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The lack of trust between customers and companies in China

Yesterday we began to explore the biggest challenge facing China, trust, and how mistrust is a pervasive feeling even at a personal level. Today we are going to slightly broaden our view and look at mistrust between customers and companies.

Between customers and companies

While the importance of trust may seem obvious, the results of mistrust are often irrational.

For example; a Chinese person is walking down the street and spots 50RMB lying on the ground. Given the lack of trust between individuals, do they A) pocket the money immediately B) look for the person who may have dropped it or C) leave the money on the ground?

According to my college students in Guangxi (about 120 of them) the answer is C. In each of the four classes, I was told that you should leave the money on the ground because it may be part of an elaborate trap, where as soon as you pick up the money the scammer will come out of the shadows and accuse you of being a thief.

As I’ve discussed before in detail, this same attitude can be seen in the marketplace; a good deal is actually a trap.

You may not realize the amount of trust you have placed in companies, but odds are you enjoy meals every day with little worry that what you’ve just consumed could kill you. When you buy a pair of shoes, a watch, or a television, you assume that it will last a reasonably long time, and if it doesn’t the store will take it back with few problems. Every transaction involves a degree of trust.

Yet in China, we see this breaking down at every level. A Chinese friend told me that the threat of contaminated food is a constant worry for him and his friends. (It’s the long term effects they are worried about from heavy metals, added hormones and God-knows-what from gutter-oil.) “We talk about it everyday,” he said, “We wonder how much shorter our lives will be or what diseases we will have.” The result has been that he eats at local restaurants far less than he used to.

After the opening up of China’s economy, small private enterprises boomed, leading to thousands of new brands. A few have established themselves as household names in China with solid reputations, but far more have opted to exploit uninformed shoppers in exchange for quick profits (People’s Daily exposes 2-3/week at least). As a result, Chinese consumers are often reluctant to try new products, which has led to a borderline obsession with “famous” brands. Consumers are then shocked when these “famous” brands are hit by scandals too (like the latest milk scandal that hit one of the two major brands).

China, it seems, is still in the sorting out phase of development. While there are companies which seek to earn the trust of customers, their efforts are often lost in the sea of scandals (a glance at what has happened with Chinese group-buying sites this year is good evidence). So much so that it will take a long time for a company to develop a reputation that is strong enough for people to actually trust because each scandal effects the entire sector (the first milk scandal happened nearly 4 years ago, but I’m still asked to bring infant formula back each time I go home).

While I believe that companies are slowly moving in a more honest direction, the process is slowed by ineffective oversight by gov’t departments. People are willing to take larger risks when the likelihood of being caught is low, and in China that can be very low. Until the gov’t is able to take strong actions that defend the rights of customers (and companies), trust will have a hard time taking root.

Next we’ll be looking at trust between citizens and journalists.


14 Comments

  1. Lorin Yochim says:

    Tom, don’t you think that the heightened presence of scandal indicates a strengthening of government regulation or, alternatively, heightened de facto regulation through the marketplace? I’m not sure which of these might be more prevalent, but it doesn’t follow from scandal that things are getting worse. My own sense is that even over my years in China one can rely on certain things much more than in the past. Having said this, buying most things is still by and large a risky thing. Environmental degradation is, perhaps, a separate issue when it comes to trust/non-trust. I wouldn’t want to argue that things aren’t getting worse in that domain.

    • Frieder says:

      Tom, Lorin, I think the case of scandals at well-known Chinese brands partly stems from the same problems as Western brands have experienced too: they are all dependent on a large and diverse number of smaller suppliers who are less in the spotlight of media and public attention. Thus, it is difficult to ensure that these smaller, unknown firms do not prefer quick profits over customer safety.

      • Lorin Yochim says:

        It’s obviously a very complex issue and unreliable suppliers is part of the issue. Frankly, most commenters speak of Chinese problems in one of two ways. 1) China is the exception to every other case that has ever existed. While this often presents as a radical anti-Chinese bigotry, equally often it comes out as radical sympathy for the poor, defenceless Chinese. Ironically, China is an exceptional country is exactly the view that China’s leaders like to encourage. 2) The problem in question is merely a stage of development. China will eventually become “just like us.” For the most part, though, the evidence on display comes from personal experiences with the problem in question. Analysis of higher level concerns relies heavily on autobiographies and supporters of liberal reforms.

      • Lorin Yochim says:

        Sorry, above should read: “Ironically, China as an ‘exceptional country’ (Chinese exceptionalism) is exactly the view that China’s leaders like to encourage.”

  2. James says:

    Is there a heightened presence of scandal, or is it merely being reported more frequently and widely due to increase of social media?

    It doesn’t follow from scandal that things are getting worse, nor does it follow from reportage of scandal that government regulation is getting better.

    • Lorin Yochim says:

      Well, I suppose neither of us has much knowledge of government regulation in China, though someone who does might turn up to contribute. Perhaps I should have been more specific and said that the development of the legal system (as opposed to gov’t regulation) and the awareness of wrongdoing are related. Your comment does remind me that wide reportage is one of the things that makes a scandal a scandal.

      • Tom says:

        It’s impossible to say whether or not scandals are getting more or less common, but the reporting of them does make people feel that they are more prevalent. That feeling is what has destroyed trust, and in the past it was simply the poor quality that made people distrust companies.
        I had a friend who told me in the early days of opening up, you would be lucky if you bought a pair of shoes that lasted even a week. Sometimes they fell apart the very next day.
        The reporting is probably a good sign, and as I said in the post, I think that many Chinese companies are heading in a more honest direction, but there is still a sense that every business transaction might be a scam.

  3. Jay says:

    After leaving China I moved to Japan. During the first week my daughter dropped a 5000 yen note (about $70) from her pocket between home and the subway. A few minutes later I popped in at the neighborhood police station to check, almost without hope, if someone had turned it in. To my astonishment someone had turned it in just a few minutes earlier. I tried to offer the person a reward but he wouldn’t take it. I couldn’t believe it! Such unbelievable honesty. I framed the bill and gave it to my daughter and asked her to never forget what an honest person is like. Japan is like this.

  4. Chopstik says:

    How much of that lack of trust is due to a lack of legal recourse? For example, if cheated in the US (or presumably Europe), a customer has the ability to seek redress from the company via the legal system. Whatever the official laws might say, the same is not true in China. If there is any form of redress, it comes only with the power of the government behind the customer. In other words, the corruption of the system has, and continues to, foster(ed) the failure to trust each other. When companies/people can cheat with impunity, where is the impetus to change and establish some sort of trust. The situation may have to reach a breaking point (a huge scandal that cannot be covered up any longer, perhaps?) before it can truly be addressed.

  5. Rod in China says:

    Amazing Story Jay. I can’t believe that there are still people like that in the world. I hope I would do the same and return the bill, but I think I would be afraid of the scam. I’ve been in China for too long I guess.

    This story hits the nail on the head. I’ve had so much trouble with buying stuff in China, and I basically have to buy everything with the realization that there’s no way I’m going to be able to return it, no matter what happens.

    I went to a higher-end furniture store to buy a desk lamp because I can’t see my keyboard properly at night. I paid 300 kuai for it, making sure to keep the receipt and the warranty card. The glass plating over the light broke from overheating in just two days. After taking it back, they told me that the glass was not part of the warranty, and I could not replace it, could not buy another one, and could not return the lamp. The light burned out a week later.

    The same thing happened with a motorbike I bought. After driving for two weeks, the mirror part fell out while stopped at a stoplight. Imagine that. So I took it back, 2 year warranty in hand, and they said that the mirrors were not part of the warranty – they were an ‘accessory’, and accessories are not guaranteed.

    Buying stuff here – people will tell you anything. Peaches? Sure they’re sweet! Does it work? Of course it does! What happens if there’s any problems? Don’t worry about it! But when problems happen they’ll shake their head and won’t even look you in the eye when they tell you it’s not their problem anymore.

    • Lorin Yochim says:

      If I can suggest a strategy to deal with this, this has worked for me a few times. Do your arguing and conclude by leaving the item with the vendor along with your contact information. Tell them that you want neither the goods nor your money back. My experience has been that those goods and money will make them very uncomfortable in a very short period of time. Risky, yes, but worth a try, no?

  6. Matthew Robertson says:

    Eye opening.

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