The website of the New York Times has an interesting discussion on the recent problems at Foxconn and Honda in Southern China, and their backgrounds. NYT asked several specialists to give their opinions on what is happening in ‘the factory of the world’. Amongst them Yasheng Huang, professor of economics at MIT and author of the eye-opening book ‘Capitalism with Chinese Charactaristics’, about the role of the state in the Chinese economy.
Some quotes from Huangs comment on China’s labor situation:
The labor income share of Chinese G.D.P. declined from 57 percent in 1983 to only 37 percent in 2005. (…) This is to say that hundreds of millions of Chinese workers have lost relative to government and corporations, which, in terms of head counts, represent a tiny fraction of China’s massive population.
Some have argued that the U.S. firms need not worry because the labor component of their production costs is small. This is simply not true. U.S. firms themselves may not have a high labor component in their cost structure but their suppliers — and their suppliers — do. American firms, which sit at the top of the food chain, depend heavily on the labor-intensive operations down below.
Another specialist writing on the NYT forum is Leslie Chang, author of the famous book ‘Factory Girls‘, about workers in a factory in Donguan, Guangdong province. Some of her comments:
The new generation came of age when migration was already an accepted path to a better life. Younger and better educated than their predecessors, they are motivated less by the poverty of the countryside than by the opportunity of the city.
Although this generation of migrants is more demanding, that does not necessarily translate into more organized protests. Chinese workers are above all pragmatic, and the prospect of joining a large-scale demonstration seems risky and futile to most.
The universe of the factory can be a complicated place. Young people living away from home for the first time are learning to deal with co-workers, roommates, and bosses. They are adjusting to a world of material and sexual freedom, fleeting relationships and crushing loneliness. They face demands from families back home who often have little understanding of their new lives. These factors create a stressful environment from which, for a handful of workers, suicide seems the only escape. To boil this desperate act down to a protest against working conditions is to deny a worker’s complexity and humanity.
The recent weeks, the Chinese news has been dominated by one very sad issue: the suicides at the Foxconn factories in Shenzhen in Southern Guangdong province. Foxconn is a 800,000 people company from Taiwan, producing electronics for HP, Dell and Apple. Foxconns 400,000 people factory in Shenzhen has been hit by a series of suicides during the last months. Some argue that the suicides are the consequence of the harsh regime in the factory where working 100 hours of overtime is default, where others try to put things in perspective by saying that the number of suicides in the city-sized factory is lower than the average in China.
The company’s first reaction to the suicides was not too subtle, with their CEO Terry Gou explaining that he worked 15 hours per day, and expected his workers to do the same. Later, the company reacted more 21st century-like, by opening its doors, and also practical by installing 1.5 million square meter of safety nets around the buildings in the campus. Now, wages are also increased in the factory by 33%.
And Foxconn is not the only one, also Honda is raising its wages with 24% after a strike last week.
Yesterday, Foxconn announced another raise:
In announcing the wage increase late Sunday, the company, a unit of Taiwan’s Hon Hai Precision Industry Company, said that within three months the basic salaries of many of its 800,000 workers in China could reach nearly $300 a month, about double what many were earning a few weeks ago.
The increase is the strongest sign yet that labor costs are soaring in China’s biggest manufacturing centers and that consumers in other countries may eventually be forced to pay more for a wide range of goods that are made here.
This combined with the increase of the value of the Yuan, leads to a raise of the costs of products worldwide, analyzes the New York Times. It might make it necessary for companies to move their business. Either to Vietnam, Bangladesh, or to western China:
Pietra Rivoli, a professor of international business at Georgetown University and the author of “The Travels of a T-Shirt in the Global Economy,” says the effects of rising labor costs will vary by industry, perhaps with lower-valued goods like garments being forced to move to western China or even to Vietnam and Bangladesh.
UPDATE 06/09:
The NYT reported that another strike hit the Honda factories in China, and this proves the increased bargaining power of the Chinese workers. The article mentions the improving inland job prospects as the reason for the labor shortage in the coastal areas.
However, the writers underestimate the size of the Foxconn campuses in our opinion:
The campus has high-rise dormitories, a hospital, a fire department, an Internet cafe and even restaurants and bank branches.
Come on, there are 300,000 people living there! Of course they have restaurants…
As we discussed earlier on this website, the pressure on China to change its currency policy is growing day by day. It now seems that something will change, it reads in today’s Herald Tribune:
The Chinese government is preparing to announce in the coming days that it will allow its currency to strengthen slightly and vary more from day to day, people with knowledge of the emerging consensus in Beijing said on Thursday. The move would help ease tension with the Obama administration about the United States’ huge trade deficit with China.- read the whole story on International Herald Tribune: China Appears Set to Make Currency More Flexible - NYTimes.com.
We already showed you the pictures, but now we have moving images! In July 2009, Xi’an opened the brand new 8-lane Xi’an Xianyang International Airport Express Highway (See pictures of the opening ceremony). But half a year after opening, the 20,6 kilometer long road does not seem to be used much - to put it mildly.
We took the highway with a taxi during rush hour in Xi’an. You can see for yourself on the images below. Is this a so-called “Grand Travail Inutil”? We’re inclined to think so, at least for the next couple of years. Our driver said: “I think we’ll never have enough cars to fill this road”, but that might not be true either…
You might fear that the Go West Project is slowly turning into a research project about the Chinese economy, instead of urbanism. Don’t worry, that’s not the case. We stay tuned on the development of new metropolises in Central and Western China.
Nevertheless, we cannot overlook the hausse on news concerning growing pressure on China to change it’s economic model, which is based on export and investment (the latter mainly in fixed assets, such as housing, offices and infrastructure - see here the connection to Go West).
Last week we wrote that the fight between the US and China over a low RMB was intensifying. It looks as if the US has found some interesting supporters. Firstly, the World Bank started to openly criticise Beijing, writes the New York Times.
The World Bank recommended higher interest rates and a stronger currency for China on Wednesday, as it raised growth forecasts for the country.
Interesting times ahead. While Chinese prime minister Wen Jiabao is blaming the US for having a weak dollar, the US is getting more and more likely to brand China as a “currency manipulator”.
For years China has kept the RMB below market levels to boost exports. During the good times, this meant cheap products for Europeans and Americans, but during an economic downturn it means China is, in fact, exporting unemployment because other countries cannot possibly compete with Chinese products sold under market value.
Top economists, amongst whom Nobel Prize winner Paul Krugman, say the US has no choice but to take a stance. America is likely to get support from other countries, says economist Fred Bergsten to Reuters:
Developing countries like India and Mexico “are screwed the worst by Chinese policies” and are furious at Beijing but stay publicly silent in the absence of U.S. action, he said. A unilateral U.S. tariff move against China “would wind up fairly quickly in a multilateral, more or less equivalent, step by most countries in the world,” said Bergsten.
If this is true, it’s a bad sign for China. It could complicate the government’s ambition to keep unemployment low and it would definitely mean the start of a full-out trade war.
HONG KONG — China’s central bank raised a key interest rate slightly Thursday for the first time in nearly five months, in what economists interpreted as the beginning of a broader move to tighten monetary policy and forestall inflation.
After breaking stride a year ago during the global economic slowdown, the Chinese economy resumed galloping growth over the summer. Government investments, real estate construction and consumer spending are all rising briskly, thanks to a surge in lending by government-controlled banks. Read the rest of this entry »
China celebrates 60 years of Communist Party rule this week. But devotion to a socialist ideology seems to have been replaced by pride in rising standards of living and the ability to go shopping, at least in the glittering precincts of Shanghai and Beijing. The Chinese government is expanding subsidies for consumer spending on home appliances. Retail sales during the eight-day national holiday are expected to soar, and 560 million people are expected to travel in China during this holiday week.
This article by Caijing’s Ci Bing gives insight in the way property development in China is (already!) recovering from the downturn: “Real estate investment is rebounding thanks to an improved credit environment and state-owned companies with plenty of cash.” Read: Property Developers Emerge from Doldrums.
A very intersting article in the NY Times about the use of Gross Domestic Product (GDP). GDP is not only used in the US, but also in China, where it is one of the main indicators of economic growth - especially in the developing cities in the West.
Bottomline of this article: “When you’re feeling a little chilly in your living room, you don’t hold a match to a thermometer and then claim that the room has gotten warmer. But that’s what we do when we seek to improve economic well-being by prodding G.D.P.”
For our project, we also make use of the extensive research ‘Preparing for China’s urban billion’ by the McKinsey Global Institute. They also made a beautiful infographic, to explain the urbanization in Chinese cities in different models, over time. Look at this:
The Go West Project is a crossover research project between architecture and journalism that studies new metropolises in Central and Western China.
It analyzes urban and social developments in the world's fastest urbanising region. Journalist Michiel Hulshof and architect Daan Roggeveen founded the Go West Project in Shanghai in February 2009.
This website gives an overview of ideas, pictures, articles and opinions related to the cities.
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