"All multinationals producing goods in China are acutely aware of the recent slew of scandals. Nearly all of them are reviewing and revising their issues and crisis-management plans and bracing for a possible incident," said Richard Burger, a senior VP at Ketchum in Beijing. As China turns into the world's manufacturing center, expenses are rising, encouraging many factory owners to cut costs -- and corners.
Last week Mattel announced its second major toy recall this month, following the recall of 1 million Fisher-Price preschool toys containing lead paint. In June, cheap Chinese tires missing a safety feature were blamed for a fatal traffic accident in New Jersey. In May, more than 10,000 tubes of Chinese-made toothpaste sold under the Excel and Mr. Cool brands were found to contain a chemical used in antifreeze and brake fluid and were recalled in the Dominican Republic. In Panama, tainted cough syrup containing chemicals from China killed dozens.
Pet food recall
The issue hit the headlines in March with the North American recall of more than 100 brands of cat and dog food made with contaminated wheat gluten.
"I do believe this has impacted China's image," said Scott Kronick, president-China, Ogilvy PR, Beijing. "The way they respond will clearly determine how it is perceived [overseas]."
China's one-party government knows it has a huge problem. It has shut down more than 180 illegal manufacturers and arrested factory owners and managers responsible for the most serious infractions. It's also set up a five-year plan to address exports.
In the Mattel case, the government banned exports by the owner of the responsible factory, Lee Der Industrial Co. The company's co-owner, Hong Kong businessman Zhang Shuhong, hanged himself in a company warehouse a few days later.
Government's good intentions
China has grown at "breakneck speed," Mr. Kronick said. "Controls have not kept pace. We have had broad-level discussions with the Chinese government, and they are taking the whole quality-of-exports issue very seriously. The issue comes in the area of coordination among the many different industries involved, and the Chinese government is addressing this now."
The government's good intentions follow a decade of slack control, but China is eager to clean up the country's image before the Olympic Games in Beijing next year.
When the pet-food scandal erupted, the official response was "petulant, passive-aggressive, a lot of denial. After they realized it was not just an issue of pet food and that internationally China was under a bright spotlight, they grew more concerned," said Scott Silverman, regional director, Asia/Pacific, for Godfrey Q & Partners in Beijing. Given China's vast manufacturing industry, he said, more problems with Chinese-made goods are inevitable.
'Testing ... like never before'
"From what I hear, multinationals are now testing their China-made products like never before," Mr. Burger said. "Whenever they get a new batch of products from the China factory, instead of presuming they were made the way the previous batch was, they're presuming they need to do the testing all over again.
"In the past, they had run tests on samples of products. ... There are already a lot of products on the shelves overseas that should never have got there. In those cases, there's nothing to do except announce a recall and go into crisis-management mode," he said.
Mr. Burger said China's government "is more than sufficiently concerned. They are scared to death. [China's] bread and butter ... is manufacturing products for export. If the world loses faith in Chinese exports, there will be ripple effects throughout the world."