'Poorly Made in China'

I'm in the middle of reading a quite informative new (2009) book, "Poorly Made in China."

The author, a non-Chinese U.S. native, learned Chinese as an undergrad and eventually got an MBA. Not wanting a stereotypical US finance job, he became a middleman in southeast China's economic heartland -- a middleman between U.S. importers and Chinese manufacturers.

First, many American companies dealing with China are just that -- importers. Their companies never made a thing in America. They're start-up or near start-up entrepreneurs, aglow at the idea of selling cheap made-in-China stuff like health and beauty aids (and how dumb is it to ship 90 percent-water shampoo across the ocean) as house or generic brands to sell at places like Dollar General.

And, Chinese plants cheat in the manufacturing process every way they can, besides the obvious, exposed ones such as lead in paint and melamine in dog food. They simply refuse to pay for internal quality inspectors, then try to obstruct U.S. ones, people like the middleman author.

Then, when they really get busted? Like the lead on Barbies last year? Did the Chinese manufacturer apologize to Mattel?

NO. Remember what happened? Eventually, Mattel apologized to the Chinese manufacturer for bringing its integrity, its Asian "face," into doubt.

And, that's another theme of the book. Asian "face" gets mingled with a developing Chinese aggressiveness, and you get more and more shenanigans like this.

Meanwhile, it appears, from this book and many other things, the Chinese Potemkin economy is a 3-legged stool: Beijing, local governors, and the manufacturers themselves. The manufacturers are often playing off Beijing and local governors, probably through a mix of threats, kickbacks, etc.

American importers have a mix of ongoing infatuation with China, fear of leaving if a competitor stays, fear of provoking a manufacturer if a competitor doesn't, and more. It's hugely dysfunctional.

And move? To where?

Vietnam? Perhaps more corrupt in some ways, and just not enough population, etc, to absorb significant amounts of Chinese manufacturing.

India? Worse infrastructure than China. Plus, mix a decentralized government and democracy, and bureaucracy can be worse. Plus, there's never one central person to bribe, if needed.

Back to Mexico? With all the drug violence? Less and less likely.

Anyway, I'll provide more when I'm done with the book.