The Origins of China’s Flood of Contaminated, Defective, and Cancerous Products
- Many of the “Southern–style” catfish fillets on U.S. grocery shelves these days are indeed from the South—of China. The Chinese government’s own reports express alarm that many rivers in this region are so contaminated with heavy metals from industrial byproducts and pesticides including DDT, that they are too dangerous to touch, much less raise fish in.
- —Washington Post
At this point, it is critical to ask: Just why are Chinese products so unsafe over such a wide range of product categories? In their defense, Chinese officials routinely argue that their products are as safe as any other country in the world. Cold, hard statistics tell a very different story. China’s failure rate consistently outpaces its market share over a wide range of products across a number of countries and continents.
In Japan, for example, China accounts for about a third of all contaminated foods but accounts for only 15% of Japan’s food imports. Similarly in Europe, almost half of all defective products identified by European Union regulators come from China. A fourth of these defective products are Chinese–made toys, but other products range from electrical appliances and cars to lighting equipment and cosmetics. This pattern holds equally true in the United States. China accounts for 60% of all consumer–product recalls in the United States and nearly all of its toy recalls—far outpacing the failure rates of other developing countries such as Brazil and Mexico on a market–share adjusted basis.
The Bait–and–Switch Quality Fade
- Some quality issues are not all that serious, but others are downright frightening. One of the most disturbing examples I have encountered while working in China involved the manufacture and importation of aluminum systems used to construct high–rise commercial buildings. These are the systems that support tons of concrete as it is being poured, and their general stability is critical.
- The American company that designed and patented the system engineered all key components. It knew exactly how much each part was supposed to weigh, and yet the level of engineering sophistication did not stop the supplier from making a unilateral decision to reduce the specifications. When the “production error” was caught, one aluminum part was found to be weighing less than 90% of its intended weight. Where did the missing aluminum go? Into the factory owner’s pocket as a cost saving. The only thing passed on to the customer was an increase in product risk.
One of the most important reasons for the high failure rates of Chinese products is a variation on the old tactic of “bait and switch” known as the quality fade. Here’s how it works:
- An American, European, or Japanese company goes to China to offshore the production of its product. A Chinese company wins the order by producing a prototype of the desired product exactly to the specifications of the offshoring company. That’s the “bait.”
- The switch comes sometime after the Chinese company begins mass producing the product. At some point, after it has gained the confidence of its foreign client, the Chinese company begins cutting costs by substituting inferior materials and/or altering the design. If the foreign company does not have adequate safeguards in place to detect the quality fade, the result of this quality switch can be disastrous.
A telling case in point is the “Aqua Dots–date rape drug” fiasco described earlier. The toy’s distributor, Australia’s Moose Enterprises, lost millions of dollars in sales and took a very heavy hit to its brand name in the wake of this scandal. The company’s investigation eventually led it to a Chinese factory that it had contracted for production. In classic and deadly quality fade, the factory managers substituted the toxic date rape chemical for a safe glue during manufacturing—all to make a few extra bucks.
Silence of the Whistleblowing Lambs
- If you want to have a good system of consumer protection, protecting whistleblowers is an essential requirement.
- —Wang Hai, Chinese consumer rights advocate
There are no gold stars awarded in China for whistleblowing—a critical policing mechanism in any supply chain for consumer protection. Instead, the much more likely result for employees who publicly expose flaws in their companies’ products is jail, a terrible beating, or both. The grim fates of three whistleblowers in China, as documented by the Financial Times, graphically illustrates the extreme dangers:
The first whistleblower, Dr. Tang Zhixiong, accused his fellow doctors of conducting unethical transplant surgeries. In addition, Ms. Zhou Huanxi and Mr. Shi Yuefu each separately denounced their former companies for producing fake medicines.
Dr. Tang is now on the run after receiving violent threats, and he fears arrest on trumped up charges. Dr. Tang’s fear of arrest is hardly unfounded. After Ms. Zhou revealed that a tonic being marketed to pregnant women as a health enhancer was nothing but snake oil, she was arrested on a phony charge of blackmail and jailed for almost four years. Meanwhile, Mr. Shi was not quite as “lucky” as Dr. Tang and Ms. Zhou. He was run over by a van with a bogus license plate and left with serious brain injuries.
First We Kill All the Trial Lawyers
Although “ambulance–chasing” trial lawyers are often ridiculed and reviled in America, the fear of multimillion–dollar lawsuits undeniably leads to more socially responsible corporate behavior. In contrast, it is almost impossible for Chinese citizens or injured consumers outside of China to sue Chinese companies making contaminated or defective products. As noted in Fortune magazine, “While suing companies in foreign countries is always more difficult than pursuing a domestic lawsuit, the complexities of filing a case against a Chinese firm are compounded by the country’s regulatory and legal systems and by political relations between Washington and Beijing. As one lawyer put it, “You’re spitting into the wind.’”
Indeed, when sued, Chinese companies often simply do not show up to U.S. courts; and it’s next to impossible to get access to any of their records. Pinning these companies down is further complicated by the fact that their headquarters are often simply bare–bones operations—glorified fronts for purveying their poison. Nor do any mutual agreements between the United States and China enforce legal judgments. By some estimates, a lawsuit against a Chinese company takes at least ten years and costs five times as much to prosecute. Only big companies can afford to pay that much and wait that long. Everybody else is out of luck.
That Cold Black Heart—A Poison–for–Profit Culture
- Actions from the top down will not solve this problem, because the problem goes much deeper than Beijing. There still remains that uneasy question lurking in the shadows of China’s rapid growth: Why would so many people be willing to cut corners to make an extra dollar, even at the cost of human lives?
- —Emily Parker
Perhaps the most unsettling and controversial part of the “Made Badly in China” problem is framed in the words of Emily Parker in the preceding excerpt. This is the possibility that in the godless state of China, far too many entrepreneurs lack the ethical fiber and moral compass to do anything other than to try to make a buck any way they can—no matter what the health and safety consequences for their consumers. In this regard, the World Christian Database reports that China has by far the largest percentage of “unbelievers” in the world.
Two high–profile cases illustrate how the cold, black, godless hearts of at least some Chinese entrepreneurs strongly suggest the absence of any moral compass in China’s “poison–for–profit” culture.
One such case involves the recall of almost half a million “killer tires” made by the Hangzhou Zhongce Rubber Company. At some point in the production process, in a classic quality fade, this Chinese manufacturer began leaving out an important safety feature called the “gum strip” to further boost its profit margin. This 0.6mm layer of rubber is added to steel–belt radial tires to prevent tread separation. The inevitable result of leaving out the gum strips is exploding tires that can kill a family of four in an SUV faster than a drunk driver on a Saturday night.
A second case that similarly illustrates China’s poison–for–profit culture involves the oft–reported case of the spiking of pet food with the chemical melamine. This heinous act killed as many as 40,000 pets in America; and it’s critical to explain just exactly why the Chinese manufacturers added melamine to the pet food mix.
Melamine is an acutely toxic organic chemical that has little or no nutritional value. It was added to the pet food for one simple reason: to falsely give the appearance of higher protein levels in the feed so that the feed could command a higher price. American pets and their owners paid a very high price indeed.
Of Corporations and Consumers with Eyes Wide Shut
While China’s government officials and entrepreneurs must shoulder much of the blame for the “Made Badly in China” problem, at least some of that blame must fall on consumers as well as on those American, European, and other foreign companies that outsource their production to China.
On the corporate front, the sad fact is that foreign companies that outsource to China often do not install adequate quality–control systems. That’s exactly why a company such as Mattel got quickly neck deep in a toy recall involving tens of millions of toys. As Professor Shih–fen Chen described that particular event, “We are not talking about a few random errors in production that escaped the eyes of quality–control managers, but about a colossal failure of the out sourcing firm that let 19 million pieces of unsafe toys slip into the marketplace.”
As for consumers, most buyers focus on product brand rather than country of origin when making their product choices. In other words, we buy Chinese iPods, Chinese Barbie dolls, and Chinese spark plugs not because we trust China but because we trust Apple, Mattel, and Bosch. That’s a buying strategy all of us need to seriously rethink!