The More Things Change...

The more they stay the same.  From Michael May at the East Asian Forum, Curbing corruption in China

One of Hu Jintao’s first addresses to party leaders in 2012 included an order to fight harder against corruption. The fight is crucial, but a poor record of success gives little reason for optimism. There are different views on why this battle is not being won. While some say it comes hand in hand with the benefits of an otherwise successful system, others say it is the legacy of extreme poverty during the Cultural Revolution. And others just believe it to be a part of Chinese culture. Be that as it may, the corrosive effects of corruption on government reforms, the economy and the reputation of the party are undeniable.China’s previous efforts to curb corruption have focused on toughening related penalties, even resorting to capital punishment. But this approach has proved unsuccessful. Rather, transparency and public accountability are more effective in fighting corruption. And while China’s authoritarian leadership provided fast and comprehensive reforms, which turned the impoverished state into a superpower, accountability has little place within authoritarian regimes. This is why reform in China is so difficult.

If you can't see the applicability to your own personal manufacturing in China, just replace party/government with corporate.  It's the same people, the same history, the same environment, the same culture that is running the govt as is running the companies--often much more so than one may realize as the % of SOE's and state investment in business is growing.  Almost any supplier (and sub-suppliers and secretaries and QC with dirty hands) in China that's making money is NOT excited about increased transparency.  Sure, at dinner, factory owners complain about the "fees" they pay to local officials.  But in the breath they extol the savings they gain from guanxi they have with the tax or safety inspectors.In the last week (that's just 5 days now) we've had 3 (count them 1-2-3) different companies, all selling large qtty's (multiple containers per order per quarter) into box stores, come back to us with the same story: "We talked with you last year, thought you were too expensive since China is so much better/easier for companies to manage directly now, and we started projects on our own.  It's been a disaster!  What will it cost for you to a) help us rescue current orders that are now delayed due to negotiation/price/other issues, b) do QC and fulfillment work on current orders to get them up to standard and out as quickly as possible, and c) can you source new factories for us and manage the re-orders? "  Some of these companies are 2 or more orders in and assumed that the second order would be smoother sailing than the first.  Never happened.  One can't even get the first order off the ground.  They did due diligence.  They test, they have independent QC.  They even have history/experience working in China.  But they are not there full-time.  They run a business elsewhere and managing China is not their core-competency.SRI is not a miracle worker, but we are on the ground.  We speak the languages.  We have experience in both negotiations and problem solving.  You need to have these specific skill sets/logistical advantages if you expect to be successful in China (or any developing country).  If you're not working with someone that specifically knows where the "corruption points" are going to be, you're going to get taken advantage of.  If you're not working with someone that can answer questions immediately, you're going to be both delayed AND get less-than-expected-quality as the lag between communicating/sending samples to the US and getting feedback will give the supplier a window to do what whatever he deems best for himself (at that moment).  This could mean replacing your approved components with something cheaper after the test, if could mean replacing your order in the production queue with one from another client.  It could mean that your stuff sits outside in the rain for a week while samples are being approved and/or redone.As usual, due diligence, trust w/verification and a physical presence are still keys to getting things done right in China.And sorry for the lack of posting for the last few months.  I've been blogging on an average of more than once a week since 2005 (and I don't have a "blog assistant" like some lucky guys I know).  It's taken it's toll, I needed a break.