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How to source when there is a lack of trust and ethics

by Mike Bellamy

Back in 2011, I wrote the blog post “ya can’t truss it” – status of China sourcing ethics. Based on that year’s business scandals and general abuse of the international buyer, I downgraded my China Sourcing Safety Index from “trust but probably verify” to “don’t trust and must verify.”

In the years following that blog I have not upgraded my rating for China because every single day since writing that blog, I have witnessed first-hand a growing number of scams and back door dealings which take advantage of international buyers and even other locals.  Just do a key word search of “scam” at or visit to see what I am talking about.

After 15 years in China, when it comes to ethics, transparency and trust, I sometimes find myself asking “Am I jaded, or are Chinese businesses really this bad”. But then I pick up the paper and read headlines like the following that confirm “yes, it really is that bad”:

Large quantity of dead fish and shrimp found on the Qinhuai River have been sold to local agricultural bazaars in Nanjing, capital of Jiangsu province, Yangtze Evening News reported.

China doctor on trial for baby-theft

This is a place where some restaurants serve up bloated long-dead fish instead of fresh ones to customers. It’s a place where some doctors even sold human babies to make a buck.  Do you really think your average factory will think twice about cutting corners on your quality if it puts more RMB in their pocket?

While my “China Sourcing Safety Index” is based on the anecdotal evidence I see while living in China.  Today I came across what appears to be a scientific study of “trust”. And to no surprise the headline reads “Trustworthiness of Chinese companies yet to improve”.

The article goes on to explain:

Worldwide research by public relations firm Edelman released on Monday showed only 36% of interviewees trust companies headquartered in China, just a little higher than for companies in India.

What did surprise me was that the article ran front and center in the People’s Daily. This government controlled media outlet only publishes what it believes to be true or what it wants you to believe is true. Either way, it’s no secret in China that the buyer must beware.

China, Russia and India came in at some of the lowest ratings, with 36%, 38% and 35%, and showed no improvement in the past five years, the report said.

So my “China Sourcing Safety Index” was accurate after all!

The full report is on the Edelman website. You will see that tens of thousands of people inside and outside of China were interviewed. It’s not just westerner’s saying there is a lack of trust in China, even Chinese are saying it!

What’s the point?

I’m not saying all suppliers in China are unethical and can’t be trusted. I trust some of my suppliers like family members.  There certainly are honest and reliable suppliers out there.  You just have to look hard to find them. Hold on to them dearly once you have a relationship established.

I don’t think this trust vacuum is rooted in culture or even unique to China. I think it has more to do with the realities of a rapid developing economy.  I’m not a cultural anthropologist, I’m just a business man from Buffalo based in China…but I personally believe the root cause of China’s reputation as a dangerous place for business is two-fold.

On one hand, there is so much competition in China that sales people will say just about anything to get your business.  They say “no problem, yes we can do that” when they really should be saying “we have never actually done that. We will try our best, but with no experience it is hard to confirm if we can meet your targets for price, quality and lead time.”  Don’t believe me?  Check out this blog post which exposes how a famous Chinese brand abused their clients for 50 years!

On the other hand, buyers need to take some of the blame.  To many purchasing managers skip due diligence and jump right to the PO without knowing who they are dealing with.  Don’t believe me?  Check out this blog post for an inside look at how a so-called “professional buyer” allowed themselves to be abused by a Chinese vendor. After you read that behind the scenes account, you will probably agree that the buyer is as much to blame for the drama as the seller.

 Related Content & Resources:

Essential sourcing skills: Supplier Verification

Video 1: Finding Suppliers

Video 2: Evaluating Suppliers

Video 3: Negotiations

Video 4: Project Management and Quality Control

Video 5: Protecting Your Intellectual Property

Video 8: Avoiding Scams

Wishing you successful China sourcing!

Mike Bellamy is an Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center. He is also the author of "The Essential Reference Guide to China Sourcing"  and founder of PassageMaker Sourcing Solutions.

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