Home -> Law Blog Directory -> International Law Blogs -> China Law Blog

International Law

: China Law Blog

How To Monitor Your Chinese Factory, The China Price, And QC By Motorcycle.

By Dan Harris and Steve Dickinson

Interesting post by Nina Ying Sun on the PN [Plastics News] China blog on the inherent difficulties inherent of monitoring your China factory. The post is entitled "Hands-on due diligence in China," and it starts out with the following quotes from an interview with Alexndra Haney, author of the book, The China Price: The True Cost of Chinese Competitive Advantage:

"More than half of factories in southern China are falsifying payroll documents!" "Many even create Potemkin factories.... Around the corner is a 'shadow factory' that produces the same goods under much less wholesome conditions." "There is even a cottage industry of 'falsification engineers' in China--consultants who specialize in doctoring payroll records and coaching workers to create a fiction of compliance with a Western buyer's code of conduct."

The post then cites some of Ms. Harney's suggestions for dealing with your China factory:

1. Acknowledge that understanding what's happening in the company's supply chain is not simply a matter of risk management or good corporate citizenship; it is a core business issue and a valuable competitive advantage. 2. Build frank, long-term partnerships with Chinese factories, rather than moving orders quickly from one plant to another. 3. Take a field trip at least once or twice a year.

Ms. Sun finds this bit of Ms. Harney's advice particularly interesting:

Schedule a visit to one of your suppliers, but arrive quietly the night before your appointment, perhaps with a Chinese colleague. Instead of having dinner at the hotel restaurant, eat near your factory and spend time with the locals. Ask them: What's the average monthly wage in this area? Are wages going up or down? What time do most people get off work? What is considered the best factory to work for, and why? Have there been any problems in any of the factories recently, fights or disagreements? Ask motorcycle drivers that work near your supplier about the hours your factory keeps its lights on, and whether they see a lot of traffic between your supplier and others in the neighborhood.

Ms. Sun very adeptly notes a flaw in relying on the motorcyclist:

When you meet the factory manager the next day, ask him the same questions and compare his answers to what you learned the night before. Sounds like some good advice from a real China expert. However, don't assume the locals and motorcycle drivers -- if there are any -- really know the answers to your questions, even if they provide you with information. Be aware that Chinese Culture 101 dictates that, out of politeness, Chinese people won't tell you no. If the motorcycle driver isn't sure about the hours of the factory, he will probably give you an answer anyway, just to complete the conversation nicely.

Anyone who has ever asked for directions in China will know whereof Ms Sun speaks. Ms. Sun's good advice is that "like any due diligence work, talk to multiple sources with different backgrounds and interests." I read and enjoyed the China Price and I have been meaning to review it for some time now. The Parent Party Girl Professional and Philosopher Collide Blog (perhaps better known as the PPGPPC Blog?), does a great job summarizing the book in her post, "Armchair China:"

Alexandra Harney does a good job of documenting the price for Chinese ascendance. In The China Price she offers tons of documented facts, personal stories of Chinese workers and factory managers, and knowledgeable commentary about the cultural context. She manages not to weigh in emotionally, although she does assign responsibility. Chinese workers, most very young or with impoverished families to support, are killed and maimed due to horrible working conditions. Cancer villages and widow towns dot the Chinese landscape. Chinese pollution shows up on the West coast of the US. Chinese factory managers, whose hours are just as inhumane and whose pay is often just as low? or their personal funds are drained in their hope of staying afloat? use a numbers game and falsified documents to try to appear to be adhering to fair labor standards, because to adhere to fair labor standards would drive the factory out of business, and many officials charged with making sure fair labor and safety standards are in place turn a blind eye. Wal Mart?s inevitable and witless commentary is present as well. Many Chinese workers and their families have turned to studying the law and combining forces to sue for benefits after injuries. The seeds of something better appear to be planted and sprouting, slowly. But according to Harney, we all pay The China Price.

The China Price does a really good job explaining what goes on in China's factories and, in particular, the whole system that has been built up in China for avoiding monitoring by Westerners. Ms. Harney's thesis is that in many cases, Western companies producing goods in China know that the prices they are paying make fair employment and decent environmental standards impossible. I recommend the book to anyone interested in how China has managed to achieve the China price and what the societal and environmental costs of that price has been. I also recommend it to anyone thinking of doing any manufacturing in China, be it on your own our through outsourcing.

Full post as published by China Law Blog on May 29, 2008 (boomark / email).