Recent headlines force me to downgrade my 2011 China Sourcing Safety Index from “trust but better to verify” to “don’t trust and must verify.”
Some readers may remember a catchy tune by Chuck D and Flava Flav back in early 90’s. While writing this article I kept thinking of the lyrics:
“So here’s a song to the strong
‘Bout a shake of a snake
And the smile went along wit dat
Can’t truss it”
– Public Enemy
There is no shortage of examples of foreign businesspeople coming to China and getting taken for a ride by suppliers and business partners because they trusted the wrong person. One of the most common pitfalls is to get into a sourcing arrangement with a company that says they are an experienced supplier when in reality they don’t even have a factory nor have they ever made a given product.
The sad reality is that unless you or a reputable 3rd party visit the site of production, you will never know if you are dealing with a legitimate supplier or not.
The Golden Rule
Buyers should follow the golden rule of China Sourcing when it comes to selecting suppliers: “assume the worst until proven otherwise.” Don’t get me wrong, I have plenty local suppliers and business associates that I trust like family. But they had to earn my trust over time. For the past few years I have always harped that buyers should “trust but try to verify” using their own sources or reputable 3rd party auditors, sourcing agents, purchasing agents and certainly due diligence/ business investigators.
I underlined “reputable” to encourage buyers to do their due diligence, even on the 3rd parties who are helping to manage the supplier. You may be saying, “it is really that bad” in China. Yes it is. And to illustrate why I’m downgrading China index to “don’t trust and must verify” here are two scandals from the first ½ of 2011 that say a lot about the current state of affairs for China business.
Visit this link to learn how Alibaba’s staff (a leading online supplier database) were in collusion with fake factories to scam money for overseas buyers just like you.
2. Mainland is dangerous, but you’re safe dealing with Hong Kong Chinese. Really?
Hong Kong is perceived as a shining city on the hill that China (and most of Asia) can look up to when it comes to ethics, transparency and anti-corruption. And one would think leadership of the HK Chamber of Commerce would be the models for good business.
June 08, 2011, Former Hong Kong General Chamber of Commerce chairwoman Lily Chiang Lai-lei is behind bars (again) and under investigation (again) for fraud. She was the leader of HK’s leading business association for crying out loud!
Who oversees the agents and intermediaries involved in China sourcing?
To get their take on the above scandals, I wanted to interview leadership from the association that governs and accredits China sourcing agents. Unfortunately, such an organization does not yet exist. That should tell you a lot.
Buyer beware. This is the Wild West East!
Wishing you successful China Sourcing!
Author, “The Essential Reference Guide to China Sourcing” (chinasourcinginfo.org/book/)