Thursday, November 15, 2007

Issues in sourcing from China

Part of the Mega Macau Trade Show last month was a lecture by China business expert Francis Yuk of Intertek Group PLC on the subject "Critical Issues in Sourcing from China: Product Safety and Quality."

Yuk said that the whole of China is busy as a bee manufacturing all imaginable sundry products. But I might say, there isn't much creativity there and most of their products are not original designs except for their native handicrafts and arts.

In South China, particularly Guandong Province, they make toys, children play articles, lighting products, electronics, textiles, precious stone jewelry and others. In the Shanghai Delta, Central China, they make electrical appliances, plush toys, home textiles, silk and other textiles. Custom-made fashion jewelry and apparel to name a few are made in Tianjin, Qingdao in North "China. And there are thousand more factories in Dalian, Harbin, in North Easter China and Szechuan, Inland China.

That is why there is a growing number of Chinese billionaires and millionaires and many of them have made Macau their playground. Macau thrives on wealthy tourists from Mainland China. Even in the plush The Venetian there are very few English speaking hotel employees except for their Filipino expatriates. Why bother when their VIPs are mostly Chinese. Macau is beautiful, but the language barrier is excruciatingly frustrating. Even their facial expression and body language are inscrutable. The only means of communication they understand, when dealing with non-Chinese visitors, is the calculator. And when they, likewise, become frustrated because they couldn't understand you either, they simply shoo you away. But Macau people are generally gentle and courteous. But their drivers seem to be practicing for the Macau Grand Prix all the time—crossing streets is terrifying. published a special report (Russell Flannery 11.01.07) on China's 400 Richest: Another increasingly common "Made in China" item: money, and lots of it. We found 66 billionaires while researching our China rich list this year, up from 15 last year. The total net worth of the 400 richest people in China is $288 billion, up from $116 billion a year ago. Still, the future looks bright for China's richest. Of the 40 richest, all but two built their fortunes from scratch. After all, many of these young entrepreneurs (average age 46, versus 66 for the Forbes 400) have much of their lives ahead of them. Read more at

Yuk identified ways to get ahead in the global supply chain; namely, price, product safety and quality, product innovation, quick response and service. Hands-down China wins with very competitively low price and quick response (According to the manufacturers I talked with, they can manufacture and deliver in 1-3 months.). The big pulldown for China-made products are product innovation, product safety and quality and service. You've heard about those horrendous stories about deaths among children using toys made in China and many others cases of safety and health related product recall.

The Chinese government response to these cases, according to Yuk, is that "Chinese Foreign Ministry sets up climate change international working group." (??????)

Yuk says that many countries have reacted with mandatory regulations and standards for imports from China. USA has activated their Consumer Product Safety Commission, American Society for Testing and Materials, Food and Drug Administration and California Proposition 65. This Christmas many American children will miss their favorite toys and things. Canada has instituted their Canada Hazardous Products Regulations and Canada Hazardous Products Act. Britain, Australia & New Zealand are sticking on their own Standards. Germany has activated its Lebensmittle-, Bedarfsgegenstande-und Futtermittelgesetzbuch, DIN.

On the other hand, Philippine authorities are resolving this issue of unsafe and poor quality China-made products in newspaper release, but when you go around shopping malls and big department stores, including those in Divisoria and Baclaran, you see nothing but China-made products in bright colors (lead and formaldehyde fortified?). Could it be that the rejects of the Western countries are being dumped here?

For legitimate exporters of China-made products Yuk suggests testing in every step of the supply chain—raw material testing, pre-production testing, mass-production testing, pre-shipment testing and on-site random testing. Will our local exporters be willing to undertake and underwrite these tests to ensure that the products they are offering to their Filipino customers are safe, high quality and provide warranty and after sales service.


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