Kathleen E. McLaughlin

The end of cheap Chinese labor

As wages go up and manufacturing slows, the era of inexpensive consumer goods draws to a close

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The end of cheap Chinese laborAn employee works on circuit boards at an electronic component factory in Hefei, Anhui province, China. (Credit: Jianan Yu / Reuters)
This article originally appeared on GlobalPost.

BEIJING, China — Factories in China’s manufacturing heartland are feeling the squeeze again, with minimum wages in Guangdong province set to rise by as much as 20 percent on Jan. 1 for the second time in less than a year.

Global Post

And while one Chinese province’s minimum wage might seem like a local issue, the salary question underlines a continuing momentum in China toward building higher-end business and better jobs.

In other words, the days of endless, cheap Chinese labor are limited. What that means for consumers in the United States and elsewhere is simple: Things are going to cost more, soon.

“I think there’s quite a good argument now that the global race to the bottom has been concluded,” said Geoffrey Crothall of the China Labour Bulletin, a Hong Kong-based labor-rights group. “There’s nowhere else to go.”

The Pearl River Delta is no longer a cheap place to produce, but it does have established supply chains, factories and infrastructure. Companies that want to produce ultra-low-cost products are moving inland in China, or to poorer countries like Bangladesh and Cambodia. Yet there’s nothing on the horizon to replace the cheap China model of the 1990s and 2000s.

“You might find cheaper workers outside of China, but you’ll never find the scale of labor force that you can find in China,” Crothall said.

New data has showed a significant slowdown in manufacturing in China.

Analysts have warned that the trend will continue, which could be worrisome for government officials concerned with keeping up employment numbers. Still, China remains intent on producing goods higher up the value chain and is forcing the issue.

In Guangdong, where thousands of smaller factories have been driven out of business in recent years by higher costs, factory owners are protesting the newest planned mandatory wage hike. Yet labor groups say the move is necessary for workers to keep up with fast-paced inflation and move toward the government’s ultimate goal – transitioning away from low-end manufacturing.

Factory bosses say they understand the government’s desire to move toward higher-end production, but it can’t be forced, overnight. Several manufacturing associations based in Hong Kong have protested this latest wage rise to the Guangdong government, saying it’s too much, too fast.

Stanley Lau, deputy head of the Federation of Hong Kong Industries, said business groups need a transition period. He said companies want to invest in better automation, research and development, but it takes time.”

“You need resources,” he said. “I cannot just do factory upgrading through talking.”

Meanwhile, small business owners in the Pearl River Delta say rising costs, and not just for paying wages, are pushing them to the brink.

“What else can we do? We have to play by the new rules,” Wu Keshu of the Hongtai Ceramics factory in Chaozhou said in a telephone interview. “We have no innovative ways to react.”

“We just have to adapt to this eventually by raising prices,” said Wu. “We are seeing some decrease in business but not much.”

For decades, Guangdong province and China’s Pearl River Delta have been at the heart of China’s economic rise. And while larger manufacturers and state-owned companies have contributed greatly to the boom, smaller and medium-sized private firms have also helped propel China to become the world’s second-largest economy.

As wages, raw material costs and other costs rise, those smaller businesses say they’re being cut out of the mix.

Lau said at the current rate, he expects 30 percent of factories in Guangdong to reduce production or close down this year, in the wake of a minimum wage increase last year. Another 18-20 percent pay rise would decimate the industry.

But Crothall is less than sympathetic, noting that although China’s inflation rate has slowed somewhat, China’s workers still need more to get by.

“I think for this kind of labor-intensive export-oriented small- and medium-sized enterprises, their time is on the wane in Guangdong,” said Crothall. “It’s going to be a process of survival of the fittest there.”

China’s domestic violence problem

A high profile case involving a prominent business man and his American wife sheds light on a widespread issue

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China's domestic violence problem

BEIJING, China — The woman in the photos is bruised and battered, one ear bleeding, a goose egg on her forehead. As she posted the pictures online, she wrote of being beaten by her husband, the well-known businessman.

The very public, recent airing of what many Chinese consider a private affair came as a shock. It generated thousands of online responses, from support for the woman to criticism of her for making her abuse public. After a more than a week of silence, Li Yang, the founder of “Crazy English” language training, finally apologized for beating his American wife.

The case shed light on a problem not often discussed in China, but one that experts say is pervasive here. There are no official statistics, in part because there’s no specific law against domestic violence.

A report from the All China Women’s Federation released last year found that 64 percent of Chinese adults have experienced violence at home at some point. Another study from from the China Law Institute estimates that more than one-third of Chinese families have experienced domestic abuse and the vast majority of victims are women.

Yet this is also a society where few people are willing to talk openly about domestic abuse. It’s unusual to discuss one’s private problems outside the home, and domestic violence is still largely considered a family affair.

Advocates hope the pending passage of the country’s first domestic-abuse law could change that, and make families more aware of the problem.

Thirty years ago, Beijing resident and women’s rights activist Wang Xingjuan saw the problem worsen when China began restructuring its economy and closing down state-owned companies, laying off thousands of workers in the process. Laid-off, unemployed men would often take out their anger and depression in violence against their wives, Wang recalled.

In an attempt to combat the trend, Wang opened China’s first help center for both victims of domestic abuse and abusers in the Chinese capital. The center, which now operates a domestic-abuse hotline, counseling services and a host of other services, appears to get busier as China gets wealthier and more developed.

Wang said better awareness may have led to people reporting more instances of abuse, but she thinks it’s more likely that the anecdotal increase she has seen stems from economic changes and a rising income gap contributing to greater family problems.

Beneath it all, prevailing cultural attitudes toward women and about violence remain problematic.

“Chinese women feel ashamed when this happens to them, and there are still so many people who think it’s a normal event,” said Wang, a silver-haired woman whose office is decorated with photos of her with Hillary Clinton and other female Chinese activists.

“It’s a slow process. We’ve had hundreds of years where men were simply allowed to beat their wives,” she said. “The culture is deeply rooted, and for many, it’s still taken for granted that women are inferior to men.”

Even the response by Li Yang, the language-training leader whose wife outed his abuse online, was telling.

Li admitted the violence in a post on his Weibo account Saturday, saying: “I wholeheartedly apologize to my wife, Kim, and my girls for committing domestic violence. This has caused them serious physical and mental damage.”

Yet in an interview with the Global Times newspaper, he was less than contrite, saying of his wife: “She ruined my career and my image, which I have spent 20 years building.”

“But, I was afraid of saying something stupid that I would regret my whole life,” Li said of his days of silence. “So I chose to cool down and continue my work instead of facing it.”

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China: Apple workers react to Steve Jobs’ resignation

Factory workers who were poisoned making parts two years ago say they never heard from Jobs

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China: Apple workers react to Steve Jobs' resignationFILE - In this June 6, 2011 file photo, Apple CEO Steve Jobs gives the keynote address to the Apple Worldwide Developers Conference in San Francisco. Apple Inc. on Wednesday, Aug. 24, 2011 said Jobs is resigning as CEO, effective immediately. (AP Photo/Paul Sakuma, File(Credit: AP)

BEIJING, China — As the rest of the world waxes nostalgic with tributes and accolades for Apple’s retiring CEO Steve Jobs, the factory workers in China who got sick while making Apple’s touchscreens remain unmoved.

Six months ago, factory workers in Suzhou poisoned two years ago by toxic chemicals at the factory wrote to Jobs directly, asking for his help in getting medical care and compensation for their illnesses and lost work time.



They never got an answer from Jobs. Two years after the chemical exposure and many months of medical treatment later, they still say they’ve never heard from anyone at Apple directly.

In fact, it took Apple more than a year to acknowledge that 137 workers got sick on the job in 2009 at a components factory run by the Taiwanese electronics supplier Wintek, working under contract with Apple. The Wintek parts factory substituted hexane for alcohol in the manufacturing process to shave time off production of Apple touchscreens, but failed to outfit workers with proper safety equipment.

Dozens fell ill, many were hospitalized for months, and several say they still suffer symptoms of nerve damage, like numb hands and feet, from exposure to the chemical.

While Apple pronounced the situation resolved in its most recent Supplier Responsibility report, former factory workers say those who are still sick can no longer get medical care. Many fear the symptoms might last for years, or return unexpectedly. Medical literature around hexane toxicity is vague, because the chemical is generally well-regulated and basic safety equipment like masks and gloves prevent toxic exposure. Nerve damage is tricky business, though, and can resurface and cause problems for years.

In phone interviews this week, former workers who got sick at the Wintek factory in Suzhou while making touchscreens said they hope Apple’s new chief, Tim Cook, will step up and investigate their situation. They also hope Apple will conduct better audits of its supplier factories and catch problems earlier.

Jia Jingchuan, a factory worker who made the personal appeal to Jobs earlier this year, said he’s not too optimistic. Jia said he continues to have health problems. Because he finally left the factory, he no longer has medical insurance but continues to spent out-of-pocket for supplements to help his nagging health problems.

Jia, who’s not yet 30, came to Beijing this year to see medical experts, and was advised to avoid physical labor.

“Steve Jobs was indifferent to our poisoning and evaded his responsibility,” Jia said in a separate statement released by the Hong Kong labor group Students and Scholars Against Corporate Misbehavoir (SACOM), which called on the new Apple CEO to address the situation.

“There should be policies to protect the poisoned workers and pay the health expenditures for the victims,” Jia said.

Two years after the fact, it seems unlikely Apple will take any further action on the matter. Even the workers affected admit the case is probably closed, even though their health problems linger on.

Wan Qiuying, another worker who got sick at Wintek, said nearly everyone affected has now gone home. The case is behind them, and they don’t think Apple will bring it back up again. She said most workers have recovered and been given some compensation in accordance with Chinese law.

“Jobs retiring doesn’t have much to do with our case,” she said. “Nothing happened then, now time has passed, we didn’t have expectations.”

SACOM, meanwhile, is taking a tougher position.

“The massive poisoning at Wintek is a serious breach of the labor law and Apple’s code of conduct,” the group said in a statement.

“Corporate social responsibility is no more than rhetoric if there is no remedy to the workers for the code infringement. SACOM demands Apple under the leadership of Tim Cook has dialogue with the workers as soon as possible.” 

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China’s biggest relocation project yet

Plans to move 3 million people and reroute the Yangtze River are underway

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China's biggest relocation project yetA villager in Shaanxi.

ANKANG, China — A decade from now, the quiet mountains and farm villages across this vast ribbon of central China will be modern towns and cities.

Farmers will be urbanites, and the region’s main river will be cleaned up and channeled toward Beijing. That is, if all goes according to plan.

There are many variables standing in the way — namely people, and China’s largest-ever forced relocation project.

In order to transform this stretch of the Qingling mountains prone to earthquakes and landslides to a safe urban zone, and to channel the river north, the Shaanxi provincial government will move more than 2.5 million people off the rivers and mountains. In the north of the province, another half-a-million people are slated for relocation.

That 3 million is twice the number of people resettled to make way for the world’s largest dam, at the Three Gorges of the Yangtze River.

Shaanxi’s relocation plan, tied in part to China’s massive South-North Water Diversion Project, will change the geographic heart of the country. The Han River, which runs through these mountains, is a key tributary of the Yangtze. It’s one of three channels being diverted to deliver trillion of gallons of water per year north.

People problems

Only a few months in on the relocation scheme, serious problems are emerging.

In the village of Qiyan, nestled along the Han River, row-upon-row of new and tidy white farmhouses are taking shape, replacing crumbling homes that have fallen to deadly mudslides and earthquakes.

This is the exception. New Qiyan, which supplanted the town where landslides killed several villagers last year, is known in these parts as “the model village,” a showpiece.

A stone’s throw away, in the 2,000-person village of Pingchuan, it’s a different story. Townspeople say promises of better living and fair compensation are unfulfilled and all they’ve got is a mountain of debt, no land and a bad apartment building.

As the model villagers of Qiyan get new, bright farmhouses, the residents of Pingchuan will be packed into six-floor walk-ups. In both villages, farmers are saddled with bank loans of at least $8,000 per family. This in a place where a strong worker can cobble together about $450 a month income from factory and farm labor.

“It will take everyone at least five or 10 years to repay the money,” said Yang Yuantao, Pingchuan’s mayor. “They weren’t rich to begin with, they all have unstable incomes and this is only going to make things worse.”

Pingchuan’s residents have a reputation for complaining. This, they believe, is why they’ve been slated for a high-rise rather than new farmhouses and still lack the road, toilets and community center promised for the new village.

Mayor Yang, speaking from the sofa in the new living room of one villager in the apartments, smiles faintly when asked about the future of his mountain village.
“We’re just trying to get by; it’s never easy,” he said. “It’s a bitter fate.”

Problems abound

Pingchuan’s complaints are the tip of the iceberg. Across hundreds of miles in the mountains and valleys of southern Shaanxi, residents expressed fear, anger and uncertainty about the ambitious relocation plan.

Government officials declined to be interviewed and the official relocation plan barely mentions the South-North Water Diversion project, but it’s clear from plentiful mountainside propaganda posters along the route that cleaning up the river is helping drive relocation.

Mile after mile on mountain roads, thousands of workers are installing new water treatment plants and rechanneling the river with giant earthmovers. Mountainside banners urge farmers to “send clean water to Beijing.”

For that reason, they’re being moved off of their own farmland, pushed toward organic farm practices and encouraged to take jobs in the emergent construction industry. Near Qiyan, villagers hope a bottled-water factory will employ many of those who lose their farms.

Area bigger than France

The scale of the project is massive, the bulk of it reaching across the three southernmost municipalities of Shaanxi, a geographic area larger than France. That’s not counting the resettlement areas in the north.

Already, this remote region with no working airport is being transformed by new infrastructure, including a high-speed rail and modern four-lane highways. New tunnels and bridges are blasted across the landscape as farmers learn about plans to uproot their lives.

“It’s difficult because farmland is disappearing and people have to go out to look for work now,” said Dong Mingfeng, vice mayor in a relocated village where the residents are happy with their new homes.

“They work now on these projects like building tunnels,” she said. “They get [$400-500] a month and when they come home, they’re so dirty their own families don’t recognize them. Many people have died because it’s such dangerous work.”

Shaanxi officials tell state-run media that relocation will make people’s lives better, and richer.

“This relocation project is for the benefit of the people,” Shaanxi Governor Zhao Zhengyong told the Xinhua news agency. “It aims to give people a safer and more convenient environment in which to live their lives.”

Deep in debt

But so far, in many places, the plan has only put farmers in debt to banks for the first time in their lives.

According to the plan, the government will pay farmers compensation that covers 10-15 percent of the cost of their new home, then provides low- or no-interest loans for the rest. In the beginning, many villagers say they were promised interest-free loans on the homes now under construction. But farmers with new mortgages are already paying only the interest on their loans.

To be sure, safety is an issue. Pingchuan, for example, is perched precariously on the side of an unstable mountain. Aftershocks from the 2008 earthquake in nearby Sichuan province, and massive earth moving from a nearby coal mine shake the soil, trees and boulders loose at a moment’s notice.

During heavy rains this spring, one woman’s home fell into the river below. Pieces of her ruined furniture still float in the murky water. She has no new home, but is staying with relatives across the road.

Next door, Wei Guojun, 24, and his parents, are waiting and hoping they won’t have to move. They spent their savings a few years ago to build a new house and can’t imagine taking out a loan to buy another one, only to watch their new house demolished.

“We still haven’t gotten an answer yet, but we’ve explained the situation to the government and we hope they let us stay here,” said Wei. “We can’t afford to buy another house.”

The official price tag of the Shaanxi relocation project is nearly $18 billion, but it’s unclear how much of that includes the mortgages farmers are being pushed into.

Boosting GDP

Those in the relocation zone say the move is funded most by those who can least afford it: poor farmers.

Their taking out untold numbers of new bank loans will quickly boost the cash flow in local townships, creating economic development and high GDP increases on paper.

The final fate for nearly everyone in this region seems uncertain. Many don’t know if they must move, while those who do know fear monthly bank payments and losing their farms, when they already own houses and land.

“The rich people are getting richer, the poor are worse off and the difference between us is growing,” said Pingchuan Mayor Yang.

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