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Saturday July 11, 2009

Dealing with China’s tactics

Poorly Made In China: An Insider’s Account Of The Tactics Behind China’s Production Game
Author: Paul Midler
Publisher: John Wiley & Sons

IF China is the world’s factory, we may all be in trouble. Given the manufacturing scandals in recent years, such as the recall of made-in-China toys and last year’s melamine-in-milk health crisis, who can blame us for believing that Chinese factory owners have no qualms choosing profit over product quality and safety?

Then again, there’s the standard argument that it’s unfair that every player in the sector is being tarred with the same brush. Poorly Made In China doesn’t give a hoot about that.

The book is one man’s take on what goes on in the factories in China, based on his experience as a go-between hired by Western businessmen to be their eyes and ears, and to deal with local manufacturers. It doesn’t pretend to be an objective, scholarly survey of China’s manufacturing landscape.

As such, to figure out how to approach Poorly Made In China, it’s useful to know author Paul Midler’s background.

The American studied Chinese history and language as an undergraduate. He had subsequently worked in China for several years before going back to the US to get an MBA from Wharton and an additional degree in East Asian business.

After that, it was back to China to be at the centre of “a unique, perhaps even historic, time and place”. He chose to take on a freelance role in export manufacturing. Mainly, he assisted small and medium-sized American importers in navigating the difficult terrain of production in China.

Here’s how Midler explains the work he did: “I had no real job description. I took care of things that needed handling. Typically called on after everything had unravelled, I was asked to put things back on track, to smooth things out, to make things right.

“Clients called and kept the details to themselves. ‘I got a job for you,’ was how it usually started, and without realising it, I was soon knee deep in it. Trouble was my business.”

This means that he had plenty of exposure to the many tricks that Chinese factory operators have up their sleeves.

In the first page, Midler declares, “During the years I worked in South China, I visited more types of factories that I ever imagined could exist.” Yet, much of the book dwells on his encounters with King Chemical, which makes consumer products such as soap, shampoo and hand cream, and its owner, known only as “Sister” Zhen.

An equally central character in this storyline is Bernie, Midler’s client who imports goods from King Chemical and sells them to US retailers. Poorly Made In China paints the relationship between Sister and Bernie as lopsided, with the latter often frustrated by cultural differences, broken promises and plain deceit.

In a memorable episode, King Chemical was caught shortchanging Bernie. Bottles of body shampoo had not been filled completely and Sister refused to accept the responsibility of rectifying the situation.

Midler’s retelling of the standoff serves as a lesson on the delicate matter of compelling Chinese suppliers to set things right without causing them to lose face. In the end, the bottles got filled. King Chemical, however, penalised Midler by not providing him the usual transportation from the factory to his hotel.

Other bad practices and aspects covered in the book includes the counterfeit culture, discriminatory pricing, the use of agents, the emphasis on short-term gains, and quality fade (the incremental degradation of a product over time).

These are not necessarily peculiar to China, but the point is, those who want to tap the country’s massive manufacturing capacity should be wise to these tactics.

Poorly Made In China shatters the notion of Chinese contract manufacturers constantly jumping through hoops to please Western customers so that the factories are kept humming. Midler frequently warns that this is an illusion.

Over time, he says, the importers will be more dependent on the manufacturers than the other way round.

“The factory understood the notion of pleasing customers when they were just starting out, or when they were struggling along, but that was just feigned modesty, part of the stagecraft, a means of catching business,” he explains.

“Once the manufacturer achieved a degree of success, it saw itself in the imperial role, while relegating its importer to that of a mere supplicant.”

We can’t expect a book like this to be consistently even-handed; after all, it’s a narrative by a guy whose job is to represent the interests of the Chinese manufacturer’s customers. Nevertheless, Midler offers interesting insights and observations, and the writing is breezy and engaging.

Poorly Made In China is not so much a hatchet job on Chinese manufacturers than a lively dissection of the cultural clash between Chinese and Western businessmen.


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