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Ask Your Grandpa about Dealing with China

So many decades ago, we were exactly like China today.

Not so many decades ago, America is like what China is today. No exaggeration, we used to be China. Our nation went through many decades of progress in labor, environmental, consumerism, etc, to get to where we are today. And looking at today's China, many people would turn away with great distaste, if not disgust.

Our goal is not to convince you that what a great country China is; we are not in the tourism or PR business. Our objective is to help those who have legitimate needs and desires to source overseas get a fair product in return. Our experience in China spans over a decade; it started right after the Communist party finally loosen the grip on the socialism economy and let capitalism trickle in. We physically witnessed the changes in China as it grew from an agrarian society into an industrial one.

Along with progress comes with costs. The very same costs that developed countries such as the U.S. had paid dearly are now China's worst enemies. While geopolitics and macro economy is beyond the scope of this writing, we'd like to point out something more down-to-earth, more relevant to our business - dealing with China on a business level. Or more specifically, how Chinese business people interact with foreign buyers.

First and foremost, while foreigners seemingly get quite a bit of respects in China, there is a hidden and deep resentment toward anything westernized. This type of mentality skews more toward people who are 35 or older and is less prevalent in the younger generation. Root cause of this resentment stems from the invasion of eight western countries (including Japan) in the 1900; that was at the end of the Qing dynasty.

China understood that it needs western buyers to build up its economy, the factories that dotted what used to be farmlands counted on orders from abroad. Since the domestic Chinese market used to be very weak, as the people were just starting out and had very little disposable income, everything China did was to build up their export. This is the reason that there's a very favorable subsidy policy for exporters, which is also one of the many sore points of western countries. Export subsidies make Chinese goods cheaper than they really are. While the buyers enjoy the benefit of a lowered cost of goods, domestic factories in these western countries, such as the U.S., become less and less competitive. China's cost of material and labor are already many times lower, with the subsidy, domestic factories just can't keep up.

While the resentment from the U.S. factories who can't compete is obvious, why are the Chinese people unhappy? For them, they know while they are making a better living with all the stuff they made and sold, they can't help but worry about the other societal costs that are put aside temporarily in the name of increasing output. The most obvious of such "deferred" costs are environmental and labor rights. While both issues have gradually surfaced over the past few years, China is more or less still in the "identify and recognize" stage. The grievance of the Chinese people is the same as all other people - a very small percentage of "entrepreneurs" get most of the windfall while the great majority gets back very little. Of course, very little is a relative term, the matter of fact is that Chinese' living of standard had grown tremendously over the past many years. The majority of the people resent the western buyers who trample their lands and lives because these buyers want the cheapest goods made, consequently, they also resent the fact that they are portrayed on the world-stage as the country that only makes cheap goods.

Putting resentment aside, the entire generations of Chinese people may have been left out on many lessons pertaining to ethics and morality. While we may attribute this to the infamous Cultural Revolution, it is, nonetheless, made how these Chinese business people behave the way they do. We have both heard and experienced some pretty nasty stuff while working in China. And the more unprofessional or unethical the deeds were, the louder the applause was from the bystanders. In the end, since the opening of the Chinese economy, most of the people have been trained to only see money and nothing else. For that, they are willing to do anything.

When I say I want it "cheap..."
I meant price, not quality!

Chinese business people do not see laws and regulations. In their belief, they think they can get away with anything. And that everything is for sale. As long as they can line-up a common goal with his adversary, nothing is impossible. This is exactly why they are able to put out sub-standard products, switching approved materials, cutting corners on workmanship, the list goes on. The bottom line is, well, the bottom line. As long as there's money to be made, they're willing sacrifice self-respect and dignity to get it.

Dealing with people of this kind of mentality is foreign to U.S. buyers. In U.S., we cherish our reputation and honor. If we are not good at something, we'd refer inquiries to people whom we deem as reliable experts in that field. We do not want to get paid for something that's sub-standard. There are accountability and liability issues. On the other hand, in China, when an unrelated inquiry comes in, the business person would very likely take the lead and try to source out the manufacturing. He would not find the best manufacturer to do the order but the cheapest. The cheaper the factory, the higher his own margin. And with all this, he's still pretending that he, indeed, is the real factory; foreign buyers just don't know better. The Chinese business people value money in their pocket more than sense of honor.

There are horror stories abound that buyers are left to their own devices when the shipment received is defective or not what they had approved; too many to count. Such orders are usually too small to take legal actions. Chinese factories understand that no buyers would spend the money to file suit against them in the Chinese court system, which till today, is still more predisposed to the people than to industry. Chinese factories know that since the buyer is always shopping around for the cheapest price, the likelihood of him getting the next order is slim to none anyway, why would he reduce his own potential profits on the current order for something that may never come. He knows he can get away with sub-standard products, just as long as his pocket is lined with cash at the end of the day.

With that understanding, it is not hard to further understand how China can produce goods so cheaply and why China is known for making sub-standard goods.

Well then, are Chinese goods usable? Should anybody still buy from China?

One of the keys here is "intervention." This is what separates a solid product and a inferior one. If the buyer cannot be physically on-the-ground, there's not much intervention that takes place. Emails and phone calls do not count as intervention; they aren't even interference. When you have a physical presence engaging the people who are working for you, they are just less likely to pull a quick one. It's simple human nature. And, in the case of international business, if your physical presence is a legal one (as opposed to a tourist who happens to visit), Chinese factories would instantly become a lot more accountable.

Through growth and the rise of Chinese domestic consumer market, the Chinese factories will eventually get used to "playing nice." But until China becomes America and loses all of its cost-saving niche, there is Cross Blue. We have the legal presence in China and the long-term working relationship to sustain a consistent quality output. We know the culture, the tradition in China, and we know and understand the expectations in U.S. So save yourself the trouble and headache of trying to get the best of the Chinese factories, your battle is already half-won when you team-up with Cross Blue.