China's Safety Issues Could Be Deadly for Its Economy

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"Is China trying to kill us?" seems to be a popular headline question on Internet message boards these days, rivaled only perhaps by the slightly more alarmist "Is China trying to kill us all?"

Sure, it's somewhat over the top, but enough deadly pet food, toxic fish, lead-painted trains, and poisonous toothpaste will make just about anyone a bit paranoid. The Chinese government seems to be taking all this pretty seriously, at least on the image front, sending lobbyists to Capitol Hill and hiring a U.S. public relations firm to get out its positive message. And earlier this month, the government executed its top food-and-drug regulator after convicting him on bribery charges.

But officials would be crazy to limit their efforts to a PR war. The last thing a country with an export-driven economy—an economy, by the way, whose hypergrowth gives the government its sole rationale for dictatorial power—needs is a global panic about the safety of its exports. I asked Minxin Pei, director of the China Program at the Carnegie Endowment for International Peace in Washington, D.C., about whether the product safety issue could harm China's economy and its emergence as an economic superpower.

How dangerous are these quality issues to China's effort to create a powerful global brand as well as to its emergence as a power in the global economy?

The perception that Chinese products are low quality and hazardous will definitely harm Chinese exports and the country's ability to develop leading global brands. So far, such a perception has hurt mostly indigenous Chinese brands or producers. Multinational manufacturers, which have much better quality control, have not been affected. But if the quality problem continues, even multinational corporations with large manufacturing operations in China could suffer reputational losses. Obviously, China 's exports will suffer , and its economic rise will be slowed down.

The average American probably thinks of China as having an all-powerful authoritarian government. How easily can it institute changes that would improve product quality?

China has a strong, authoritarian central government only in name. In reality, power in China is diffuse and decentralized. Beijing can issue orders, but it cannot expect its orders to be carried out by local officials. At the local level, officials with real power are often connected with manufacturers through family ties or economic connections. Producers of shoddy, fake, or outright dangerous goods are often protected by local officials whom they have bribed or given shares in their firms.

China is also so large that enforcing strict quality rules requires a much larger bureaucracy. Therefore, it is not easy for Beijing to impose changes that would improve product quality very quickly. However, crisis can spur action. Right now , Beijing feels it is under siege, so it is taking steps to address the quality issue. The real challenge is to introduce durable reforms. Otherwise, the quality problem will be back in two or three years.

What steps should China take to ensure that it is not merely known as an assembler of products and perhaps a poor one at that? What should the government be doing?

The government should give the regulatory agency in charge of enforcing standards more power and autonomy. Right now, this agency is a weak bureaucratic player and answers mostly to the Communist Party. As long as the agency is politically weak, it cannot do its job.

China should also introduce more punitive civil laws so that victims harmed by poor-quality products can sue for triple damages in Chinese courts. Finally, to regain the confidence of its international customers, China should welcome and perhaps commission well-established western quality-rating agencies, such as J. D. Power, to regularly survey Chinese products and measure their quality.

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