Migrant workers, for years the backbone of China's export miracle, are discovering their economic muscle, threatening an end to the flood of cheap goods heading west, the author of a new book said.
The seemingly endless supply of cheap labor that has flooded into Guangdong and other southern provinces is evaporating, pushing up wages and the price of cheap televisions, toys and clothes, Alexandra Harney says.
Her book The China Price: The True Cost of Chinese Competitive Advantage examines the lives of individual workers behind the country’s manufacturing miracle.
“Ten to 15 years ago workers lined up outside the gates — they would be lucky to have a job at your factory,” said Harney, who spent two years interviewing workers, factory bosses and foreign investors in the region.
“Now a lot of factories I know are having to pay bonuses to workers to convince their family members to come and work there. They send them to the countryside and ask them to bring people back,” she said.
China’s booming export sector has been one of the undoubted success stories since the country began to open up its economy 30 years ago.
Foreign firms have employed local factories or set up their own operations to make goods ranging from cutlery to underwear, computer chips to furniture.
The success was based on the minimal cost of labor, kept low by a stream of work-hungry bodies from across China desperate to escape crippling rural poverty.
It led to perhaps the biggest migration in human history, with around 200 million workers churning out products for export across the world, a sprawling group that Harney was attracted to write about as they were “really powerful, but nameless.”
And their power is increasing as labor has begun to dry up since 2004, mainly as a result of China’s one-child policy, which has left a dearth of teenagers seeking employment.
Inevitably the reduction has led to higher wages — Harney says in some cases up to 20 percent annual pay rises — and combined with the higher cost of raw materials, has created a crisis for manufacturers.
“It is clear that the forces that have been at work on Chinese factories in the past few years — rising costs, rising wages, more aware workers — are now coming to a head as they are combined with an appreciating renminbi,” she said.
“That has created a perfect storm for manufacturing,” she said.
Although the former Financial Times journalist believes there is some exaggeration of the problems by factory bosses — recent stories of 15,000 factories having to shut down are aimed at watering down a costly new labor law, she said — Harney has little doubt that the balance of power is shifting toward workers.
“If you are entering a factory now after several years of worker shortages, you are likely to find it has better conditions than it previously did,” she said.
“A manager five years ago thought workers were a dime a dozen. And now he has a greater consciousness, he needs to think more about worker retention, motivating his workforce.”
Although Harney said there has been an increase in workers’ appreciation of their legal rights, the awareness has yet to manifest itself in any form of noticeable movement to rival China’s official trade union.
But the shortage has given some migrants incredible opportunities, as demand for workers in all industries is so high.
Li Luyuan, 20, was able to switch from a job stitching sweaters for 18 hours a day into one selling real estate, an incredible turnaround for a woman with no formal education beyond junior high school.
“While that truly is an exceptional story the pace of change in these workers lives is without comparison elsewhere, and perhaps in history,” said Harney, who became friends with Li.
“To go from having no running water to selling real estate in just a few years in a young life is just extraordinary,” she said.
What these workers as a group decide to do next has ramifications not just for their own lives, but also for the era of cheap goods, Harney said.
Many factories are moving further inland to find new workers. Other regional competitors such as Vietnam are starting to undercut China on labor costs.
And last year’s horrific snow storms over the Lunar New Year meant many workers faced horrendous journeys home on their only holiday of the year, a fact that kept many of them from returning.
Some factories will move up the value chain to high-tech goods, but others will be forced into consolidation or closure, Harney said.
“The China Price,” she said, “is rising.”
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts