China Discovering Low Priced Goods Can Also Be Low Quality [复制链接]

China Discovering Low Priced Goods Can Also Be Low Quality
(ASQ.org)

There has been lots of recent attention paid to China’s super low cost workforce stealing jobs away from European and American businesses. But Chinese leaders are now wondering whether manufacturing truly low cost—and ostensibly lower quality—goods is in the country’s best long-term interest.

Duan built a hydraulic pressure fittings plant for a U.S. company in Xi'an with an investment of more than $1 million, which included his own money made in his 10 years of hard work. But when the plant was put into operation, Duan found the raw materials, apparatus and even equipment offered by his domestic suppliers just cannot work normally. He had to import these things from the United States and South Korea, which deprived him of his advantage on prices.

One of the domestic suppliers for Duan’s plant is a big special steel producer. The models and standards of its steels are the same as those of foreign products, but the quality is not. Said the producer to Duan: “In theory, we have no problem offering you the steel with the quality you require. But in practice, we have [a problem].”

China exports a massive number of steel products every year. But they are mostly cheap. In the meantime, China has to import a lot of high value added steel products every year. How can added value and profits be generated when there is no innovation or quality guarantee? This can also explain why there are only two Chinese manufacturing players in the world’s top 500 manufacturers, although China boasts the fourth largest manufacturing industry in the world, following the United States, Japan and Germany.

Low efficiency is the central problem behind the poor quality. The labor productivity in Chinese factories is one-twenty-fifth of that of the United States, one-twenty-sixth of that of Japan and parallels India. As a result, producers resort to price wars to grab market shares.

Hu, an overseas Chinese investor from the United States, has seen some Chinese enterprises are apt to jump on the bandwagon by vying to churn out the same products that proved to be a cash cow for others. Then a price war usually breaks out. The Chinese companies begin to offer prices lower than their competitors’.

Hu mentioned another way to stand out. “You should try to improve your efficiency, the technical content of your products and the added value of your products when your rivals are labeling cheaper price tags. In this way, you can make more money than your competitors.”

Duan once visited a Chinese factory with an American CEO. There they saw an oil pipeline controlled by screws. An engineer of the factory told them he had to replace the screws, which can only work for a few days. When the American guest asked about the costs, the engineer shrugged and answered: “Very little. Screws are quite cheap.” The American CEO told Duan later he wondered how the Chinese factory calculated the costs. The more expensive they are, the more they spare labor and trouble.

It is not true that Chinese plants are not able to make quality products. In fact, they have the capability. But they are not ready to. A make-do attitude permeates in many Chinese enterprises, which do not think of tomorrow as long as they can find buyers today.

The make-do mentality prevails especially in small and medium sized companies in processing industry. Duan said American and Japan businesses always had their products up to a six stars standard if their customers asked for five stars. But Chinese makers would think it all right to provide something a little bit better than four stars.

“How can Chinese enterprises with this make-do attitude to customers compete with manufacturing giants from Europe and the United States that are transferring their facilities to China?” asked Duan.

Duan’s experience is not an exception. Many experts that poor quality constitutes a bottleneck in China’s manufacturing industry. Many Chinese producers operating their facilities with low efficiency and no innovation do not turn out quality products to generate high added value and profits, which in turn makes it even more difficult for them to invest in R&D activities to improve the quality.

Embarrassing but very true, isn't it?

Such a long article ................

I think this phenomena is the result of nation policy.