The true cost of Chinese goods

- Editor


In recent years the prices of consumer goods have become cheaper and cheaper in real terms as Chinese manufacturers have had their margins squeezed by powerful retailers, such as US firm Walmart which buys 1% of the value of China’s whole economic output every year. According to a recent article in The Weekend Australian, the implications of this pressure are now being seen in corners being cut, risks taken and little or no testing of goods before they leave the factory as producers compete fiercely among themselves for the business.

Lead in the paint used to finish toys is the latest in a list of unsafe or questionable quality issues.Others have included unsafe tyres, clothing, toothpaste, seafood, and petfood tainted with the toxic chemical melamine in its wheat gluten content. The size of these recalls is large - 1 million toys in the latest recall following on from a previous recall of 1.5 million playthings due to risk of lead poisoning. The cost of the recalls and the loss in sales can be huge.

What is also at stake is the position of China as a hub of globalisation and industrialisation. The Weekend Australian points out that ten years ago, products would mostly have been distributed in the local cities and provinces and failures would have been confined to these areas. Now the shortcomings are widely-known.
The widespread concern sparked in international markets over the “Made in China” label, caused the Chinese government  at the end of August to introduce systems enabling dangerous food and toys to be recalled. This effort to improve safety standards is part of a four-month campaign announced by the Vice Premier Wu Yi to improve the quality of its consumer products and to safeguard the reputation of Chinese products and the country’s image. It includes strengthening supervision, expanding the scope in punishing illegal production activities and implementing the demands on importers and exporters to fulfill their obligations. This could be difficult in a country where much of traditional morality has been discarded in recent years and Deng Xiaoping’s credo “to get rich is glorious” has become dominant in today’s values.

Most of the revelations about unsatisfactory products have come from the US where also pressure to protect companies from alleged unfair competition from China is emerging as a political issue.The lack of democratic structures or accountability to the courts in China are handicaps to the long-term success of industrial companies which benefit from the restraints and discipline imposed thereby.

One of the largest challenges China will have to face is that of the environment. China contains 16 out of the 20 cities of the world with the most polluted air. Health problems such as outbreaks of severe acute respiratory syndrome have been impossible to keep quiet although the government attempted to stop news leaking out.
Another constraint to the continuing industrialisation and globalisation of China is the slowing in the streams of workers from the countryside willing to work long hours for low wages.

“The poor have benefited less from growth than the rich,” said the Asian Development Bank’s chief economist Ifzal Ali in Beijing in August. “Efforts should be taken to prevent legal, political and economic institutions from being captured by the few so that social tensions could be reduced”, he said. China leads Asia in the gap between rich and poor.  Addressing the unequal distribution of income is yet another challenge.