Made in China

Posted by Reading Time: 2 minutes

The eminently readable James Fallows has an excellent piece on manufacturing in China in the upcoming issue of The Atlantic. When not judging beer in Shanghai, Fallows apparently spends a lot of time eating breakfast at the Four Points hotel in Shenzhen. In The Atlantic July/August cover story, he takes a look inside China’s manufacturing world and comes out with some interesting insights. A couple of choice excerpts:

Many people I have spoken with say that the climb will be slow for Chinese industries, because they have so far to go in bringing their design, management, and branding efforts up to world standards. “Think about it—global companies are full of CEOs and executives from India, but very few Chinese,” Dominic Barton, the chairman of Mc­Kinsey’s Asia Pacific practice, told me. The main reason, he said, is China’s limited pool of executives with adequate foreign-language skills and experience working abroad. Andy Switky, the managing director–Asia Pacific for the famed California design firm IDEO, described a frequent Chinese outlook toward quality control as “happy with crappy.” This makes it hard for them to move beyond the local, low-value market. “Even now in China, most people don’t have an iPod or a notebook computer,” the manager of a Taiwanese-owned audio-device factory told me. “So it’s harder for them to think up improvements, or even tell a good one from a bad one.” These and other factors may slow China’s progress.  

That is an interesting take on the lack of Chinese international CEOs, though it’s hard for me to agree with the “most people in China don’t have an iPod of a notebook computer” statement however. While, granted, the majority of Chinese peasants probably don’t have an iPod or similar mp3 player, one needs only take the subway in Shanghai to see literally hundreds of tiny white earbuds in each subway car. Yes, Shanghai is not China, but it is an indicator of trends in greater China. Ten years ago the toy of the elite few was a mobile phone, by June of this year, China will have over 500 million mobile phone users, so basing China’s lack of innovation on the small number of iPod owners seems a touch mislpaced. An education system and corporate culture that champions conformity are better places to start looking.

Fallows’ concludes the article with some keen observations on the standard U.S. grievances towards China:

American complaints about the RMB, about subsidies, and about other Chinese practices have this in common: They assume that the solution to long-term tensions in the trading relationship lies in changes on China’s side. I think that assumption is naive. If the United States is unhappy with the effects of its interaction with China, that’s America’s problem, not China’s. To i­magine that the United States can stop China from pursuing its own economic ambitions through nagging, threats, or enticement is to fool ourselves. If a country does not like the terms of its business dealings with the world, it needs to change its own policies, not expect the world to change. China has done just that, to its own benefit—and, up until now, to America’s.