Last summer I wrote about the idea that few Chinese companies have embraced a dedication to making best-in-class products. In my many visits to factories in China over the past five years I was almost universally asked about quality control and how it might be implemented. I quickly realized that in most cases the Chinese factory was not really interested in better quality since it would result in higher cost that those companies were unprepared to invest.
Almost all the Chinese companies I have visited are no closer to successful exportation of their products to the U.S. The main reason is that being the lowest cost provider does not work any more in a country where annual percentage wage increases are consistently in the double digits.
Shaun Rein of China Market Research wrote about this in his book ‘The End of Cheap China’ two years ago. Not only has Shaun proved to be prescient and correct he also indicated the path to success for Chinese export enterprises – making higher quality goods. There’s good reason to have confidence in Chinese companies once they dedicate themselves to producing consistent high quality goods. It’s not as if the Chinese people don’t have a long history of paying attention to the most miniscule details (think Chinese art and calligraphy for example).
Undoubtedly the Chinese have the knowledge to make high quality products (and affordable ones at that). It’s simply that up until this point there’s been a lack of general desire to make Chinese goods that are admired as the best around. Yes as I noted Lenovo is an exception and there are others but the overall ”let’s make the best” Chinese business approach has yet to develop. It will happen sooner than later. It has to since the only other outcome is losing market share to newer, more nimble competitors in other countries in Asia and beyond.
Have you heard of Haier? How about Huawei? Some westerners know Tsingtao Beer but how about Li Ning sporting goods? All of these companies make excellent quality products but for various reasons have not made great progress in the U.S. Part of the problem is a lack of understanding on the part of U.S. consumers as to what those brands stand for.
Chinese President Xi Jinping without a doubt has his hands full with a host of domestic and international issues. However what might be one Mr. Xi’s most important roles will be the behind the scenes work to change the Chinese factory mindset from ‘find a corner and try to cut it’ to ‘make a great product, each and every day and price at a fair market value’.
I think the wheels are already in motion and look forward to working with companies that have that forward thinking mindset. I hope I do not have to wait too long for that opportunity.