Christopher Devereux, managing director of consultancy ChinaSavvy, now resides in southern China. But he has a very interesting background -- specifically, extensive experience in the plastics industry in three continents, Europe, the Americas and Asia.

He first dived into the plastics business in the early '70s as a product development manager for an English investment bank that owned several manufacturing companies with extensive injection and blow molding facilities. Then he left his home in the U.K. and worked in the polymer industry in Central and South America in the mid-70s. In 1984, he returned to the U.K. to found a packaging company using injection molding and extruded foam thermoformed processes. Later he joined Packaging Corp. of America (Tenneco Packaging, Inc.) as business development manager for Europe and set up the company's first OPS packaging company in Belgium. He set up Chinasavvy in 2002 to help Western companies outsource and manufacture plastic and metal parts and products in China.

Hearing complaints every day here in the U.S. about China taking jobs away (especially in this election season), I wanted to pick his brain on the trends of geographical shifts of manufacturing. I'd like to share his reply with our readers:

Whenever labor jobs are lost, politicians scream. It's only natural. The United Kingdom politicians screamed as their automobile industry declined and as their manufacturing businesses slipped below the 50% mark (it's much lower than that now). Everyone said it would be the end of the British economy.

But what has happened there? The U.K. has now one of the most buoyant economies in Europe. The economy has shifted from a manufacturing economy to a service economy.

And the British, like the Americans, are good at inventing, designing and developing products. They know their markets. So what do they do? They invent. They design. They develop. Then they go to China and have it made and a third of the cost of making it in America.

The Chinese, on the other hand, are not good at developing products. They don't understand the markets. But they are good at copying and making to someone else's designs. It will be many years before they start producing home grown products that will beat American or British designed and developed products.

Remember the inflation of the last 20 years? Horrendous at times. Now we have low inflation. And why? Because the cost of goods coming in from China (and Asia) has brought down the cost of living and inflation.

If importing countries try to block these low cost imports they will find that prices will rise very fast.

What American producers and manufacturers need to do is to embrace the opportunities of an outsourced manufacturing base or setting up manufacturing within the China/Asia area. They will find that they can expand their sales and their exports through high quality/low cost manufacturing using their designs and IP.
There is a lot said about the lack of IP protection in China. This is changing but it only affects companies who want to attack the Chinese market. They have all the protection they need within the US.

Manufacturers who embrace the low cost manufacturing base in China will be the ones who will be laughing all the way to the bank.

If we look at economic history, the center of manufacturing shifted from the U.K. to the U.S.

The U.S. succeeded in overtaking the U.K. with higher productivity. Labor productivity in U.S. manufacturing was already roughly double the U.K. level in 1870, according to economist Stephen Broadberry. Measuring labor productivity by output per worker, the U.K. was still 36 percent behind the U.S. in 2000, according to a paper by the U.K. HM Treasury. About 65 percent of the gap was attributable to innovations, while physical capital accounted for only 31 percent, another research paper found.

How wide is the gap between China and the U.S. in innovation? As Devereux indicated, China doesn't excel in innovation at all. And the productivity is much lower than the U.S. level. Therefore, instead of seeing China as a threat, maybe it'll work better for all to respect the natural flow of manufacturing, especially the low-value-added, labor-intensive type. The future of U.S. economy can't depend on retrieving and retaining those low-level jobs. Expand the service industry and strengthen innovation, jobs will be recreated, and these upgraded jobs won't pollute the air and water either.

Apparently, 84-year-old May Johnson in Northeast Portland has found a good use for the plastic shopping bags cluttering in her house, according to a news story in The Oregonian.

She makes hats and purses with chain store bags and gives them to friends.

One of her fellow members at the plastic-as-art group, Leave No Plastic Behind, turns plastic strapping from newspaper bundles and other materials into purses and baskets.

Johnson also thinks about making buttons out of plastic shaker lids on spice bottles.

These are all great, as an art and a refreshing message to the public about the use of resources.

It looks to me like it just stops there, unfortunately. How are you going to commercialize these lovely ideas? If commercialization can't be done, then it's not gonna solve or mitigate the shopping bag issue.

First, let's take a look at how these special hats and purses are produced:

Johnson cuts the plastic bags into strips and braids four at a time into a flat rope that she then sews together. She fashions flowers from remaining plastic for the hats and either braids a button-shaped clasp for her purses or employs a plastic bottle cap. Particular skill comes in lining up the colors into a crosshatch or a herringbone pattern.

I don't know about you, but I can't help but wonder if the plastic bags are washed, or better,sterilized before their transformation. Is it safe to actually wear these hats? What about the printing ink on the bags? How many bags does it take to make a hat? How durable can they be?

Even assuming the product is good and safe, the required manual labor dampens the chance of large-scale production.

Well, that's under the assumption that the production takes place in the States. It's different in China. Those of you who have been to China, do you recall seeing products fabricated from plastic tubes in the mid-90s? They came in all kinds of designs, mostly animal shapes such as pandas, kittens and lobsters. I bought a handful of them for a buck. Then, it seemed like all of sudden, they were gone. Newspapers said workshops were busted for making the handicrafts with used perfusion tubes! I know my fear for used plastic is probably ungrounded in the States, where bio-hazard waste is strictly controlled.

Still, unless the safety parameters are tested and made clear to the public, I will stay away from products made of used plastic.

Plastics News' good friend Dan Harris came up with a list of why Chinese companies are having a hard time penetrating the U.S. market in a recent post on his China Law Blog.

My eyes lit up when I saw the list. That's exactly what our readers in China want to know, I told myself. I am seeing more and more Chinese companies at international trade shows and conferences. Demonstrating typical Chinese low prices, they crave a piece of the U.S. market, which in their minds is associated with hassle-free transaction, stable supply relations and sizable margins.

Many of the points are sharp and insightful, but in order to shed some light on the deep causes of these market-entry blunders, I'm adding comments under each point. There are also things that I have a different opinion on, and I'll tell you why.

1. Chinese companies focus on a Chinese consumer, not an American one.

Comment: Chinese companies would like to find out more about their target American consumers, but they mostly rely on personal-level approaches to collect business information, lacking a systematic and scientific market investigation conducted by professional Westerners that understand the market.

2. Chinese companies fail to realize that one reputation -damaging mistake in the United States could doom them forever here.

Comment: This one is dead-on. And how come they don't realize this common sense? Because they get by in China and assume it's the same in the States. See my recent post A monumental blacklist for more.

3. Chinese companies fail to realize it will take time for them to make an impact in the United States and they are unwilling to spend the time and money necessary to do so.

Comment: Chinese people take such pride of the fact that industrialization, urbanization and modernization have happened in China in a much shorter period time than in the West that they believe, if you try hard enough, everything can be done fast and well. Why don't they invest enough money to lay the ground work for the new market? Well, they look at the exchange rate. The same exchange rate that makes the Chinese production cost in yuan seem so low magnifies the marketing cost in dollars in the States.

4. Chinese companies focus too much on the end result (making money), and by doing so, they sacrifice the professionalism that would allow them to achieve long- term success.

Comment: The Chinese would ideally like long -term success. But the drastic social, economic and political upheavals and changes in the past century have paralyzed Chinese people's long-term thinking. Fill the pocket as full as possible before the next change hits, be it credit policy, industry standards or consumer interest.

5. Chinese companies tell users what they want instead of listening to users.

Comment: This obnoxious mentality is a hangover of the old Soviet-Union-style "planned economy" (1949-1978). That period of time featured insufficient supply of necessities and one-sided propaganda. Although it's hard to question about China running a market, capitalistic economy today, the country skipped some vital steps in the development of the Western countries.

6. Chinese companies focus too much on making money in the short term, rather than on building the quality necessary to sustain themselves in the long term.

Comment: What pops up in my mind includes: vicious and endless price wars, a business environment that has deprived consumers their say, and lack of technology and craftsmanship.

7. Chinese companies fail to understand how beauty and design might distinguish their product from that of their competitors.

Comment: Traditionally, domestic consumers simply can't afford beauty and design. Price is the only distinguishing point. Plus, the companies don't want to invest much on design, because it's bound to be copied by competitors right away, thanks to the absence of intellectual property protection in China.

8. Chinese companies rely too much on phone calls and face-to-face meetings instead of e-mail.

Comment: This is probably part of the Asian culture, underscoring personal communication instead of machine-generated and less interactive e-mail. I don't think it's necessarily a disadvantage though. Japanese companies have done well in the U.S. market, despite their preference for in-person meetings and phone calls rather than e-mail.

9. Chinese companies fail to use "simple and elegant designs."

Comment: Unfortunately, they are trapped in between complicated traditional styles and a blank page of modern Chinese inspiration. Again, they can't justify investment on design, because it will be copied by competitors overnight.

10. Chinese companies fail to realize their need to hire MBAs and those with local knowledge.

Comment: Call them cheap or arrogant. They don't trust MBAs or Western veterans unless foreseeable return is guaranteed. They also want everything under their control, not threats and risk brought by language barrier and different business values.

These are just my opinion. I welcome yours.

You can never be too street-smart in China, even for a native like me, because there are tricks and catches everywhere in the booming economy. You can easily find counterfeits of not only the Western brand names, but also virtually everything, such as Chinese brand beer, shampoo and even milk. Can't believe it about the milk knockoff? Check out this Chinese-language news report.

My American coworkers asked why unethical business practices are so rampant and what counterfeiters thrive on. My answer was a tip told by a Chinese friend: "It's OK to burn your customers and not expect them to come back, because if you burn every Chinese person [of the 1.3 billion] once, you'll make a fortune already."

That's sort of true. But more fundamentally, it's because China doesn't have a credit monitoring system for individuals or record keeping agency for foul businesses. No Better Business Bureaus. Consumers are in the dark. Therefore, even if the bad businesses, mostly very small in scale, get exposed by the press, the owners often disappear overnight and start a new shop the next day.

But, all this could be changing, gradually. Thanks to the wave of recalls of Chinese-made products in the West, the Chinese government, worried about the export-led gross domestic product, started right away pushing for mechanisms that track product information. An unprecedented "Product Quality Credit Scores" database was launched January 15, 2008, by China's Administration of Quality Supervision, Inspection and Quarantine. "Focus on product quality and credit, establish good faith," it says on the Web site. Anyone can use the online system to search the records for a company name or product name as well as browse relevant laws, standards and announcements. The system has six channels, 17 sub-databases, and 430,000 records. It also keeps track of all recalls of made-in-China products by the U.S. Consumer Product Safety Commission.

Although not comprehensive yet, the database looks to me like a good starting point. In the "bad records"(straight translation) section, I did a search for plastic product and found 11 records out of the total pool of 831.

Considering maybe one of the English-language readers of this blog entry is sourcing from China, I think it might help to translate these 11 records, generated based on testings in 2007, for your reference. Here they are, with manufacturers' names, product names, and specific defects.

1. Anshan City Qianning District Ningyuan Township Xinbao Village PS Board Factory, polystyrene foam for thermal insulation uses, surface density.
2. Baoding Windmill Balloon Electric Co Ltd. Huaxin Branch, plastic film/bag for packaging food seasonings, residue of benzene-base solvent.
3. Beijing Meilan Power Switch Factory, circuit breaker with plastic casing, breaking capacity.
4. Foshan Fozhou Electrical Switch Co. Ltd., circuit breaker with plastic casing, breaking capacity.
5. Fujian KaiDa Printing Co. Ltd., multilayer plastic film, residue of benzene-base solvent.
6. Jiashan Ren He Insulation Material Co. Ltd., polystyrene foam for thermal insulation uses, combustibility.
7. Jiang Yi Electrical Group Co. Ltd., circuit breaker with plastic casing, breaking capacity.
8. Shenyang Dongling District PengXin PS Board Factory, polystyrene foam for thermal insulation uses, combustibility.
9. Wenzhou Southern Flexible Packaging Co. Ltd., multiplayer plastic film for food packaging, residue of benzene-base solvent.
10. Xiong County Huayue Color Printing Co. Ltd., multiplayer plastic film for food packaging, residue of benzene-base solvent.
11. Zhejiang Taihua Electrical Co. Ltd., circuit breaker with plastic casing, releasing and breaking capacity.

"China's tooling industry remains substandard and largely incapable of making highly complex, sophisticated products," a recent story on the Design News Web site quoted Zhou Yongtai, vice secretary general of the China Die & Mold Industry Association (CDMIA) in his year-end report.

That's why the article had an eye-catching headline: "Want to develop products in China? Think Again." But is the reality that gloomy? Are companies that are currently using Chinese-made molds in jeopardy? Not really. Here, Larry Hotaling, founder of Hong Kong-based consulting firm Global Diligence Ltd., shared the lessons he learned of how to watch out for the pitfalls and ensure good quality:

Tooling/molds in China are, in fact, still sub-par, if you don't hands-on manage the build and you use the lower tier mold shops versus the better ones, which are limited in number. Left to their own devices, they will build a substandard mold. But, as I have advocated for years, a company must take ownership of the mold build through a focused collaborative process of managing the design and build. Then it is possible to get a good mold with a higher tier shop.

For instance, regarding the life cycle, they will normally use soft steels -- my clients have insisted on hard inserts for maximum life. The cost increase is usually minimal, as materials cost is only slightly higher. Machine time is longer and so adds cost. But it is against a low base, so you are still way ahead. The other aspect is ensuring that no mold ships until you have several test runs with 100% acceptance of part quality (dimensional and functional) as well as proper mold performance (cooling, cycle time, etc). Where there have been disappointments you usually find these steps were skipped.

The Design News article also quoted Zhou that the lack of skilled workers as one of the biggest problems plaguing Chinese mold making. In an e-mail correspondence, Hotaling confirmed the problem:

This is a big challenge -- I know one Singapore mold maker who has had to slow down his program of mold build in China substantially due to an inability to find and or retain skilled workers. He is bringing skilled people in from Singapore -- although it raises his base costs, rework/quality costs have gone down.

Leveraging talents in India can help overcome the language barrier, Hotaling suggested:

Another aspect to this is we are having the design work done in India -- low cost like China but much more sophisticated. The mold build with good 3D drawings and a BOM (Bill of Materials) that specs out the materials to be used (like hard inserts) allows the build to occur in China provided there is a solid Western-thinking project engineer in China to guide the build. The other option is build the mold in India at low cost vs. the USA but good quality and easy program management since English is the language there.

The most important take-away message I get from the Design News article, though, was that China provides big business opportunities for more sophisticated molders in Europe and North America. Instead of holding a grudge against the Chinese for stealing low-grade tooling work, it's the perfect time for American toolmakers to upgrade to the higher-margin business of top-grade tools, which Chinese molders are craving.

How desperately does China need advanced tooling? The latest data I've received from CDMIA showed that in the first 10 months of 2007, China imported US$1.67 billion in molds and exported $1.10 billion, posting a trade deficit of $569 million. Plastics and rubber molds account for 51.96 percent of the import and 69.46 percent of the export.

China's largest mold importers are Japan, South Korea, Taiwan, Germany, the Untied States, Singapore and Italy. China's top export destinations include Hong Kong, Japan, the United States, Taiwan, Germany and Thailand.

Note that China's most popular export markets are actually quite sophisticated. The CDMIA theory, only based on data reported by state-owned and collectively owned enterprises, simply doesn't reflect the entire industry, which features foreign-invested and private companies as the majority development forces.

Bob Kroshefsky's recent letter to the editor in the February 11 issue of Plastics News and on the PN Web site at here showed understanding and sympathy for the difficulties Chinese factories have undergone lately and also rightly pointed out that the lowest-possible-cost mentality is what is causing quality issues. Kudos for that!

However, his speculation that "Even if someone there raised the lead-paint-and-kids issue, well, hell, the toys are going to be exported, so it's not like we'd be endangering any of OUR kids" neglects the reality in Sino-U.S. trade. I have no way to prove that the Chinese don't ever have any nationalistic thinking in doing business with foreign countries. But I know for a fact that China's exports are of much higher quality than goods sold domestically. Market regulations and standards play a large role, in part because the Chinese, three decades ago, had very little merchandise in the Communist planned economy. Having started from scratch not long ago, the country has a long way to go before it pars its product standards with developed countries.

Products that contain lead paint and other hazardous content are very common in China. Even with the rising awareness of product safety, consumers in China are much more vulnerable than their Western counterparts, due to the lack of information and a consumer-rights system to back them up. A nationwide recall system, such as the Consumer Product Safety Commission in the States, is nonexistent.

In the Mattel case, the paint supplier violated its contract with the factory and sneakily sent over substandard paint. The factory was completely unaware of it. Did the paint supplier ever reflect on the lead-paint-and-kids issue? We don't know. But if he'd thought his dirty trick wasn't going to harm his kids, he'd be wrong. Sadly, the recalled Mattel toys returned to China and climbed on its store shelves! Yes, consumers in China are still buying the products that America threw out because of the danger. Why do they remain stocked in China's stores? A Wall Street Journal article unfolds the complex situation:

In the U.S. and Europe, a wave of recalls of Chinese-made goods during the second half of 2007 led to heavy news coverage and a coordinated effort by regulators and the toy industry to pull dangerous products off the shelves. In China, it is a different story. The nation has no comprehensive rules governing recalls and no system for tracking injuries from defective products. Together with a thriving trade in black-market products, that means some of the goods that have caused alarm in the West are still available to Chinese consumers.

The situation is a reminder that often the people most at risk from China's public-health and safety lapses are the Chinese themselves. It raises questions about the responsibility of multinational companies to keep dangerous toys off the shelves in parts of the world where consumer-protection laws are weak and the threat of legal liability is relatively low -- but also about their ability to do so.

And the incentive for selling the hazardous toys rejected by the U.S.?

When U.S. companies cancel orders because products are defective, Chinese factories loath to lose money may resell the recalled goods out the back door. When the defect lies with the manufacturer rather than the design, the big brand may decline to pay the plant for the tainted toys -- often ensuring they won't be returned. Dangerous toys can wind up on Chinese auction sites like Taobao or in retail stores through a murky chain of suppliers.

Peter Humphrey, managing director of ChinaWhys, a Shanghai-based supply-chain monitoring firm, said the Chinese business-to-business world is 'full of shoddy, illegal goods.' He said enforcement is 'nonexistent, and people will sell whatever goods they think they can get. . . . There is a very lawless, unregulated Internet trade here in China.'

Back to Kroshefsky's concern on Chinese nationalism, who are the Chinese kidding? As the ancient idiom goes, harm set, harm get (Hai Ren Hai Ji).

Mr. Kui Cai, a 20-something engineer with injection press giant Ningbo Haitian Group Ltd., is stranded in Ningbo by the snowstorms. But he's excited! He received help buying a new condo and a free vacation package as Chinese New Year gifts from his bosses.

Cai, a native of the Jiangxi province, joined the research and development department of Haitian in 2006 upon college graduation. He and his new wife, also from Jiangxi, were ready to go back to their home province for the Spring Festival this year, but were forced to cancel their trip because of the snowstorms lashing China. So they found themselves with nowhere to go in Ningbo for the holiday.

The couple had planned to settle down in Ningbo to be together near Cai's work, so they started saving for a down payment on a condo. But the money was not adding up as quickly as they had wished.

When Haitian management heard of the couple's situation, they offered Cai 80,000 yuan to cover the condo's down payment.

Now the couple is busy decorating their new place for the holidays.

"Without the generous help from the company, I wouldn't know how to have a decent New Year," he told the local newspaper.

Cai also can't wait to use his bonus vacation package. The company will pay for everything during a one-week trip to Hong Kong and Macau, he said. He's never been off the mainland.

But Haitian is not the only plastics company that's going the extra mile to make sure their nonlocal employees enjoy the Chinese New Year even when they can't spend it at home.

Hangzhou-based Wahaha Group, China's beverage giant with in-house bottle making capacities, said most of the nonlocal employees are staying in Hangzhou for the Chinese New Year. Company executives, including the president and chief executive officer, invited all employees to attend the company's New Year's Eve reception. Wahaha organized performances and other entertainment activities for the celebration. The employer also tripled the pay for those who work during the holiday, plus overtime allowances.

Processor Zhejiang Guangbo Group Co. Ltd. originally had planned to escort 800-plus migrant employees home via charter bus services. As the snow blocked the roads, the owner immediately ordered 1,000 comforters for the dorms and arranged for a holiday celebration and local tours.

Information in this post is based on Chinese-language coverage in Ningbo News and China Business Times.

To try to help Westerners understand how important the Chinese lunar New Year celebration is and why the snowstorms blocking holiday travel is such a big deal, let's take a common image we see here in the U.S.

Christmas is a time when many families gather, with the fireplace glowing, the Christmas tree trimmed and children anxiously awaiting Santa Claus. Now think of the family member who has to miss this annual gathering and multiply that by ten. Because odds are that the family member who misses the Christmas holiday will have other opportunities during the year to see his or her family. This is not the case for Chinese families, and many times it's the only time during the year that young families will see each other.

Unlike in the States, it's not uncommon for Chinese families to be located in different parts of the country. A typical scenario in China is one where a husband works as a laborer in a big city while his wife and child stay home in the village. The half-month Chinese New Year celebration is the time when Dad comes home, bringing hard-earned money and new clothes for the family, plus it's time for him to restore his energy for another tough year on the assembly line.

I read a story about a Chinese migrant worker who reportedly boarded a first class flight from Guangzhou to Chengdu with a packed comforter and plastic bucket. Some might question why he traded a big chunk of his annual income for a first-class plane ticket because coach seats sold out and trains and buses stopped running. But many others understand his choice, knowing how important a family reunion during the lunar New Year is to an ordinary Chinese man who works out of town all year round.

Plastics News managing editor Don Loepp pointed out the attention the Western media gave Chinese product-quality issues last year in a recent post, as a few U.S. news reports on the subject have become strong candidates for the 2007 Pulitzer Prize awards for journalists.

"China is a land of toxins and danger. Our homes may be full of made-in-China products, but we look at them suspiciously," Loepp wrote, summarizing the prevailing perception of China in the United States.

He also rightly pointed out that a Pulitzer may trigger Washington to take a closer look at Chinese manufacturing and product quality.

The same issues also have been recognized in China with the country's Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) listing the Mattel recalls as one of the "Ten Most Influential Events of 2007."

Besides pressure from its overseas buyers, Chinese manufacturers now face enraged domestic consumers who've read about Western countries' reactions to unsafe products and realized that their own domestic goods are much worse but nobody is there to safeguard them!

AQSIQ and other authorities have, since June, fast-tracked a few projects targeting better product information transparency and stricter quality control. The newly launched online database "Product Quality Credit Records" is empowering the average Chinese consumer in an unprecedented measure.

The same agents are also building a "China Import and Export Products Inspection and Quarantine Information Bank." The Chinese version is expected to go live online March 15 and the English version on June 15.

With such a system, Chinese users will be able to have one more reference before they make a purchase. Profit-driven manufacturers will no longer be able to pass off their recalled products onto domestic consumers.

All of this, without the recalls in the West, wouldn't have had a chance to be accomplished any time soon.

So, in a sense, Chinese consumers owe Americans, the biggest importer, a thank-you. Thanks very much for heightening China's awareness of consumer rights and helping clean up the marketplace, whether it was intended or not.