China's shoppers learn 'Made in China' hazard
By Olivia Chung
HONG KONG - China's entrepreneurs, their export sales battered by the global
slowdown in demand, are having to confront a surprising obstacle as they turn
attention to the domestic market to stay in business - consumers' distrust
their products.
China's exports dropped 22.6% in April from a year earlier, their sixth
consecutive monthly decline following falls of 17.1% in March and 25.7% in
February as the economies of two key markets, the European Union and the United
States, almost shut down.
The European Union, China's largest trading partner, posted a 2.5% drop in
first-quarter gross domestic product (GDP), while 6
million jobs and associated spending power were lost last year in the
second-largest trading partner, the US.
That has led to large-scale factory closures in China and a severe brake on
output growth there. The mainland's first-quarter GDP grew 6.2%, down from 6.9%
in the fourth quarter of last year.
China's leaders, not least through fear that widespread closures of
labor-intensive manufacturing, such as textiles, toys and electric appliances,
could trigger social instability, have encouraged increased sales in the
domestic market while also taking steps to help exporters.
Farmers, for example, have been granted a 13% subsidy on the retail price of
home appliance purchases, a measure that helped sales in the countryside jump
72% in March from a month earlier to 2.24 billion yuan (US$328 million). That
goes some way to offsetting slowing growth in home appliance exports, which
increased only 13.2% last year, compared with a 27.1% jump in 2007.
The farmers, however, have found their new spending power being wasted on
low-quality TV sets, washing machines, refrigerators and air-conditioners,
according to the mainland media.
Manufacturers have used circuitry from second-hand machines and stuck on their
goods logos that mimic famous brands. Televisions, for example, have been given
the "TGL" logo to look as if they were made by TCL, China's biggest maker of
consumer electronics. As core components of the machines are seriously worn
after years of use, they can cause fire, injury or death, according to China
Daily.
Health risks of a different sort face buyers of Chinese-made clothes, and if it
is difficult overseas to avoid such garments - China is the world's leading
garment exporter, supplying 30% of the global total, according to the China
Textile & Apparel Council, an industry body - it is practically impossible
in the country itself.
Textile and garment exports fell 9% in the first quarter, after a 15% decline
in the first two months, customs data show. With 1.3 billion people in the
country, the domestic market should offer a valuable alternative.
Even so, tough competition, thin margins and the lower prices offered at home
can mean quality controls take a beating. Safety officials in Guangdong, the
southern province that is the main producer of garments and much else, say
about half of the children's clothing made there is unsafe.
Just 31 of 60 tested children's garments, made by 43 companies, could pass
safety standards, the province's quality and technology supervision
administration said last month. Problems included false information about raw
materials and excessive formaldehyde content. The chemical can cause skin or
respiratory infection.
Too much formaldehyde was also found in children's furniture. Only 42 of 62
tested items were found to be safe, with some of the products failing due to
excessive heavy metals, including lead, cadmium and chromium, officials said.
The finding of excessive heavy metals in products used by children comes almost
two years after US-based Mattel Inc, the world's largest toymaker, recalled
about 21 million China-made toys in August 2007 because of excessive levels of
lead in paint and other issues. In October the same year, Mattel recalled
Chinese-made Fisher-Price plastic boats because the paint contained too much
lead.
A safety crackdown following the recalls led to the export licenses of more
than 600 toymakers being revoked. Nevertheless, China remains the world's
biggest toy exporter, supplying more than 20 billion pieces of toys, about 60%
of the global total, in 2007. More than 70% of those toys came from Guangdong.
A switch to the domestic market is vital as toymakers feel the brunt of the
export downturn, according to Li Zhuoming, vice chairman of the Guangdong Toy
Association. The province lost 30% of its 3,900 toy factories last year. In
recent months, the US and European Union have imposed trade barriers on China's
toys.
"Things won't be looking up this year at all and more small and medium
enterprises might have to close down," he said.
Potential buyers might take some consolation from the safety inspectors, who
found fault with only four of 80 toys that they tested and were made in the
province. Three were easily broken and one was a fire hazard. Even so, when
parents are restricted to having one child, as in China, the safety of that one
can result in extraordinary concern.
Wang Ting, who already has her hands full as a single mother, travels to Hong
Kong regularly from her home in the neighboring Guangdong area of Shenzhen,
with the prime purpose of buying US-branded baby milk formula - even though the
product is readily available throughout the mainland.
Wang is among thousands of mainland residents who go to Hong Kong for milk
powder since the widely used product from China-based Sanlu was found last
September to be contaminated with melamine, a chemical now strictly forbidden
in food processing. The tainted milk powder killed at least six children and
sickened 300,000.
"I have no confidence in domestic brands even though the tainted milk powder
scandal was discovered almost a year ago," Wang said when in Hong Kong last
week.
Wang was referring to baby formula, but as the government tries to encourage
its consumers to spend more in shops it is increasingly clear to officials that
her sentiments are shared by many of her fellow shoppers and apply to more than
just milk.
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