THE issue of 2007 must have been Quality Fade. A huge proportion of last year's China-related media coverage and all the consequent spats and convulsions flowed from some lead-painted toy, toxic pet food or other faulty products that had the label Made in China on them.

And the random reduction in quality of some Chinese products, which the whole world uses...(except probably soon for Martin Richenhangen, whose leading tractor-making company has been consistently prevented by Beijing from attaining a majority stake in a Chinese state-controlled company. From FT.com, Richenhangen slammed Chinese manufacturing for, among other things, its obsessive copying of other companies and for not working hard enough) ...fosters a sense of foreboding about the quality of future supplies, which could at any time fall prey to short-term planning by Chinese factories.

What makes the phenomenon of Quality Fade so interesting is the seeming deliberate malfeasance inherent in the process, and how this illuminates the interplay of economic conditions in China. The term was coined last year in the wake of a host of product quality issues by Paul Midler (audio interview at China Talk Radio here) who described it as the deliberate and secret habit of widening profit margins through a reduction in the quality of materials...(W)ith each successive production run, a but more of the necessary inputs are missing. Seeking cost savings, suppliers push the limits until they are caught, or until disaster strikes. As manufacturers in China are subject to a government able to act without restraint or controversy, factories operate with a sense of urgency, hence they have become excellent at the 'short game' to compete at the lowest prices in order to ensure profitability over the short term.

Midler's views elicited a host of responses. While acknowledging quality fade as a problem in China (telling his customers that the fade usually sets in with the fourth shipment), Dan Harris at the China Law Blog saw a less gloomy outlook as the product situation in China is slowly improving and will continue to do so as China's economy evolves. Quality fade is driven by economics, he argued, and occurs in order for Chinese manufacturers simply to survive for a few more months in the face of currency re-evaluation, competition, tax reform and the end of VAT rebates. In addition, much of what is described as Quality Fade Harris sees as inevitable odd mistakes resulting from the increase in products produced in China, and instances of bad products are by no means confined only to China, despite that the media have created a frenzy about faulty products sourced from China.

At Smart China Sourcing, David Dayton recently outlined two types of Quality Fade, the willfully dishonest variety described by Midler, and a more common 'natural' quality fade over time, the result of an inadvertent slide in various aspects of the manufacturing process, such as standards, production equipment, testing procedures and instruments, and so forth. Yet ultimate responsibility for ensuring product quality, Dayton argued, lies with the buyer to remain diligent in maintaining quality control. Importers are often hypnotized by the opportunity and hospitality offered by China, and under the China sourcing spell, we too often check our good sense at the door.

Quality Fade starts with the supplier, Dayton posits, but ultimately has to stop with the buyer, who holds the final responsibility. A straightforward solution to either type of Quality Fade is to hire third-party inspectors, who should catch many of the problems. Another solution is to build your own production facility and hire and train your own staff, although this could take years and a lot of money. Yet the bottom line is, according to Dayton, at some point you must have a degree of trust with your supplier... Trust but verify is excellent advice, but verification will never be 100 percent. Some element of your QC is necessarily left to trust in the relationship.