The report is excerpted from Professor Cheng Hong’s article, “the root cause of quality problems in China”, published in China Business News.
Quality problems exist in China. What are the factors behind these problems? This is a mandatory question to answer. Three categories are roughly analyzed and concluded: the first category is the government who is responsible for their inadequate attention to quality problems, ineffective governance as well as local protectionism due to local administrative considerations in finance, employment, economy and other factors; the second is lack of business accountabilities, prominently in entrepreneurial quality defects and their intentional frauds in production and management; the third category lies in the social level, mainly for the social development lagging behind consumers’ demand for product quality and public inadequate knowledge of quality culture etc.
Based on the empirical analysis of the data, I have concluded that the root cause behind quality problems in China is the irrationality of quality allocation efficiency.
In fact, developing the economy in a region (or increasing the total factor productivity in a region) is generally promoted by two approaches: one is to improve the productivity in the region, and the other is to improve the systems and mechanisms influencing the behaviors. And the two solutions to our existing quality problems are mainly quality production efficiency and quality allocation efficiency.
I have made an empirical evaluation on the performance of government quality governance based on industry differences, and found that government inspection is focused on the enterprises in the key regulatory industries, but it makes insignificant difference to improve the quality of their products. The results show that government inspection of product quality cannot effectively solve the problems of product quality.
Therefore, I believe, the key to the complete elimination of quality issues in China is to change the misplaced quality regulation policies of the government, pay more attention to the improvement of quality allocation efficiency, establish the competition order promoting competitive prices and quality in the market, and promote the decisive role of the market in allocation of resources.