A Better Life on the Production Line

Since the mid-1990s, China’s leaders have thrown open their borders to virtually any multinational corporation that could inject millions of dollars into the nation’s economy. More importantly, these companies bring the information technology China so desperately craves. The cost of this foreign investment, however, is the establishment of a sweatshop industry that provides wealthy countries with their material goods, but offers local migrant workers some of the lowest wages in the world. For the millions of Chinese now laboring in factories, is this product of globalization a progressive step, or simply a slide down the ladder of humanity? – YaleGlobal

A Better Life on the Production Line

Dan Roberts
Wednesday, February 5, 2003

As more and more of the world's manufactured goods pour out of the factories of coastal China, investors and consumers face a moral dilemma.

Growth has been achieved by millions of migrant workers earning among the lowest wages in the developing world for long hours in dull, repetitive jobs. But foreign investment is also giving many Chinese their best hope of escaping the even worse drudgery of agricultural subsistence. Multinationals are importing cutting-edge technology, management practices and environmental standards, which are passed on to a new generation of home-grown entrepreneurs.

Whether such benefits justify the exploitation is best answered by men such as Huang Jing, a 34-year-old worker at the Golden Chang shoe factory in the Pearl river delta, the heart of China's new industrial revolution.

Hunched over a metal meal tray in a cavernous dining room that looks as if it could easily accommodate all the company's 7,000 workers at one sitting, Mr Huang has just finished making Caterpillar and Wolverine boots for about RMB1,200 (£88) a month. Even for a Saturday lunchtime, which technically qualifies as overtime, the place is surprisingly quiet; perhaps there is little to talk about after a morning filling the unforgiving seconds of the production line. Certainly, it is a far cry from the glitzy western shops where each pair of boots can sell for the equivalent of a month's wages in the factory.

Mr Huang, who is older than most of his colleagues, has a dark face and a weary smile and comes from the impoverished interior province of Hunan, the crucible of Chairman Mao's revolution. He explains that he has been driven to this job out of a need to provide for his four-year-old daughter's education. Education used to be virtually free in his village among the misty mountains near Zhangjiajie. But with the onset of market reforms nothing in China is free any more. "It costs me RMB400 just for kindergarten," says Mr Huang. "I had to leave my daughter with my parents. She is so young and of course I miss her - but there is no other way."

Almost every one of China's 150m migrant workers has a similar story. Moving to a coastal city to work long hours on the factory floor represents for some an escape from the tyranny of life on the farm. For others it is a necessity; the rising cost of education, healthcare and living in rural areas has created a powerful force pushing workers to the coastal factories.

Few wish to stay long - but at least the foreign-owned factories of the Pearl delta offer chances to learn modern business skills and enjoy some of the trappings of capitalism. Away from the cavernous canteen, where rice arrives in 40-foot shipping containers just like any other industrial raw material, there is a recreation area that looks more like a university campus than a factory. The leafy arcade boasts a computer centre, where employees can learn to use computer-aided design software during their lunch break. "If they do well, they can get a job in the research centre," says James Ho, the young Taiwanese manager.

There is also a cinema where Hero, the latest Zhang Yimou blockbuster, is showing, as well as telephones to call home and banks to handle money transfers back to the home town.

Such conditions, found here and in more than a dozen factories visited by the FT in the Pearl river delta, contrast sharply with the picture of sweatshops that is painted by anti-globalisation protesters. But the most compelling argument against Naomi Klein and other authors critical of globalisation is provided by multinationals based in China.

Visitors to BP's newest factory, producing chemicals for plastics factories near the coast in Zhuhai, get a taste of the strict environmental controls inside when they have to pass an exam on the safety drill before they are allowed inside. The giant factory employs only 196 local staff, compared with more than 1,000 in less technologically advanced Chinese competitors. "The Chinese government were disappointed because they thought we would be employing more," says Linda Shum, BP's local president. But BP's paranoia about being seen to abuse environmental standards in a developing country is hard to deny.

When the factory's next-door neighbour wanted to use coal to fire a boiler, the British petrochemicals giant forced it to stop because pollution could contaminate its processes. Air emission standards are higher than China's government requires, because all the company's subsidiaries have to hit group targets. And during the 1.5m man hours it took to develop the site, there were only two minor injuries requiring nothing more than first aid, although BP spent $500,000 (£304,000) upgrading the local hospital to handle emergencies.

A similar story can be found down the road at General Electric, where despite the company's notorious pressure for profit improvements, the biggest panic seems to be about a safety audit being carried out by head-office staff from America.

It is not all philanthropy. BP and GE fought hard to get permission to build plants in the delta so they could take advantage of the region's huge demand for plastic. Honda, which is about to open its first export-only car factory in nearby Guangzhou, is more blunt about what attracts it to the region. "Here we don't need to automate as much; we use manpower," says Koji Kadowaki, president of the existing Guangzhou plant, which produces for the domestic market.

Just 26 Japanese expatriates manage 2,400 Chinese, producing 60,000 cars a year, and the absence of labour controls found in European or US plants is a huge advantage. Kiyoshi Sugiyama, chief engineer at the Guangzhou factory, is a veteran of failed attempts to bring Japanese management techniques to the Longbridge car factory in Birmingham and is dismissive of British workers' ability to compete. "The big advantage of China is there are no unions," he says. How long such hierarchical conditions will prove attractive to China's educated engineers remains a question; but ultimately many will just copy what they can and start their own car plants.

Hot property in the delta

All factory bosses are interested in efficiency but few can be more consumed by it than Mitsuhiko Ikuno, the Japanese manager of Ricoh's copier plant in Shenzhen, writes James Kynge.

Each of his 3,500 workers is encouraged to come up with suggestions for shaving seconds or centimetres off the production process. With each worker averaging 1.26 suggestions a year, there are several new ideas to be considered every day. Every once in a while, someone comes up with a gem.

One worker recently suggested narrowing the distance between two conveyor belts from 120cm to 90cm, shortening by one stride the distance he had to carry boxes. Mr Ikuno says the suggestion saved less than a second on each repetition but over the course of a year it saved RMB2,613 ($296).

Ricoh's is just one among thousands of factories bringing foreign management techniques to the Pearl and Yangtze deltas. Soliciting suggestions from workers is not cutting-edge or high-technology but techniques such as these can be essential when profit margins are down to 1 or 2 per cent.

"By far the most valuable thing being transferred from foreign to local companies is not technology. You can buy technology. It is management," says Guo Xiangang, chief executive of G-Management System Group, a consultancy for Chinese companies.

In several Chinese-owned factories around the Pearl river, the senior management is populated by executives who have years of experience in a foreign corporation and are now transplanting their knowledge to a local competitor.

Li Chunhai, manufacturing chief manager at MG, China's biggest maker of audio equipment, arrived in the delta as a migrant worker from the impoverished inland province of Hunan. But after eight years in a local Japanese factory, he had picked up enough skills to run a production line.

© Copyright The Financial Times 2003