Cheap? Yes — but now China has quality issue

updated 6:00 p.m. ET July 25, 2007

SHANGHAI, China - Wang Wenlong knew he wasn't going to get top quality when he plunked down $4,700 for a locally made car.

But he didn't expect so many problems from his Xiali subcompact — from windows that refused to open to windshield wipers that wouldn't wipe.

"I got what I paid for, and at least it didn't cost too much to fix those problems," said Wang, a 30-year-old Beijing resident. "That's why those cars are still very popular and sell well in the market."

But will they sell overseas? China clearly has such ambitions. Earlier this month, a major Chinese automaker partnered with the Chrysler Group to export to Western markets.

A recent spate of scandals, though, has exposed a major weakness behind the country's transformation into a global export power: Quality control. As authorities scramble to reassure overseas customers, the stakes are huge. China, following in the footsteps of Japan and South Korea, is banking on a shift to higher-end exports to continue its economic climb and better the lives of its citizens.

Success hinges on lifting quality to international levels. American and European factory workers may fear Chinese competition but, on this front, China still has a ways to go.

"It's clear that China is going to have to match global standards for quality and safety," said Gene Grabowski, a senior vice president at Washington-based Levick Strategic Communications.

"The question is how fast they can do it," said Grabowski, who works mainly with big-name food and consumer goods companies.

So far, Beijing's handling of the complaints over its exports has been mixed. While it has promised both stepped-up inspections and more stringent enforcement of regulations, it has also suggested that the problem is overblown by the foreign media.

The Chinese government said on its Web site Wednesday that the Cabinet had passed a draft food safety regulation that "strengthens the responsibility of local governments and increases the punishment for illegal activities." No details were given, or a timetable for adopting the regulations.

China doesn't have a centralized food-safety regulatory system; responsibility is split among at least six agencies overseeing health, agriculture and commerce. The lines of authority are ill-defined, and different bodies oversee different laws. Agencies contacted for comment did not respond.

China also has no equivalent to the U.S. Consumer Product Safety Commission that can alert consumers to recalls or hazardous products, although it does have an official Web site listing automobile recalls.

Over the past 25 years, China has become the workshop for the world, as manufacturers in just about every industry have shifted production offshore to cut costs and expand into overseas markets.

As China supplies an ever growing share of products — exports to the United States last year were $288 billion, nearly triple the level of just five years ago — quality and safety issues are grabbing greater attention.

Most multinational corporations, which in some industries have to partner with Chinese companies to enter the market, invested heavily in quality controls to ensure that their made-in-China products satisfied safety standards and consumer demands in their home markets.

The approach helped Chinese manufacturers win a reputation for reasonably well-made and inexpensive low-tech exports, said Robert Kapp, a business consultant who headed the U.S.-China Business Council from 1994 through 2004.

But foreign retailers and distributors have begun cutting costs by buying directly from local manufacturers, using Internet-based sourcing and other means to bypass the multinationals. This came partly from market-opening measures agreed to under China's 2001 entry into the World Trade Organization. Prices fell, but quality has suffered.

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