regulatory agencies contend
with internal conflicts and cope with external
pressures, are we sure they’ll be able to
effectively address their product-safety and
product-quality problems?
Learning from
experience Although this sounds like a
story with an unhappy ending, it is that Chinese
ability to turn desire into action - which may
have led to these problems - that can also provide
the solution. For the Chinese government does
possess the ability to crack down when necessary.
Two other tales in which the Chinese government
had to take sharp corrective action over the past
decade - civil aviation safety and doping in
sports - are optimistic.
In the 1990s,
China had one of the worst passenger
aviation-safety records. A string of air disasters
tarnished the country’s
international image and even
led the US Federal Aviation Administration (FAA)
to consider restricting Chinese flights. This
threat of international ostracism apparently
prompted the Chinese leadership to take decisive
action.
In 2002, to make safety the
priority, Beijing replaced China’s top aviation
regulator with Yang Yuanyuan. Under Yang, the
Civil Aviation Administration of China (CAAC)
introduced a broad range of reform measures into
the management of airlines and airports and
focused CAAC’s mission on safety. Most
importantly, it insisted on rigorous safety
compliance by companies and pilots.
CAAC
was also eager for foreign assistance. It rewrote
China’s aviation regulations with help from Boeing
and the US FAA. It even enlisted specialists from
the International Air Transport Association to
audit Chinese airlines and release their findings.
All this helped make the Chinese aviation industry
a "global leader in air safety" with "the best
safety performance in the world" between 2004 and
2007. [2]
A similar story of cheating,
international ostracism and then successful reform
finds its narrative in Chinese sports. While the
reform era enlivened Chinese athletics, the
ever-rising stakes for winning also increased the
temptations for sportsmen and their coaches to
cheat. Though cheating has been a worldwide
phenomenon, in China, the decentralization of
sports governance - which stimulated competition
among the localities for medals - coupled with a
rudimentary antidoping institutional environment
offered especially fertile ground for the corrupt
behavior of doping and match fixing. For a while,
these incentives propelled China’s rapid ascent as
a global sports power, but it was only a matter of
time before some of the athletes became a national
embarrassment.
Chinese swimmers hauled in
record amounts of gold medals in the 1990s. Soon
after, China landed at the center of a series of
high-profile doping scandals. These doping
scandals - and the unprecedented number of Chinese
athletes testing positive - cast an especially
dark shadow on the meteoric rise of the Chinese
women’s swimming team. Much as the recent spate of
product-quality and -safety problems has dented
China’s image as a manufacturing power, cheating
in sports gave rise to the view that China would
seek to win by whatever means.
Though at
first Chinese officials sought to explain away the
doping scandals as the work of a few misguided
individuals, when international pressure mounted,
even threatening to exclude China from certain
sports, Beijing knew it needed to address the
issue. Salvaging the country’s tattered reputation
and regaining the world’s confidence mattered.
In cooperation with international sports
organizations, Chinese sports authorities
undertook a multipronged approach to prevent the
recurrence of doping embarrassments, establishing
the China Anti-Doping Commission, strengthening
antidoping laws and regulations, enhancing testing
facilities and capabilities, and improving
oversight of local teams. Meanwhile, going beyond
international requirements, China began enforcing
the "sudden death" treatment: swimmers who test
positive for steroids, including first-time
offenders, are banned from competition for life.
All this worked. China was transformed - a
near pariah in the late 1990s, model performer at
the 2004 Athens Olympics. Not a single Chinese
athlete tested positive for drugs in Greece,
unlike several other major sports powers. But this
cleansing did have an impact on China’s medal
count. Their swimming team dominated in the '90s,
but they only won one gold medal in 2004. No
matter, the value of that lone swimming gold to
China’s reputation: priceless.
Building
better Sometimes a strong party-state is a
very good thing. The successful corrective
measures with respect to aviation safety and
antidoping in international sports are undoubtedly
encouraging. China is able to comply with
international rules and norms. Recognizing that
China’s reputation was at stake, China’s leaders
took on serious reforms and tough regulatory
actions. Unlike in many other developing
countries, China, with its communist party, has
the capacity to get things done when it matters.
Efforts to overcome corruption and
cheating in the wake of opening up the Chinese
market solved some problems but created others.
Though Chinese officials openly express their
annoyance at Western media reports they feel
exaggerate the magnitude of China’s product-safety
problems, they do realize that the reputation of
"Made in China" is imperiled - and they care. As
Vice Premier Wu Yi noted, bad press had caused
"serious damage to China’s national image". The
government saw the writing on the wall and has
taken a new wave of steps to improve watchdogging.
To help fix the problems plaguing
regulatory agencies, like fragmentation and poor
policy coordination, the State Council established
a leading group on product quality and food safety
in 2007. The leading group, headed by Vice Premier
Wu Yi, is comprised of representatives from 15
government agencies. And the Chinese government is
putting muscle into policy implementation.
Building on its long-standing efforts to
improve market order, the Chinese government
launched a nationwide campaign in August 2007 to
investigate and fight the manufacture and sale of
fake or substandard food, medicine and
agricultural products. By October, the government
had arrested 774 people in the crackdown. As of
late November 2007, authorities had also closed
down nearly 8,000 slaughterhouses for operating
without licenses or for failing to meet government
standards. For toy manufacturers blamed for
producing toxic products, the government has
suspended their export licenses - the kiss of
death for an export business. Foshan Lee Der Toy
Co, one of the first to be blamed for Mattel toys
containing lead, was shut down. The owner
committed suicide.
But most importantly,
the Chinese are upgrading quality standards in all
areas, from food to pharmaceuticals. They’re
taking proactive measures to strengthen the
monitoring and supervision of production and
supply chains for food and manufactures, including
implementing monitoring and inspection programs
for wholesale farm-produce markets in all major
cities, introducing recall mechanisms for food and
more rigorously testing the quality of export
products at the border.
In spite of the
domestic campaign and crackdown, it is simply
impossible for Chinese regulators to achieve full
compliance in the domestic market in a short time
period. There are hundreds of thousands of firms
and families involved in producing food and
manufactures. So, the focus of governmental action
is, in the words of Wu Yi, "to strengthen the
system of supervision and control over product
quality, especially relating to exports". This
means that, while there will be general
improvement, the improvement in the domestic
market will likely lag behind that of exports.
As with aviation-safety regulation and
antidoping, the international pressure on China to
improve product quality has been accompanied by
international assistance. We can hope this
collaboration will be as effective. On products
ranging from preserved and pet foods and
farm-raised fish to certain drugs, medical devices
and toys, the US and China have reached agreements
to strengthen the quality of Chinese exports.
Whereas previously, authorities would
ignore the errant or unlicensed factories until
after a product-quality problem had been
uncovered, the agreements signed during the Third
US-China Strategic Economic Dialogue in December
2007 require Chinese exporters to register with
the government and accept inspections to ensure
compliance with American standards. This is
clearly designed to mitigate counterfeiting and
safety problems before the products even leave
China.
Also as part of the agreements, and
as an indication of the growing interdependence
between the Chinese and American economies,
Beijing has allowed US inspectors to become
"embedded" in China to monitor the quality
standards of certain Chinese export products,
ensuring they meet US quality standards.
Stationing US FDA personnel abroad helps bridge
different regulatory systems. This kind of
cooperation is a nascent but significant step
toward deep regulatory integration and may also be
replicated in other countries. All this highlights
the disparity between American and
developing-world standards.
Meanwhile,
even without the major Chinese government
initiatives, the massive recalls would have caused
businesses on both sides of the Pacific to modify
their behavior. Western buyers, mindful of the
high costs of safety-related recalls, have become
more demanding when it comes to quality and
safety. On the other side, many Chinese
manufacturers quickly adopted more rigorous
testing and tightened quality standards to keep
the orders coming in. Those unable to bear the
rising costs and risks have simply exited the
market.
It’s unlikely that government
regulation will be fully effective in the Chinese
domestic market, if for no other reason than the
sheer number of businesses that need to be
regulated. But when it comes to Chinese exports to
developed markets, the message is clear: Beijing
will ensure products destined for American markets
meet US standards. As Wu Yi said, "China will live
up to its responsibilities and obligations when it
comes to product quality and food safety." Both
government initiatives and market forces will
point the way. After all, China’s reputation is at
stake.
Notes 1. Reuters,
"Mattel Apologizes to China for Recall,"
International Herald Tribune, September 21, 2007.
2. Andy Pasztor, How China Turned Around a
Dismal Air-Safety Record," Wall Street Journal,
October 10, 2007. Yang Yuanyuan was replaced as
the head of caac and posted to the State
Administration of Work Safety in January 2008.
Dali L Yang is the director of
the East Asian Institute in Singapore and was
previously chairman of the Department of Political
Science at the University of Chicago. He is the
author of Remaking the Chinese Leviathan:
Market Transition and the Politics of Governance
in China (Stanford University Press, 2004)
and Beyond Beijing: Liberalization and the
Regions in China (Routledge, 1997).
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