The quality control crisis in Chinese manufacturing may be on the verge of getting some high-level attention, if recent news coverage is any indication. In a stunning acknowledgement, China’s General Administration of Quality Supervision, Inspection and Quarantine [AQSIQ] yesterday released figures showing that 23% of non-export toys manufactured in six major provinces, do not meet national safety standards. Subscriber only South China Morning Post has the full story, with stats, but a softer version can be found on Xinhua. I have been unable to find the raw stats on the AQSIQ site.
The SCMP story describes stuffed toys filled with “unsterilised industrial materials – mainly cotton leftover from rug making.” These stuffed items, the story makes clear, were destined for China’s domestic market. As I read this, however, I could not help but reflect upon a conversation that I had at the gym last week with a sourcing agent for an American sporting goods company. The primary product of this company requires foam stuffing, and typically that stuffing is made up of shredded foam from automobile seats and old furniture. The sporting goods company, I was told, has a strict standard for the quantity of metals that can detected in the foam – not just fragments, but also traces of lead and other materials that have seeped into the foam itself – and as of a few weeks ago, those standards were no longer being met.
The sourcing agent blamed the falling dollar for forcing manufacturers in China to seek cheaper means of ensuring a “China price.” But now that we know the situation is affecting production on the domestic market, I think we have to look deeper.
Though unremarked in the Xinhua or SCMP stories, the stuffing used in Chinese toys purchased on informal scrap markets that are sprouting up all over China (initially sourced by scrap buyers from factories that prefer not to pay for disposal). This is not a new phenomenon when it comes to metals and paper, but it is relatively new as applied to textiles and foam. As that market grows, participants will be inclined to find markets for material that would otherwise be burned or landfilled – such as the material described in the SCMP story. This is a well-remarked phenomenon in the scrap metal and paper trade, and there’s no reason it won’t repeat in foam and textiles.
There are no reliable statistics on the size of China’s domestic recycling industry, its output, or even its organization. But as I’ve noted over the last four years in writings for Scrap and Recycling International, bringing “order” to that marketplace has been a top priority for market participants and, increasingly, the national government. Since 2000, most of the order has been imposed on China’s thriving scrap import markets. Later this year, the Chinese government is going to release several laws related to its domestic recycling industry, and presumably some kind of regulation and quality control will be imposed on new materials being cycled into manufacturing without any pre-processing.
Now, to be honest, I am as skeptical as anyone about the ability of China’s government to impose order on a market that likely has millions of participants, and where the lowest market entry barrier is owning a scale. But we’ll see. Tomorrow I fly up to Tianjin for three days of presentations on this very topic.