HONG KONG - A longtime manufacturer known
as China's "Sesame Street toy king" became a
casualty in the ongoing, widening trade dispute
between the United States and China regarding
unsafe Chinese exports when he hanged himself last
week.
Hong Kong toy manufacturer Cheung
Shu-hung committed suicide on August 11 at his
company in Foshan city, an hour's drive south of
Guangzhou in southern China's Guangdong
province, after Mattel, the
world's largest toymaker, recalled nearly a
million toys manufactured by his company because
of worries over lead-based paint, which is illegal
in the US.
The incident followed a series
of problems over the safety of food and other
products, including tainted medicine and
chemical-laden toothpaste, exported from China.
Beijing has slapped the companies involved in the
scandals with export bans.
On Wednesday,
Baoqing Zhao, the first secretary of the trade and
commerce section of the Chinese Embassy in
Washington, DC, held a rare two-hour news
conference in which he said Beijing takes the
recent incidents seriously and is cracking down on
troublesome companies. China has increased its
food inspections, Zhao said, adding that starting
September 1, all Chinese food exports will carry a
government seal declaring that they have been
inspected.
But Cheung's suicide is a
personal example of the increasing difficulties
facing Chinese manufacturers, and the need for
them and Beijing to enhance the supervision and
testing of their products.
Cheung, who was
in his 50s, was found last Saturday in a warehouse
at the Li Da Toy Co where he had hanged himself.
The company had been slapped with an export ban by
the General Administration for Quality
Supervision, Inspection and Quarantine, which
oversees the quality of China's exports, after
967,000 Li Da Toy-made products were recalled in
the US.
The toys, sold under Mattel's
Fisher-Price brand, included popular preschool
characters such as Big Bird, Elmo, and dozens of
other items, many from the children's television
series Sesame Street. The recall was
expected to cost Li Da about US$30 million.
Li Da's co-owner and chairman, who was
only identified by his surname Xie, was quoted by
Guangzhou-based Southern Metropolis News as saying
Cheung was a victim of the export ban and of the
"fake" paint, which Xie said was supplied by a
company in Dongguan.
"The company
presented new production samples for testing after
the recall, but the move was refused by the
mainland authorities, saying that the company had
been temporarily banned from exporting products,"
Xie told Southern Metropolitan News. "I remember
Cheung had said a few days before his suicide that
he was unlucky to have stepped on a landmine in
the Sino-US trade war."
In a letter to the
Foshan Entry-Exit Inspection and Quarantine Bureau
on August 6, Chueng lobbied to lift the export
ban, saying it threatened the survival of his
company and the salaries of 5,000-odd workers.
"The company generates an output value of
200 million yuan [$26.3 million] annually, which
is almost the same value of its exports. [The
company has] a gross profit margin of 6-7%, so it
makes only a small profit. It can survive only if
it maintains the same scale of production and
exports. The [toy recall in the US in June] has
resulted in substantial economic loss to the
company. The company has ceased production for
supervision reform since mid-June. If it is not
allowed to export products again, the company will
close immediately. If the salaries of workers are
delayed and other series of problems cannot be
dealt with properly, it will lead to a new
crisis," Cheung wrote.
Last Saturday,
shortly before he hanged himself, Cheung went to
his company and apologized to some of his workers
for the possible closure.
A worker
surnamed Chong said Cheung, who was single, was a
good boss and had kept improving the working and
living environment of his employees.
"He
sent us mooncakes during the Mid-Autumn Festival.
He gave us a bonus at the end of the year and had
never delayed workers' salaries, even in difficult
times. Some of the workers wept when they heard of
his death," Chong said.
Xie said the paint
the company was using was provided by a trusted
longtime supplier that later provided Li Da with
the "fake" paint from a company in Dongguan
because its usual paint was out of stock.
Meanwhile, Cheung’s company allegedly missed
testing the paint in the period when it was used.
Industry experts and manufacturers from
Hong Kong, the biggest investor in Guangdong, said
Cheung is a scapegoat of the Sino-US trade
dispute.
He Maochun, director of legal
department of the International Trade and Economic
Cooperation Research Institute under the Chinese
Ministry of Commerce, said exporters or traders
are "sometimes innocent and helpless" in trade
wars.
He said that after China entered the
World Trade Organization (WTO) five years ago, the
country's businesses could expect to face further
and more difficult foreign competition and
challenges.
"Under WTO membership
arrangements, China was given a five-year grace
period for the all-around opening of its economy,
but many companies on the mainland haven't
prepared for or understand the cruelty of the
international market," He said. He said he
expected more industries, including fashion,
electronic and machinery manufacturers, to face
challenges similar to the food, drug and toy
scares.
A man surnamed Ho who is the
department head of a Hong Kong
electrical-appliance export company with factories
on the mainland said his company has spent
increased time and money on quality-control
measures for its kettles, electric ovens and
toasters since increased import regulations went
into effect in July 2006.
"Months before
RoHS [the Restriction of Hazardous Substances
Directive] took effect on July 1, 2006, which
restricted the use of six hazardous materials in
the manufacture of various types of electronic and
electrical equipment, we had to make sure each
component of our products conformed to the
standards, either through self-declared letters
from suppliers, certificates of laboratory tests
or both," Ho said.
Ho's company exports
its products to European countries, the US, Japan
and other countries.
"In order to reduce
risks, our [mainland] suppliers are required to
give us a guarantee and will be asked for
compensation if their components are found to
contain hazardous substances," Ho said. "However,
big suppliers are reluctant to do this, and we
have to do the checking ourselves for the
materials."
Ho said he expects more
countries to formulate import regulations and to
expand such rules to include environmental
protection and energy conservation. "This is the
increasing trend of international trade, and there
are more environmental-protection issues, such as
the RoHS directive, which increases production
costs," he said.
David Chiu, chairman of
the Hong Kong Small and Medium Enterprise Progress
and Investment Association, said the toy industry
has become a scapegoat in the widening trade
dispute between China and the US. Chiu, who is
also a toymaker, blamed this on the increasing
trade imbalance between the two
countries.
Based on some of his experience
with overseas importers, Chiu also sought to cast
blame on the foreign buyers and charged that their
accusations of unsafe products were "excuses" for
them to return stock that didn't sell.
"Enterprises, particularly processing
exporters from Hong Kong, are being sandwiched by
the trade wars," he complained. He cited China's
new rule on processed exports, under which
authorities will impose a levy of up to 100% on
raw materials imported from Hong Kong as of August
23.
Olivia Chung is a senior
Asia Times Online reporter.
(Copyright
2007 Asia Times Online Ltd. All rights reserved.
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