobs at home (toy and toothpaste manufacturing specifically). Great idea. And since no research was done to either support or prove otherwise you know that the general public will read just what the unions and “journalist” want them to read: “22% increase in recalls from China.”

Tags: Politics by david
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I don’t like articles that are written to scare, as is this one. But it does tell a couple of good stories that (hold your breath) have an actual helpful point to them. Here’s the link to the William Foreman, AP article.

The article backs up a couple of points (I made as recently as this week’s post on Returning Product) obviously worth repeating. First, if you reject or return finished product you will see it again. The guy in this story saw his product 6 months later at the next industry trade show.

Second, you’d better personally check out every factory that you use. If you don’t you are to blame when problems arise. Avoiding the “small” factories and only working with “big” factories is not enough. You’d better verify EVERY production site you plan on using.

Finally, my point not the article’s, the importance placed on IPR and Western standards of safety are not yet completely understood, even by large factories, over here. Profit is. That’s not a slam on China, it’s just really how it is. Even when specific controls are built into contracts if you’re not confirming that they are completed they there is a good chance they were not.

Tags: Business by david
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I have a friend that has his own business and has been exporting goods from China/Taiwan on his own for a few years now. He has recently had quality issues and it has finally gotten to the point that he can’t take sub standard product any more. He wants to return a full 40’ container of product to the factory now. So he called me up for some advice—what should he be watching out for?

Here’s what I told him.

1. This will kill any good will you may have developed with your supplier. You will need to find a new supplier. My belief is that Chinese style “cooperation” means that you allow for a few mistakes/problems and still accept the product for the purchase price. Now you are calling their bluff and asking them to actually put up cash (redoing the order is cash out of their pocket).

2. You may not get the product back into the country—especially if it’s defective or already opened because of import restrictions. There are limits to what China (and all countries) will allow into their country. Rejected product and or second hand items are often not allowed into China. You need to confirm with a freight forwarder before you start negotiations with your supplier that this is really an option.

3. You must decided who will pay and where the cash will come from before you take any unilateral action (”I’m just going to send it right back to them, dammit!”). Phone calls and verbal commitments from your factory rep are ABSOLUTELY not enough. You need to get a written, stamped document from a factory manager/owner that says exactly what you agree to.

4. There is really no such thing as “credit”—the cash for the redo has to come from somewhere. Be careful. If your factory says that they’ll “credit your account” you’d better know how much actual cash and what that will buy next time. If you think that you’ll get another order for free (especially if you can’t send it back) you’re probably wrong.

5. You will see the returned product again, somewhere. If the product is usable and if you can send it back into China and if you are getting a second order for free I can guarantee you that the factory will sell the stuff to cover their costs. They don’t care about your reputation in the industry—they are concerned about their bottom line, first and foremost. Be prepared for customer service calls from Karachi.

6. What will it really cost you in terms of time, shipping costs lost clients due to the production flaw, etc? You need to balance the nature of the problem with the fact that giving the product back will destroy your factory relationship and your product will still find it’s way into the market and you’ll have to pay costs (return shipping at least) that you don’t have now.

So what’s the solution? DON’T EVER SHIP BEFORE YOU (YOU PERSONALLY OR SOMEONE OTHER THAN THE FACTORY) APPROVE IT. It doesn’t matter how “good” your relationship with the factory is. It doesn’t matter if you’ve shipped the same thing a dozen times before. It doesn’t matter how big your order is or how many other future orders rely on this shipment.

If you’ve got product in your home country (and you’ve already paid for it) it’s too late to be finding find problems.

Tags: Business by david
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It’s happening; the fangs of state sponsored nationalism are starting to come out.  In small, but significant bites, the Chinese Government is showing how powerful indirect control can be.  What am I talking about?  People power—specifically private citizens policing the actions of other private citizens.  In China, it’s the new black.

Example number one, the new Employee/labor law.  What’s the scariest thing about it?  Not that it’s complex or that it’s more rules to follow or even that the degree of direct government enforcement is still unknown.  The worst part is that now businesses are scared of their own employees and taking drastic measures to limit the risks they could face.  I’ll bet almost every factory I’ve talked with in the last couple of months has told me of recent or impending layoffs to avoid the law—this, despite the fact that here in Southern China labor is at a premium right now.

Example number two, the new online video rules.  Once again, the limitations and degree of government enforcement are both unknown and not the big deal.  The kicker is that foreign and domestic sites operating in China are being asked/forced to police themselves.  Chinese sites are already demanding that users report other users posting objectionable content.

Example number three, the domestic ISP’s own self-censoring.  This well document phenomenon is starting to hit home.  For example, I had to change servers because some of my website’s pages were blocked by Top Way (cable internet) but not by ADSL in the same city, Shenzhen!  It forces me to either use a proxy in the office (very slow in China which is already slow; VPN’s are even slower) or head out of the office to Starbucks or over the wall to Hong Kong just to get access to my own website—and we’re a legal Chinese entity with no political motivations!

Example number four (OK, this is more of a joke than a threat) the new ads on CCTV for the Olympics are asking Chinese to think about others (share a seat, talk quietly on the phone, don’t spit or litter) in order to change the international image of ‘cultural backwardness” before the world comes to the birth place of all wisdom, culture and history, Beijing.  But this isn’t the end of the story.  In Beijing and Shanghai laws have been passed against activity such as profaning and cursing and arguing in public (yea, I can’t believe that I have issues with these laws either).  Who gets to make the call on what is and is not profane?  At what point is an argument illegal?  Reports out of the capital are also mentioning the groups of “volunteers” that are enforcing the new manners campaigns along the streets.

But it’s all politics, right?  It really doesn’t matter to business, does it?  Only if opportunity doesn’t affect economics.  China and the US being the greatest cases in point ever—the US economy built on entrepreneurs and opportunity and the Chinese economy dead to the world until Deng, on his famous Southern Tour, pronounced “To get rich is Glorious” and let people actually work for themselves.  Given the opportunity, Chinese are fantastic business people (just ask them) as their 10% plus for 10 years+ growth would attest.  Limited opportunity means limited entrepreneurialism, limited growth, limited exposure to new ideas/technology and limited on creativity.

But there are specific issues of concern here too. Simple resource like various Google searches, the Apple Store, Blogger.com and of course the oft-mentioned Wikipedia are all either blocked, or limited.

My business relies heavily on the internet for communications—including VoIP and large FTP file (video and other) transfers.  I’ve already seen the declining quality of Skype within China (it was once reported to be banned in Shenzhen).  A new limit on video transfers, which we use to spec out detailed packaging procedures, could be difficult to work around, to say the least.

Further, at what point will confrontations with factories become illegal?  What happens if what I’m manufacturing/reading/watching/discussing via webcam or in video is determined to be “offensive” to anyone that may just happen to pass by?

Nationalism is the tool.  The roots of this new MO are in the State’s obsession with harmony.  For 2008 this means that the Olympics are so important that everything (other than Taiwan) will be subordinated for the rest of the year.  It means that the available tech is getting too advanced and so prevalent that the government needs help in keeping surveillance.  It means the possible realization of the fear that a combination of social factors (inflation, Western spiritual pollution, widening rich/poor gap) may case unrest.  It also means that without a rabid case of nationalism to make it palpable to the domestic audience control to this degree would be impossible.  Let’s hope that economics are not the victim, as they have been in the past.

Didn’t China see this type of nationalistic self-policing 40 years ago?  Yikes.

Tags: Business, Politics by david
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