Quality deterioration is indeed a major problem in China. However, the reason why this is happening is not so much so Chinese manufacturers can rake in big profits, it is so they can survive. Many Chinese manufacturers have no profit margin whatsoever.
Economic Reality
Between currency revaluation, massive competition, tax reforms, and the end of VAT rebates (a Chinese tax), huge numbers of Chinese manufacturers are operating at a loss. They are sacrificing quality in a desperate attempt to stay alive for a few more months or years.
Some Chinese companies have gotten themselves into a desperate situation by pursuing contracts at the absolutely lowest price possible. China’s manufacturers cannot continue this race to the bottom of the pricing scale and expect to survive.
At some point, they will need to shift to higher quality goods at higher profit margins. This shift is already happening in the market as a whole and I have seen individual Chinese companies make this shift as well.
More and more importers are being told by their Chinese suppliers that they cannot continue to maintain expected quality levels without price increases. Importers are well advised to listen to these suppliers and wherever possible stress quality and safety over bottom end pricing.
I have also seen importers fight a price increase when they certainly knew there was no way quality could be maintained without it.
It seems that economics is what is driving the quality deterioration right now. Just as it did when Japan and then Korea were not known not for the quality their goods, but rather for their low prices. This is not some special characteristic exclusive to the Chinese people. The economic reality is that this can be corrected. Time will tell if the Chinese can break out of this cycle of deteriorating quality. Japan and Taiwan did it and I do not see why China cannot do the same.
The Chinese Government Steps In
The Chinese Government has also intensified their efforts to ensure better quality for their exported goods.
Under the agreement reached at a two-day meeting on the safety of consumer products held Sept. 11, 2007, both the U.S. Consumer Product Safety Commission (CPSC) and China’s General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) agreed to full cooperation in quality inspections in four categories: toys, fireworks, cigarette lighters, and electrical products that are exported to the United States.
The AQSIQ will strengthen their inspections on the exported products and assist CPSC in tracing hazardous products. Here is a link to the AQSIQ website for more details: http://english.aqsiq.gov.cn/
China has also agreed to provide the European Union with detailed quarterly reports to prove it is dealing with complaints about potentially dangerous consumer product exports.