Sunday, March 30, 2008

China moving upmarket?

ChinaLawBlog highlights the move of some manufacturers to produce high end and even luxury goods in China (as illustrated by an article in the WSJ). The article notes:

In light of the strong euro and steep prices for Italian suits, Jhane Barnes is touting the suits' provenance as an advantage. [...] While Mr. Burke acknowledges that there is still some stigma associated with suits made in China, he can already see men's resistance softening.
While I can agree with the general idea that like Japan, which up until the 70s was seen as manufacturers of junk, China too will move upmarket at some point into products and services that have greater value added to them. But I tend to agree more with Paul Midler at The China Game who notes:
I’m not so sure much has changed. Manufacturers have for some time now been in the position to make a product at virtually any quality level. The bigger variable is whether the customer is getting what has been ordered.
I think we are quite a ways away from anyone associating the China "brand" with high levels of perceived quality. Even amongst seemingly established firms, the variance in managerial thinking of what is acceptable to ship ranges drastically. While I don't doubt that the front line skill base and even the capital base with high end precision equipment exists in China, there remains significant managerial and process gaps that can result in large variances in both what a firm is really capable of (versus what they should be capable of) and more importantly between what is specified and what is produced.

As Mr. Midler further points out, unless you don't really care what gets made, generally speaking, when working with Chinese vendors - particularly those based in China, there's no substitute to adding safeguards to ensure that goods are produced to specification. This will also come at a cost - particularly as your vendors realize that you're planning to check.

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