China: Not the monolith it seems

I read an article on auditing suppliers the other day written by a German businessman who has been importing electrical goods from China to EU countries for over two decades. The writer basically made some of the same points I have been making about doing factory audits, namely that it is important to come to some understanding about factory management, as well as knowing what QC processes the factory has in place and what kind of equipment they are using. After all the machinery, even if it is top-flight, is of no value if you have management that so focused on cutting costs that they don’t want to train people how to use the machines or burn the energy it takes to turn them on. The writer also mentioned that when evaluating a factory you should do the following:

1.) Make sure that you know who your factory’s subcontractors are.
2.) Confirm that rejected parts from these subcontractors are under lock and key ( one of the standards of ISO 9000).
3.) Confirm that the factory complies with China’s labor standard ( mainly the child labor laws).

The problem with the article I thought is that is leaves one with the impression that all factories in China are the same – large with management structure in place and at the point of ISO certification. However, the opposite is true. 60 % of China’s exports come from small businesses/factories and the great majority of these factories are located in rural parts of China where the factories operate pretty much at the whim of the owner. Child labor in these factories can be a problem and subcontractors are often local villagers that number in the thousands. In other words, there is no way to evaluate sub-contractors. Absolutely impossible. At most of these factories if you mentioned ISO9000 you would get a quizzical look from factory management.

You really need to remember that China, although it often comes across as one, is not a monolith. Just as there are regional varieties of Chinese cuisine, so business practices vary from Province to Province. What applies in Anhui Province, for example, may not necessarily apply in Guangdong Province. The same with factories. What is accepted as standard at a big electronics factory outside of Shanghai, would most likely be thrown out the window at a small furniture factory in Fujian. You have to keep this in mind at all time. Once again, do as much research on your own as possible before you enter into an agreement with a vendor or get on a plane to go to China to do a factory audit. It will save you much time and money.


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