What a week. On April 30, 2018, there were top-level delegations from two disciplines: In Beijing the Chinese hosted a cabinet-level delegation of U.S. trade representatives; and in Seattle, the ASQ hosted the Sino-U.S. Quality Summit, the first of its global summit series as part of its annual World Conference on Quality and Improvement (WCQI).

The Sino-U.S. Quality Summit was a meeting of about 100 senior executives and staff from American and Chinese organizations to present and discuss ideas on quality. It was an impressive list of attendees, as the Chinese were represented by the chairmen, presidents, and vice presidents of prominent organizations. A couple dozen American and multinational companies were represented, including Boeing, BMW, Genentech, Google, IBM, Northrop Grumman, and Johnson Controls.

The one oddity of the agenda was the imbalance of speakers. Eight Chinese executives were scheduled to speak, but only two Americans, one a growth strategy consultant, the other from The Fortress Initiative, a Pennsylvania community STEM education nonprofit. So the day clearly came across as a focus on what the Chinese were doing, their strategies, and how they saw relations with the United States.

This event justified ASQ’s motto, “The Global Voice of Quality.” It should be given credit for having the vision to lead this global dialogue on advancing quality and excellence by partnering with other countries, sectors, and multinational organizations. (You can expect another quality summit to be held in conjunction with the WCQI in 2019.) International pageantry was on full display at the opening of the ASQ conference, with a wonderfully choreographed parade of flags from more than 40 countries, all by attendees—a shining display of quality planning in action.

Meanwhile the trade talks in Beijing were prompted by the Trump administration’s aggressive position about trade between the two nations. By most accounts, the Chinese have been put on their back foot by the administration’s demands and urgency for dramatic change. Although many feared that the talks would collapse and unilateral measures would be slapped on, the markets sighed with relief when the two sides agreed to hold quarterly consultations.

Did these two “summits” intersect? Absolutely. Huang Guoliang, the director general of the Quality Management Department of the State Administration for Market Regulation, which oversees a wide array of quality-related issues, was the foremost Chinese representative and the opening speaker at the conference

U.S. Treasury Secretary Steven Mnuchin, a member of the U.S. trade delegation to China, in Beijing, May 3, 2018. (Reuters)

Speaking through a translator to nearly 3,000 attendees, he wasted no time addressing matters of trade between China and the United States, emphasizing the need for free markets, open trade, combating intellectual property infringement, and reducing trade tensions through cooperation and sharing. (It should be pointed out that many believe that when the Chinese use the phrase “open trade,” it especially includes more access to America’s advanced technologies.)

Guoliang  and virtually every other Chinese executive who addressed the summit quoted Chinese President Xi Jinping multiple times, which clearly displayed the centrality of the government’s role in directing the priorities of business—and quality was clearly among the highest priorities. You wouldn’t hear the president of the United States referenced in the same way by a panel of American speakers, not even when the Malcolm Baldrige National Quality Award was first launched under President Reagan in 1987. (Quality Digest's founder, Don Dewar, was on the first panel of Baldrige examiners and present at the ceremony.

Why now?

Many people we interviewed were surprised at the idea of a quality summit. What made 2018 the year that it all came together? As Bill Troy, CEO of ASQ put it, “There are quality issues of immense mutual importance to both American and Chinese executives. This provides a forum for exchanging them.”

It is instructive to consider the summit’s subtitle “New Vision of Quality in the Digital Era.” Today, you can’t talk about quality management without also addressing digital management. From the internet of things (IoT) to the reliability and safety of autonomous cars, and the security of intellectual property to real-time feedback and instantaneous corrective action, quality and digital are inseparable.

On a commercial level, this digital revolution intersects directly with China’s immensely ambitious initiative to move up the manufacturing value chain, which the country has designated “Made in China 2025.’ Originally approved by China’s State Council in 2015, the initiative has businesses and governments across the globe gravely concerned.

Made in China 2025 is a blueprint for Beijing’s intention to transform the country into a hi-tech powerhouse that dominates advanced industries like robotics, advanced information technology, aviation, and renewable energy vehicles.

A new model of quality

During the summit, various Chinese representatives displayed unmistakable hubris. One speaker showed some slides discussing models of quality—the American model, the Japanese model—and he considered both to be out of date. Then he showed China’s model, which seems to be based somewhat on a “Silicon Valley” approach of rapid deployment, feedback, and improvement.

It will be fascinating to watch how the Chinese quality models may supplant our existing models, much like the Japanese models did 40 years ago (albeit those were based in large part on what Japan learned from W. Edwards Deming and other Americans during the 1950s).

The elephant in the room 

What everyone is increasingly aware of, and that overshadowed the entire summit, was the knowledge that China is on the verge of challenging, or simply overtaking, the United States in many technology arenas that America has long taken for granted as its exclusive domain of dominance.

China’s world-class tech giants, Alibaba and Tencent, possess market values of about half a trillion dollars, rivaling Facebook’s. The largest online-payments market is in China, and its equipment is being exported across the globe. The fastest supercomputer is Chinese. The earth’s most lavish quantum-computing center research center is being built in China. The soon-to-be-launched Chinese satellite-navigation system will compete with America’s GPS system in two years.

Eric Schmidt, the former chairman of Alphabet, Google’s parent company, warned that America will be overtaken by China in artificial intelligence by 2025.

All this has executives in the United States, Europe, and Japan more than just alarmed. “Made in China 2025 seems to reject all notions of comparative advantage and future opportunities for high-value-added manufactured exports from the rest of the world to China,” says Jeremie Waterman, president of the China Center at the U.S. Chamber of Commerce.

“If Made in China 2025 achieves its goals,” he says, “the U.S. and other countries would likely become just commodity exporters to China—selling oil, gas, beef, and soybeans.”

Behind this is not the fear that the West cannot compete head to head with the Chinese, but the fear that China will use its vast reserves of cash as state-sponsored subsidies to bolster any company or sector it chooses to target for supremacy. This would allow China to focus on the longer term, freeing it from the short-term demands of the shareholders who are part of the fabric of Western capitalism.

This all sounds so reminiscent of the 1980s, when Japan was rising to superstar status, threatening, and sometimes devastating, one American industry after another. With China, the difference is in scale: The country’s economy is already well more than twice the size of Japan’s, with 11 times the population.

On top of all that, there is a growing intolerance on the part of businesses and governments of the United States and Europe of China’s mandatory Chinese partial ownership requirements, forced technology transfer, and well-known intellectual property infringement (and sometimes outright theft). It’s been a double-edged sword for companies wanting to do business in China: While they salivate at the idea of getting into the gigantic and growing Chinese domestic market, the price of admission is being seriously questioned.

The bargain that started it all

“Designed by Apple in California. Assembled in China.”

These words are etched onto iPhones and function as shorthand for the economic and technical covenant between the world’s two largest economies that began with a familiar dynamic: America provided the innovation, while China provided the assembly lines.

President Richard Nixon’s historic trip to China in 1972 pried open the door to the Middle Kingdom and was the genesis for China’s economic rise. As China plugged into the global economy during the 1980s, Chinese in Hong Kong and Taiwan were the first to invest and build factories in mainland China. By the 1990s, American corporations were in a mass exodus to transfer production to low-wage, low-regulation China. With its seemingly endless supply of eager workers, factory output boomed. Everyone was happy—at least for the time being.

Quality management

As the quality wave swept across America, due in large part to the acknowledged high quality of Japanese products, both business and consumers began displaying increasing intolerance of any hint of “shoddy workmanship.” This fueled a burst of quality control practices in U.S. factories in China, and to a lesser degree, in Chinese factories serving American companies.  

China’s focus on quality was on full display at the summit in Seattle. Each of the Chinese executives told the audience how their company approaches quality, their commitment to quality at the highest levels, and how their efforts will benefit international trade and global prosperity. (There was an undeniable air in the room that the Chinese were there not just to talk about quality but to calm American suspicions. They reminded Americans what a good customer China is, pointing out that there are more than1,000 Boeing planes in China today. They wondered, rhetorically, how many American jobs that has created, an example no doubt chosen especially for Seattle.)

Guoliang even joked about how the Trump administration needs to take a deep breath and count five, four, three, two, one—to help him calm down and stop panicking. This was followed by enthusiastic applause by the Chinese in the audience. Other Chinese speakers followed his lead throughout the day.

There are of course an abundance of U.S. quality consultants doing business in China. But in the same way that Americans helped Japan get back on its feet, and then witnessed Japanese consultants arriving in America to teach The Toyota Way, kaizen, and lean, we can expect to see Chinese consultants teaching Americans how to better manage quality as China’s expertise continues to grow. Maybe not tomorrow or next year, but the trend line is established, and history provides the examples.