Sunday, July 08, 2007

The world at stake


How China handles doubts about its manufacturing integrity will decide if it has a world to win, or lose.

The Star: July 8, 2007 - There was a time when Hong Kong was notorious as a source of shoddy merchandise. Under the British, the label “Made in Hong Kong” became so unsaleable it was often replaced with “(British) Empire Made,” leveraging on the cachet of the mother country.

China today is changing fast, perhaps too fast for industry regulators and law enforcers. Anything less than effective regulation of industry could scupper future success, as unbridled free enterprise becomes China’s own worst enemy.

Gone are the days when fake Rolexes and DVDs from backyard operations riled only bona fide manufacturers. What was once a cottage industry is now a shadow economy, with fake teapots, tea leaves, hens’ eggs, whole road-going Ferraris (330P4s) and even a fake NEC Corporation comprising almost a parallel universe.

In March, wheat gluten and rice protein in pet foods containing melamine as fake protein from China sickened and killed pets internationally.

For people, fake albumin (blood protein) is reportedly sold widely to hospitals and pharmacies, threatening the lives of patients.

A host of other problem items, from fake infant formula milk powder and lead-infused toys to fake medicines and Viagra, continue to plague China’s export market and economic future. In its fledgling automobile industry, Chinese cars sent to Germany for testing recently scored only one out of five possible stars for crash safety.

The least that Chinese authorities can do is admit to the problems and clean up their act, swiftly and comprehensively. While some efforts are in that direction, there are complaints that reports of sub-standard goods have exaggerated things.

Part of the problem lies in the complacency of earlier leaders, including Deng Xiaoping’s indiscriminate celebration of riches as “glorious”, without adequate strictures or safeguards on how wealth should be created. Forget integrity, sully a reputation, and competitiveness is compromised.

Today’s leaders have begun to understand the problem, such as in recognising the need for adequate protection of patents and copyright to safeguard China’s own inventiveness at least.

But legal institutions and practices still have to catch up with an industrial culture tempted to see a fast buck as the overriding priority.

The answer lies in tough and coordinated action against errant manufacturers nationwide, possibly the best attribute of central planning today. China cannot afford the luxury of leaving it to market forces or social institutions to develop consumer aversion to unscrupulous traders and thereby check their criminal profiteering, since the global brand is “China” rather than unidentified back-street operators.

The February-March 2007 survey of foreign investors by Ernst & Young still places China as top investment destination, but the views were formed before the latest wave of manufacturing malpractices could begin to sap confidence. Meanwhile, the low labour cost incentive of China is being diluted by rising wages and other low-cost “emerging economies” in Indochina and the former Eastern Europe.

It is said that while a more promising China develops manufacturing capacity, an emerging Russia is only exploiting depletable resources like oil and gas. But neither Russia nor India needs to do much to close the gap if China compromises its manufacturing reputation by alienating world markets.

Events like next year’s Beijing Olympics and the 2010 Shanghai Expo should spur China to raise standards all-round, or else suffer greater infamy from the heightened international exposure. The watershed nature of such events makes for the delicate crossroads at which China now faces global realities and responsibilities.

Hong Kong has shaken off much of its past negative image as a Third World sweatshop to emerge as a leading global port and world-class financial centre. Can the rest of China emulate something of this, and in time, to confound its growing circle of sceptics?

Once again, sheer necessity is driving China to meet historic challenges of monumental significance. The stakes are astronomical and the choice is stark: adapt and improve, or wither and die. China today is vast and getting stronger, but the global market it has entered is even bigger and more powerful.

OLYMPIC WATCH: Human Rights in China and Beijing 2008

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