Dankdude
Well-Known Member
Children's favourites Big Bird and Elmo are featuring large in the nightmares of grown-ups in southern China's booming industrial zones these days. The biggest toy company in the world, Mattel, had recalled 18 million made-in-China toys because of potentially hazardous magnets, just two weeks after it recalled 1.5 million toys over fears about lead paint.
The recalls have hit Mattel's share price and prompted fears about consumer safety. It also has people asking big questions: does this scandal spell the end for the "Made in China" brand?
Not likely, as long as Chinese goods remain competitive on price. But it does mean it could become more difficult to assign contracts based on price alone and increased watchdog attention means it will be harder to turn a blind eye on safety.
Consumers have also become increasingly alert to the Made in China tag. Asda yesterday withdrew 115,000 children's bottles from sale after three customers raised safety concerns over the weekend about a product that has been on sale for more than two years.
The recalls and international attention increases pressure on British and other Western companies to behave ethically when assigning purchasing contracts to companies, and making sure that they are not forcing companies to produce on wafer-thin margins, or even at a loss. And Western companies will be expected to do more to inform Chinese factory owners what Britain's or America's safety standards really entail.
"There is so much pressure on manufacturers to keep costs down," said the head of one European company involved in outsourcing in southern China. "How is a guy in a small town in Guangzhou supposed to know about quality directives in the US or new legislation from the European Union - that's the Western company's responsibility and they are pushing it all back here."
Some 80 per cent of the world's toys are made in China, and most of them come from Guangdong province, just over the border from Hong Kong. Alarm bells started ringing at the factories near Shenzhen and Dongguan, where Big Bird and Elmo come from.
It's not just toys - nearly half of all finished industrial goods in the world come out of China and the country has been reeling from the impact of scandals involving tainted pet food, toothpaste, tyres, medicine and fish.
Consumers in the US polled this month said they were extremely wary of products made in China, and nearly two-thirds said they would support a boycott of Chinese goods, a fair indication of how much ill-will these scandals are generating. Driving through the industrial areas of southern China, where you can travel for hours past mile after mile of factory, it's hard to imagine the machines ever falling silent.
The key to its success is that it is a cheap place to produce - lots of willing hands and cheap materials.
In effect, China has become too cheap, and something had to give. In many cases, the first sacrifice is a healthy working environment for the employees, but sacrificing safety standards is not long in following.
Mattel has withdrawn 18 million magnetic toys globally, including two million in Britain and Ireland, just days after it pulled one million plastic Fisher-Price pre-school toys for lead-paint.
In June RC2 recalled about 1.5 million Chinese-made Thomas The Tank Engine toys because they too contained lead-based paint.
As far as quality control is concerned, there are cultural issues to be overcome. China is still a Communist country, although these days it's more socialist with Chinese characteristics. While attitudes are becoming more progressive as capitalist mores start to impact on production methods, there is still a strong sense of "cha bu duo", or "Near enough, that'll do" - which means many inferior products are shipped before they are ready. But Western companies have also come in for criticism. "Importers have got to have responsibility along the whole supply chain. Purchasing people are coming up with ridiculous cost demands," said a local businessman.
The margins have become so thin that there simply isn't room for testing toys. When contracts are being given out in southern China, often they are decided by e-auctions, sometimes called reverse auctions - sellers compete to gain business and the aim is to drive prices downwards.
It is only afterwards that they do their sums and realise they cannot afford to carry out the terms of the contract, that they are operating for less than cost price. "They don't want to fire their employees, so they start cutting back anywhere they can," he said.
After the first recall, Chinese officials temporarily banned Lee Der Industrial Company from exporting. The co-owner, Cheung Shu-hung, hanged himself. "A man has committed suicide over this. There's no way he's 100 per cent guilty and there are hundreds more like him around. It's crazy," said the entrepreneur.
The issue also risks being hijacked by US politicians keen to lobby for a reduction in America's massive trade deficit with China. Last month, China's trade surplus stood at more than £12bn. But the picture is not all grim. Many foreign-owned factories in southern China have very strict quality control measures. And the central government is aware how these product recalls are undermining confidence in exports. Earlier this month it allocated £500m to improving food and drug safety.
As so often in China, the solution comes in the form of a Five Year Plan.
The upside of this scandal is that it could potentially help China move away from plastics manufacturing and into clean sectors such as IT and biotech, long a goal of the communist government.
Ultimately, the goal is to transform "Made in China" in the same way as the Japanese did, changing "Made in Japan" from cheap and cheerful into high-tech and cutting edge.
Retailers back Chinese goods
British toy retailers yesterday insisted they are happy to continue sourcing products from China in the wake of the Mattel recall.
The UK spent more than £1bn on importing toys from China last year, according to the Treasury. There have been concerns that shoppers would shy away from Chinese products, which would pose difficulties for retailers as more than 80 per cent of toys sold worldwide are made in China.
Gary Grant, chairman of the Toy Retailers Association, which represents about 75 per cent of the UK trade, said: "As a retailer and as a parent, I would be happy to give my children products that are sourced from China. But to quantify that, it would need to be known brands, such as Mattel and Hasbro, which have stringent testing in place."
As Mattel has ramped up its testing procedures by increasing the number of lines they are checking, all Mattel products coming into the UK from China are being delayed by a month, which means some items may not be available in time for Christmas, Mr Grant said. Mat- tel had been in constant contact with retailers, he added. "Over the last two weeks, they have been undergoing full batch tests of all the products they are exporting from the Far East from all their 50 factories. This... task is being undertaken by Mattel on a worldwide basis."
China crisis: the fairy tale goes wrong - Independent Online Edition > Business Analysis & Features
The recalls have hit Mattel's share price and prompted fears about consumer safety. It also has people asking big questions: does this scandal spell the end for the "Made in China" brand?
Not likely, as long as Chinese goods remain competitive on price. But it does mean it could become more difficult to assign contracts based on price alone and increased watchdog attention means it will be harder to turn a blind eye on safety.
Consumers have also become increasingly alert to the Made in China tag. Asda yesterday withdrew 115,000 children's bottles from sale after three customers raised safety concerns over the weekend about a product that has been on sale for more than two years.
The recalls and international attention increases pressure on British and other Western companies to behave ethically when assigning purchasing contracts to companies, and making sure that they are not forcing companies to produce on wafer-thin margins, or even at a loss. And Western companies will be expected to do more to inform Chinese factory owners what Britain's or America's safety standards really entail.
"There is so much pressure on manufacturers to keep costs down," said the head of one European company involved in outsourcing in southern China. "How is a guy in a small town in Guangzhou supposed to know about quality directives in the US or new legislation from the European Union - that's the Western company's responsibility and they are pushing it all back here."
Some 80 per cent of the world's toys are made in China, and most of them come from Guangdong province, just over the border from Hong Kong. Alarm bells started ringing at the factories near Shenzhen and Dongguan, where Big Bird and Elmo come from.
It's not just toys - nearly half of all finished industrial goods in the world come out of China and the country has been reeling from the impact of scandals involving tainted pet food, toothpaste, tyres, medicine and fish.
Consumers in the US polled this month said they were extremely wary of products made in China, and nearly two-thirds said they would support a boycott of Chinese goods, a fair indication of how much ill-will these scandals are generating. Driving through the industrial areas of southern China, where you can travel for hours past mile after mile of factory, it's hard to imagine the machines ever falling silent.
The key to its success is that it is a cheap place to produce - lots of willing hands and cheap materials.
In effect, China has become too cheap, and something had to give. In many cases, the first sacrifice is a healthy working environment for the employees, but sacrificing safety standards is not long in following.
Mattel has withdrawn 18 million magnetic toys globally, including two million in Britain and Ireland, just days after it pulled one million plastic Fisher-Price pre-school toys for lead-paint.
In June RC2 recalled about 1.5 million Chinese-made Thomas The Tank Engine toys because they too contained lead-based paint.
As far as quality control is concerned, there are cultural issues to be overcome. China is still a Communist country, although these days it's more socialist with Chinese characteristics. While attitudes are becoming more progressive as capitalist mores start to impact on production methods, there is still a strong sense of "cha bu duo", or "Near enough, that'll do" - which means many inferior products are shipped before they are ready. But Western companies have also come in for criticism. "Importers have got to have responsibility along the whole supply chain. Purchasing people are coming up with ridiculous cost demands," said a local businessman.
The margins have become so thin that there simply isn't room for testing toys. When contracts are being given out in southern China, often they are decided by e-auctions, sometimes called reverse auctions - sellers compete to gain business and the aim is to drive prices downwards.
It is only afterwards that they do their sums and realise they cannot afford to carry out the terms of the contract, that they are operating for less than cost price. "They don't want to fire their employees, so they start cutting back anywhere they can," he said.
After the first recall, Chinese officials temporarily banned Lee Der Industrial Company from exporting. The co-owner, Cheung Shu-hung, hanged himself. "A man has committed suicide over this. There's no way he's 100 per cent guilty and there are hundreds more like him around. It's crazy," said the entrepreneur.
The issue also risks being hijacked by US politicians keen to lobby for a reduction in America's massive trade deficit with China. Last month, China's trade surplus stood at more than £12bn. But the picture is not all grim. Many foreign-owned factories in southern China have very strict quality control measures. And the central government is aware how these product recalls are undermining confidence in exports. Earlier this month it allocated £500m to improving food and drug safety.
As so often in China, the solution comes in the form of a Five Year Plan.
The upside of this scandal is that it could potentially help China move away from plastics manufacturing and into clean sectors such as IT and biotech, long a goal of the communist government.
Ultimately, the goal is to transform "Made in China" in the same way as the Japanese did, changing "Made in Japan" from cheap and cheerful into high-tech and cutting edge.
Retailers back Chinese goods
British toy retailers yesterday insisted they are happy to continue sourcing products from China in the wake of the Mattel recall.
The UK spent more than £1bn on importing toys from China last year, according to the Treasury. There have been concerns that shoppers would shy away from Chinese products, which would pose difficulties for retailers as more than 80 per cent of toys sold worldwide are made in China.
Gary Grant, chairman of the Toy Retailers Association, which represents about 75 per cent of the UK trade, said: "As a retailer and as a parent, I would be happy to give my children products that are sourced from China. But to quantify that, it would need to be known brands, such as Mattel and Hasbro, which have stringent testing in place."
As Mattel has ramped up its testing procedures by increasing the number of lines they are checking, all Mattel products coming into the UK from China are being delayed by a month, which means some items may not be available in time for Christmas, Mr Grant said. Mat- tel had been in constant contact with retailers, he added. "Over the last two weeks, they have been undergoing full batch tests of all the products they are exporting from the Far East from all their 50 factories. This... task is being undertaken by Mattel on a worldwide basis."
China crisis: the fairy tale goes wrong - Independent Online Edition > Business Analysis & Features
