The first thing you need to know about Chinese manufacturers is the first thing they want you to know -- they take product quality very seriously. Any hint or suggestion that the "Made in China" label is synonymous with inferior products is met with a prompt, and sometimes extreme, response.

When U.S. toy company Mattel Inc. recalled 21 million of its toys and dolls, the immediate culprit appeared to be one of its Chinese suppliers that sprayed excessive amounts of lead paint on some toys (See "How to Avoid a Costly Recall"). The executive of that company ended up committing suicide, an act that apparently is not uncommon among disgraced Chinese officials. U.S. consumers were understandably outraged to think that their children could have been exposed to hazardous levels of lead paint. It seemed possible, at least for a moment, that the U.S. government might insist that Mattel move its factories back stateside, where it would be easier to monitor their production.

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As more was learned about the recalled toys, however, it became obvious the vast majority of the recalls had nothing to do with the Chinese and everything to do with Mattel -- namely, a product design flaw that caused magnets on some toys to come loose. When Mattel CEO Robert Eckert issued a public mea culpa to China for damage done to the country's reputation -- "Mattel does not hold Chinese manufacturers responsible for the design in relation to the recalled magnet toys" -- it was a clear sign of exactly how important China's factories are to the U.S. toy industry, as roughly 80% of all toys sold in the U.S. are made in China. And it's an even clearer sign that Mattel has no plans to pull its manufacturing out of China any time soon. Nor, in all likelihood, do any other U.S. companies who rely on Chinese manufacturers to produce the vast majority of their goods.

According to a recent study conducted by the Deloitte Global Manufacturing Industry Group, 59% of the U.S. companies surveyed have operations in China, but as we've learned from the Mattel example, those "operations" are being managed under quite different conditions, with much different goals, than are typical in the United States. To get a better idea of exactly what manufacturing processes are like in China, IndustryWeek partnered with the Manufacturing Performance Institute (MPI) to develop a study that reveals the current state of manufacturing in China.

As the charts on the following pages illustrate, Chinese manufacturers have set themselves the objective of achieving high quality with their products, but it's a fact that China's "low-cost" reputation is one that'll probably stick for quite some time, with hourly wages for production workers well under a dollar (while typical U.S. workers earn over $15 an hour).

In line with China's push toward high quality, the country's predominant improvement methodology is total quality management, with more than 80% of respondents saying they use TQM to measure their performance. Lean manufacturing, on the other hand, is more of a rumor than a fact of life throughout Chinese plants, with just 25% of respondents pursuing lean initiatives. In terms of strategic practices, the Chinese focus above all else on customer satisfaction surveys (nearly 60%), whereas U.S. manufacturers most typically pursue continuous improvement practices (nearly 77%).

The relative youth of most Chinese manufacturing facilities (56.8% of China's plants are less than 10 years old, compared with 9.4% for U.S. factories) is perhaps also borne out in the overall lack of progress toward world-class manufacturing status. According to the study, 53.8% of China's manufacturers have made "no progress" at all toward world-class, compared with only 12.8% for U.S. companies. As the core strategy of many U.S. manufacturers is to ensure that their products adhere to international quality standards, while still enjoying the benefits of China's low-cost labor force, it becomes a matter of considerable importance to ensure that productivity goes hand in hand with solid management practices (see "Five Practical Strategies for Building a Chinese Workforce").

How to Get It Right in China

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