COMMENTARY
How Unsafe Goods Provide Damage to the China Brand
November 1, 2007
Christopher Bjorke, AFP

Beijing's battle to keep faulty and dangerous exports out of the marketplace continues. But for every arrested businessman or shuttered illegal factory, another embarrassment arises.

This week alone brought news stories of 774 arrests of people connected to unsafe consumer goods along with another report of a dangerous Chinese export, the latest being medicine-following toys, toothpaste and, in the same week as Halloween, costume vampire fangs.

The New York Times on Wednesday reported the lack of regulation of chemical companies manufacturing pharmaceutical ingredients for foreign markets. According to the Times article, these companies are not required to meet any sort of drug-manufacturing standards. Chinese pharmaceutical exports have been connected to cases of death and severe health damage in Haiti, Panama and elsewhere.

Bad publicity like this is a threat to China's standing among its trade partners, some of whom, including the United States, would welcome new excuses to put up barriers to Chinese products.

Defending the brand

China's leaders are in a bind right now because they have limited means for monitoring and enforcing standards despite the damage that dangerous products pose for the Made in China label. So they resort to what Peter Navarro calls the Casablanca effect-round up the usual suspects and create the illusion of control.

"The highly publicized crackdown of a relatively small number of people is used as a tool to signal to either their own society or the world that everything is going to be all right," said Navarro, a University of California-Irvine professor of business and author of the book, The Coming China Wars.

Despite the damage to China's reputation, authorities have little power to stop the flow of faulty goods, he said.

"First of all, they don't have a regulatory structure in place that can deal with the issue. Second, many of the bureaucrats and regulators who run the agencies that are in charge of this are corrupt. And third, the calculus that entrepreneurs make in China given the risk/reward to cheat favors cheating."

Not only are rules lacking, regulatory staff are, too. For example, the U.S. Environmental Protection Agency has 20,000 employees compared to roughly 300 in China, according to Navarro.

Despite the problems it faces, Beijing will try to take on the problem. It sent some strong signals in the past year that it is serious about corruption through the dismissal of a top Shanghai party official and the execution of the head of the national food and drug administration.

One result of the Communist Party Congress held in October was more political power transferring from the local level, where corners are cut and palms are greased to maximize investment and production, to the central government, which sees a greater need to protect the reputation of its exports.

Whether Beijing will succeed in enforcing standards remains to be seen, but Brand China cannot afford more embarrassment.

Commentary on developing China issues appears in every edition of China Headlines. Comments can be sent to Christopher Bjorke at cbjorke@chinaforum.com.

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