China’s product quality


Via David Altig, a WSJ piece that’s skeptical of China’s ability to ascend the product quality ladder:

China’s industries are composed of hundreds of thousands of tiny factories and farms — plus traders, brokers, haulers and agents, all of whom take control of the goods and materials but add little value to the product. With every additional player in the chain, the cost, risk and time grow. Effective quality control in this environment is difficult… As the product recalls demonstrate, China can barely make low-value goods reliably, much less higher-value ones. The problems are structural, not the result of a few bad apples…

To compete head-to-head with the American economy, China will have to revolutionize the very way its industries are organized. It must shake out the thousands of low-value middlemen and integrate the tiny factories into larger, more competitive companies. It must train a workforce in modern technology and business practices. And, it must instill transparency and a uniform rule of law. Such an effort could span generations.

These observations complement more scholarly work in weakening Dani Rodrik’s argument that China’s export profile is unusually sophisticated.