Chinese Junk

From the ricksha-cluttered commercial district of Shanghai to the waterfront of Tientsin, hardly a Western businessman could be found last week in all of Red China. The traders who came and went with revolving-door regularity only a few months ago, crying the benefits of trade with the Chinese Communists, have returned disillusioned to Germany, Italy, Great Britain, France, Canada. What soured them on doing business behind the Bamboo Curtain was no political change of heart, but the best reason a businessman can have: unbusinesslike methods of doing business, developed by the Chinese into an exasperating art. Snapped a British trader: "Why go? It's a damned waste of time."

When it started its highly touted trade offensive short months ago, Peking lured Western businessmen with offers of $7 violins. $23 sewing machines, $14 bicycles, promised to deliver nails, newsprint and electric motors at prices far below Japanese goods. But haste to gather foreign exchange to cover a huge trade deficit with Russia--and to do what it could to damage non-Communist competitors--led Red China to overstep itself. Its rickety economy suffered from primitive production methods, an overburdened transportation system, and an anarchic planning system that put untrained workers on industrial machines and knowledgeable technicians in mines or paddies. A classic example of chaos was Peking's 1958 decision to encourage hundreds of thousands of peasants to set up tiny blast furnaces in their backyards to raise steel production. The system proved so uneconomic that it has been abandoned, after millions were spent on backyard plants.

Lectures & Whims. Many of the samples that lured Western businessmen also turned out to be junk, and others were not delivered in promised quantities. Orders of iron bars arrived with pockmarks of rust, textile bolts with lengths misstated, rice colored by bluing on the sacks. In Shanghai, 20 out of 31 steam turbines and 64% of electrical relays manufactured during one period were below standard, and one-third of the castings for electric motors were worthless. A whole shipment of electric generators had to be rebuilt at the factory because of "faulty cores." Canned goods, sometimes turned out by several different communes to make up a single order, varied widely in quality, were often bad. After eating a shipment of canned foods from their Chinese comrades, nearly 4,000 East Germans became ill, and some died.

That is bad enough business, but the Red Chinese further infuriated Western businessmen with high-handed, independent business practices. Businessmen ordering goods were forced to undergo long,, pompous lectures on Marxism. Prices and offers changed from day to day at Peking's whim, and officials often tried to play one trader off against another. A British businessman who went to Canton to buy 500 tons of vegetable oil was told it was not available. Then he was awakened at 4 a.m., told that Peking had decided to give him the oil. The next day Chinese authorities sold half the shipment to his competitors.

When it comes to taking goods in return, the Chinese are far more efficient. As a shipment of 4,500 tons of South American cotton arrived at a Chinese port recently, U.S.-trained Chinese inspectors swarmed over it, carefully grading each" bale. The Chinese are tough and unbending in trade negotiations, often cancel contracts for no obvious reason. Said a Frenchman who packed his bags and returned home from Red China without a franc's worth of trade: "The atmosphere is decidedly bad for doing business."

No Good. The result is that the Red Chinese trade offensive has lost its wind both in the West and in Southeast Asia. In the first five months of 1959, the Red Chinese funneled $60 million worth of goods through Hong Kong to Southeast Asia, v. $80 million last year, and exports through Singapore fell 73%. The Canton fair held this spring rang up $79 million worth of trade; last year the total was $180 million.

Peking has become so disturbed by this turn of events that the Peking Daily Worker complained that " 'more' and 'quick' are stressed, but 'good' and 'economical' are ignored" in Chinese industry, even suggested that "individually run enterprises" might be set up side-by-side with state enterprises. To woo back disillusioned businessmen, the Red Bank of China has taken the unprecedented step of accepting claims by traders seeking damages for substandard exports. So far, the Bank has seen fit to rule in the trader's favor only a few times.

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