Sunday, June 24, 2007

China: totalitarian anarchy?

The NYT has been doing an excellent job following up on China's flurry of quality and fraud issues, most recently covering the "Lead Thomas" news. Today David Barboza gives us some insight on what's going on behind the scenes after a visit to Thomas's home -- RC2, the largest toy manufacturing facility in the world ...
David Barboza - My Time as a Hostage - New York Times

AS an American journalist based in China, I knew there was a good chance that at some poozaint I’d be detained for pursuing a story. I just never thought I’d be held hostage by a toy factory.

That’s what happened last Monday, when for nine hours I was held, along with a translator and a photographer, by the suppliers of the popular Thomas & Friends toy rail sets.

“You’ve intruded on our property,” one factory boss shouted at me. “Tell me, what exactly is the purpose of this visit?” When I answered that I had come to meet the maker of a toy that had recently been recalled in the United States because it contained lead paint, he suggested I was really a commercial spy intent on stealing the secrets to the factory’s toy manufacturing process.

“How do I know you’re really from The New York Times?” he said. “Anyone can fake a name card.”

Thus began our interrogation, which was followed by hours of negotiations, the partial closing of the factory complex and the arrival of several police cars, a handful of helmet-wearing security officers and some government officials, all trying to free an American journalist and his colleagues from a toy factory.

Factory bosses, I would discover, can overrule the police, and Chinese government officials are not as powerful as you might suspect in a country addicted to foreign investment...

For American journalists, there’s a tradition of showing up at a crime scene, or visiting a place that has made news. But in China, where press freedoms are weak, such visits can be dangerous.

Last year, a young man working for a Chinese newspaper was beaten to death after he tried to meet the owners of an illegal coal mine. Local officials later insisted he was trying to extort money.

My colleagues at The Times have been detained several times. And one of our Chinese research assistants is now serving a three-year prison term for fraud. He originally had been accused of passing state secrets to The Times, a charge this paper has denied.

.... Many experts have told me that one of the most serious problems in China is that the government lacks the power to control the nation’s Wild West entrepreneurs, deal makers and connected factory owners.

Bribery is rampant, and government corruption widespread. Just a few weeks ago, the top food and drug regulator was sentenced to death for taking huge bribes from pharmaceutical companies. But it’s not clear that strong messages like that will stop the anarchy.

“China effectively has no oversight over anything,” said Oded Shenkar, a business professor at Ohio State University and author of “The Chinese Century: The Rising Chinese Economy and Its Impact on the Global Economy, the Balance of Power and Your Job.”

“People have this idea they are Big Brother and everyone is under watch,” Mr. Shenkar said. “But this is not China. In China, local authorities often turn a blind eye to problems because maybe they’re invested in it.”

Indeed, the impotence of local officials was clear to me from my visit to the RC2 Industrial Park in the city of Dongguan, which is thought to be the largest toy manufacturing center in the world.

The private plant is the main supplier to the RC2 Corporation, an Illinois company. And the Hong Kong or Chinese entrepreneurs who run the facility seemed to hold great sway over the government.

We had no problem entering the complex or looking around until we met “Mr. Zhong,” a rough-looking factory complex supervisor. He scolded us for entering the grounds and taking photographs, and then invited us to a small villa on the campus, a stylish house filled with luxurious rooms, black leather chairs, a giant-screen TV, a huge stock of Cuban cigars, even a massage parlor.

This would be our prison. (Business correspondents are a more fortunate breed than war reporters.) Mr. Zhong offered an interview and a tour. But he later changed his mind and issued an ultimatum: hand over the pictures or we call the police.

Confident we had signed in properly with the security guards, who had allowed us onto the campus, we opted for the police. After over an hour, the police failed to show up, and we tried to leave, only to be nearly tackled by the factory’s ragtag army of security officers.

My translator then called the police.

The scene was farcical. We were locked inside the factory gate, surrounded by 16 security guards and 4 or 5 factory bosses. All trucks trying to bring supplies in or out of the complex were rerouted. Inside, large crowds of factory workers in blue uniforms were gawking. A crowd had also gathered outside the gates.

The police arrived an hour later, listened to both sides and then stood around. More police officers came. And more police officers stood around. It was clear they had no power to intervene.

So we called government officials, who suggested other government officials, who offered up more.

Finally, after hours of waiting, a higher-level government official arrived to settle the dispute.

He was a friendly man who admitted that he could not release us, that he didn’t have the power. We should negotiate, he said. For the next five hours, he shuttled between rooms in the villa trying to negotiate a settlement. There were shouting matches. There were demands that pictures be turned over.

After hours of squabbling, Mr. Zhong demanded we write a confession saying we had trespassed. He settled for a few sentences explaining why I had come and that I had not asked his permission to take any pictures.

The fight between government and factory during our detainment seemed to underscore the dysfunctional relationship the Chinese government has with industry.

In the endless back and forth, it was apparent that the government I often imagined as being all powerful and all seeing could be powerless and conflicted when it came to local businessmen and factory owners.

When we were released early Tuesday from a local police station, where we were sent to fill out a report, we noticed that while our translator was giving an account of the day to the police, the factory bosses were laughing and dining in another room, making the nexus of power in these parts and in this age ever more clear.
I'm visiting my parents in Montreal, and as we drove out to lunch my father told me how things worked in the 40s. Then, if you were stopped by the underpaid and undertrained provincial police, you'd offer the officer a cigarette (everyone smoked), with $5 tucked in the pack. A payment of $500 would get anyone a job on the police force - no questions asked.

Ten years earlier, in the 1930s, the Chicago business scene would have been very familiar to Mr. Zhong. Twenty years earlier Sinclair Lewis described Chinese-style factory life and practices in the US.

Times change. Only an idiot would try to bribe a Quebec provincial police officer today. It might work, or it might get you arrested. That's enough uncertainty to ensure no-one will try. (On the other hand, Bill Clintons million dollar speeches prove that bribery has not vanished, it's just become more refined.) China's changing fast, maybe the rule of law will emerge there in twenty years rather than fifty years.

In the meantime it seems easiest to think of China as 1930 Chicago with an added dash of totalitarian tradition. That means we shouldn't waste our time trying to get China to enforce food safety laws. Instead, we should make American importers legally liable for whatever problems are found, including criminal liability where that applies. That kind of pressure will force change all the way down the supply chain.

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