I've been working with companies in China for almost 15 years and I can definitely state that not all Chinese vendors are bad or incompetent. There are many small companies that are good and take pride in what they do. They are willing to learn if you are willing to invest time, money and effort in teaching them how to do things correctly or what not to do. On-site supervision and building a long-term relationship with the vendor is the key to successful production in China. You either hire someone localy or plan to spend extended perioeds of time on site in both the RnD center and in the factory.
If the bean counters decide that they want to move production to China then the only way to ensure that you get what you want is to budget for having someone on site. Perhaps if they look at the real total cost of moving the production to China then they will understand that it does not always make sense.
You also need to be proactive in your communication with the vendor throughout the whole process from start to finish. Don't wait for them to ask questions, make sure that all your requirements are as clear as possible. You need to develop an ACK-NAK protocol for communicating with your vendor to make sure that there are no misunderstandings. If you do not have a feedback loop with your vendor then expect problems. This is just like any control system, if it is an open loop with no feedback then that system has to be very well behaved in order to yield good results. Good feedback requires someone that is looking out for your interests to do the supervision.
I don't know if the following is an urban legend or if it really happened but I've heard this example used many times regarding communication problems with Chinese vendors. A foreign company provided a specification to a Chinese company which stated that the color of the final product should be "fire engine red". To make sure that they understood the requirement the Chinese vendor went to their local Fire department to look at their trucks which of course happened to be screaming yellow. You can fill in the rest of the details regarding what happened.
Communication is one of the keys to success. Bad communication leads to frustration on both sides.
Returning the goods and financial penalty changes vendor much quicker.
Forgive me, but your response is a little naive.
Let's assume that the board shop changes a track. We don't detect it because the power supply passes its tests. We ship the product to our customers and then a UL inspector discovers the uncertified change. We have to recall the power supplies, replace them, along with all the shipping and storage costs. That doesn't include damage to our reputation, possible liabilty as a result of our customer's downtime and the undoubted re-auditing by UL of all our products.
Even assuming that we could quantify all of that and try to sue our supplier, how would we expect to do that through the legal system in China? Both we and our suppliers are small companies, the financial hit could sink either or both of us.
Why not visit vendor before you start your business. If you avoid doing your essential homework of vendor selection, you may get similar results.
Some manufacturers have their own permanent quality representative at their Chinese subcontractor(s). I guess there are some who send out someone with every contract. We are too small and/or the profits aren't significant enough to allow for these costs. We deal with one manufacturing house. Every time we place an order, they review the components and their subcontractors (as they should) and give us a quote based on those numbers. We have no way of knowing what the quality of their subcontractors will be. We simply reuire that the end product meets our standards.
But if it fails to meet those standards- irrespective who gets the blame, it looks bad on us because there would be late deliveries.