Made in China, not Sold in China?

Takeaway: If internationally China has long been known as the factory of the world and exporter of everything, what about the domestic Chinese market? This article is about maturing Chinese consumption patterns and the lagging supply chain that is geared towards supplying foreign brands with high-quality products meeting international standards, while leaving Chinese consumers with a “quality swamp”. If Chinese consumers wish to buy higher quality “made-in-China” products manufactured for foreign brands, then often their only option to go abroad.

High Quality Products Made in China, but not Sold in China? Even the People’s Daily Sees Red

Source: 高质量的中国制造不在中国卖?连人民日报都怒了!

Running shoes bought abroad are still good after a whole year of wear, the exact same running shoes bought in China fall apart after two months; meatballs produced in China and bought in Hong Kong taste much better than meat balls produced and sold in markets in China; premium “Made in China” rice cookers, can’t be bought in China…

Today’s People’s Daily (December 2nd) even started to follow the phenomenon of “high quality products made in China not sold in China,” and asked:

Have we become a “quality swamp”?

Regarding this title, journalists from the Economic Daily interviewed many shoppers and experts this afternoon to see what they said.

Why are there differences between domestic and foreign products made for the same brand and in the same location?

Many shoppers have discovered that in comparison to products seen and bought abroad, something was often lacking with the quality of the same product or service seen or bought in China. Regarding this, the People’s Daily pointed out:

There are two different standards and two difference production lines—one for goods destined for foreign consumers and another for goods destined for Chinese consumers: first grade products are sold abroad, and second grade products are sold in China. This phenomenon has almost become common practice in a few Chinese industries.

Li Na, a resident of Changpu District, Shanghai, went to Japan not long ago and brought back a rice cooker sold in Japan. After using it a few times, she felt that in terms of functionality and performance it really was better than many rice cookers sold in China. Li Na was chary and discovered that underneath this Japanese branded rice cooker a label was impressively stuck on saying, “Made in China”. ‘Was it even possible to buy this China-made rice cooker in China?’ Li Na asked Su Ning Shanghai and Guomei and many other big electronics stores, and still didn’t find any trace of this rice cooker.

Mobiles, rice cookers, clothes, shoes, food, high tech toilet seats…many of the products sold on the international market are “Made in China,” yet the majority of high-quality products “born” in China are not sold in China, and are directly shipped to foreign markets. If Chinese consumers want to buy these products they have to follow the products abroad on a little holiday, and spend a lot more.

“Little” Chen, who works in a bank in Shenzhen and who is knowledgeable about the quality differential between products sold domestically and in Hong Kong, told the Economics Daily reporter: ‘A little bit closer to Hong Kong and nearly all clothes are bought in Hong Kong. Quality standards in Hong Kong and the mainland are not the same. Many of my friends and I think that Hong Kong standards mean “safer”.

‘For example my razor, although it was made in Guangdong and the price was reasonable, however it was a lot more durable than the one I had bought domestically. I also stock up on dried and tinned cat food in Hong Kong because I trust Hong Kong more as regards product standards and customs inspection standards.’

So, why are there differences between domestic and foreign products, when they are made for the same brand and in the same location?

A manager from an audio trading company told the reporter: ‘The standards for products sold abroad and domestically are definitely different because we always follow the order placed. Whatever the customer requires in the order, then you have to do it that way. For some orders you even have to sign a confidentiality agreement, which means that products from that order cannot find their way into the domestic market.’

Chinese consumers start to demand high-quality products

Today at a press conference Cong Liang, the chief of the national council of the NDRC, said that consumer characteristics are evolving from copying trends and fads towards consumption driven by high quality, individuality, and diversification. Consumption has rapidly expanded particularly in areas such as travel, culture, sports, health, education, and the potential untapped market is enormous.

And following the boom in high-quality consumption, the phenomenon of the “quality swamp” must be monitored.

Cong Liang pointed out that at the same time as seeing potential, the current consumption model needs updating and the areas mentioned above need upgrading. Structural upgrades are particularly needed in the supply chain, which is lagging behind changes in consumption, predominantly manifested in insufficient availability of high-quality goods and service, thereby limiting any increase in consumption.

Guo Jingli, a deputy researcher from the Chinese Agricultural Science Institute, told the Economic Daily, ‘The current surge could be termed a “consumer wave,” and the interesting thing about this period is that satisfying basic requirements such as warmth and hunger have changed to chasing high-quality and individual products. On one hand consumers are becoming more idealistic, on the other they have higher requirements and standards. When consumers idealise high-standard products, they naturally vote with their feet and choose to buy foreign goods, even if these “foreign” goods were produced in China. If products can access foreign markets then consumers automatically think that they are produced in accordance with international standards—essentially this is a matter of whether or not we require high or low standards.’

Thus, as regards establishing standards for consumer goods, what period is China in?

‘From the few creative manufacturing industries I’ve encountered, there is a blank where the establishment of a standards system is concerned’ famous venture capital consultant Shi Yi said. ‘Not long ago the “weather bottle” was a fairly popular product on the internet. Firstly there were lots of counterfeits produced in little workshops, secondly this kind of hot product comes on the scene quickly and disappears just as quickly. The product life is often not long at all, so there isn’t time to set standards before it has already lost popularity. You have to set relative standards, and comparatively speaking the government has high input costs. The reality is that for new products determining the longevity of a trend, precisely identifying consumer interests, and establishing dynamic inspection and standardisation systems are all important.’

According to the “Consumer goods standards and quality improvement plan 2016-2020” released today by the General Office of the State Council, the target is to reform and improve standards in the supply chain, ensuring that 95% of the standards for essential goods are the same as international standards, and that 90% or more consumer goods pass national inspections and spot checks.

Head of international trade research at the China trade promotion research center, Zhao Ping said,’Chinese production standards are divided into two kinds: mandatory and recommended. Mandatory standards are in place for products that directly effect people’s health, such as food and drugs. Raising mandatory standards means boosting standards for the whole industry, and the quality of all products will improve. Recommended standards are more to push industries to develop modern standards and promote high-level industrial development.’