Business Standard

Behind the China Price

Kanika Datta  |  New Delhi 

Nothing has altered global business models quite so dramatically as the Middle Kingdom’s extraordinary skills in manufacturing a vast number of goods at ever-lower prices — the phenomenon that is simply referred to as the This ability to leverage an enormous population into a competitive advantage has, in turn, created one of the fastest and most revolutionary social transformations in modern history.

Admittedly — and particularly when set against the struggles of other emerging former Communist and socialist economies — it is difficult not to admire China’s economic miracle. But this book is a contrarian offering from the dewy-eyed literature on the China phenomenon. It focuses on the human costs of the — both to the people who make it possible and the consumers who thrive on it.

The central premise is not startlingly novel. Western enterprises desperate to gouge market share from competitors and maintain the margins to generate shareholder returns have long held a nudge-and-wink attitude to China’s questionable labour practices. Since the has lubricated the profit and loss accounts of most the world’s largest corporations, international censure has been sporadic, half-hearted and opportunistic.

Even so, the book remains an absorbing read because Harney avoids the “bleeding hearts” approach favoured by an emerging breed of China critics. She fully acknowledges China’s achievements miracle and its impact on incomes and standards of living but relies on meticulous reporting — no mean feat in a country in which freedom of information is hardly an acknowledged right — to make her point.

Harney shows, for instance, how western statutory insistence on better labour standards in China’s factories combined with extreme and constant price pressures have exacerbated the situation for China’s workforce and encouraged large-scale corruption.

As Harney explains in the introduction, “In order to get to the China Price, China has made economic growth its primary aim and let many laws go unenforced. This policy has created a new kind of uneven playing field, where factories that follow the law are handicapped. Operating without the threat of government censure, factories take shortcuts to save money and lie about their business to placate international buyers.”

So we have stories of the visiting Wal-Mart inspector speed-checking her way through a factory — quite unaware that another operation nearby, owned by the same entrepreneur, supplies the world’s largest supermarket chain with the same goods at the same price but without any of the facilities and benefits in the inspected factory.

Factories that pass muster often do so through massive collusion by managers who fake worker job-cards to reflect legal working hours — most work more than double that time — and coach factory hands to provide inspectors with prescribed answers.

Chinese entrepreneurs say they are forced into such chicanery because they would rapidly go out of business if they followed such codes of conduct and compliance programmes in a market in which there are hundreds of competitors for every product.

Little of this attracts worker protest partly because of China’s political system but mostly because of the visible wealth-creating opportunities embedded in China’s factories. But Harney shows how they are increasingly paying the price in terms of health and social costs. The lung disease silicosis has become endemic from badly ventilated factories and poor pollution control measures — whole villages have been afflicted. Like elsewhere in the developing world, workers injured in the line of duty (much of it from carelessness brought on by overwork) have little recourse to redress.

The book is certainly thought-provoking but it is, ultimately, written from the perspective of the West, where maturing economies are able to offer their workers the luxury of a reasonable standard of living. One of the grimmer truths to be derived from western industrial history is that worker rights have scarcely been a priority in the early stages of industrialisation — the Dickensian world of the Industrial Revolution is testimony to that. China and many emerging economies are at that stage of evolution and, given that country’s feverish investment in technical education, will eventually move up the value chain.

It would be all too easy for Indian and western readers to link China’s questionable labour practices to its lack of democracy. Those who do so should remember that 85 per cent of workers in India, the world’s largest democracy, work in conditions that are as bad, if not worse, as those extracted by the  

THE CHINA PRICE
THE TRUE COST OF CHINESE COMPETITIVE ADVANTAGE

Alexandra Harney 
Penguin USA 
$15, 337 pages

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Behind the China Price

Nothing has altered global business models quite so dramatically as the Middle Kingdom’s extraordinary skills in manufacturing a vast number of goods at ever-lower prices — the phenomenon

Nothing has altered global business models quite so dramatically as the Middle Kingdom’s extraordinary skills in manufacturing a vast number of goods at ever-lower prices — the phenomenon that is simply referred to as the This ability to leverage an enormous population into a competitive advantage has, in turn, created one of the fastest and most revolutionary social transformations in modern history.

Admittedly — and particularly when set against the struggles of other emerging former Communist and socialist economies — it is difficult not to admire China’s economic miracle. But this book is a contrarian offering from the dewy-eyed literature on the China phenomenon. It focuses on the human costs of the — both to the people who make it possible and the consumers who thrive on it.

The central premise is not startlingly novel. Western enterprises desperate to gouge market share from competitors and maintain the margins to generate shareholder returns have long held a nudge-and-wink attitude to China’s questionable labour practices. Since the has lubricated the profit and loss accounts of most the world’s largest corporations, international censure has been sporadic, half-hearted and opportunistic.

Even so, the book remains an absorbing read because Harney avoids the “bleeding hearts” approach favoured by an emerging breed of China critics. She fully acknowledges China’s achievements miracle and its impact on incomes and standards of living but relies on meticulous reporting — no mean feat in a country in which freedom of information is hardly an acknowledged right — to make her point.

Harney shows, for instance, how western statutory insistence on better labour standards in China’s factories combined with extreme and constant price pressures have exacerbated the situation for China’s workforce and encouraged large-scale corruption.

As Harney explains in the introduction, “In order to get to the China Price, China has made economic growth its primary aim and let many laws go unenforced. This policy has created a new kind of uneven playing field, where factories that follow the law are handicapped. Operating without the threat of government censure, factories take shortcuts to save money and lie about their business to placate international buyers.”

So we have stories of the visiting Wal-Mart inspector speed-checking her way through a factory — quite unaware that another operation nearby, owned by the same entrepreneur, supplies the world’s largest supermarket chain with the same goods at the same price but without any of the facilities and benefits in the inspected factory.

Factories that pass muster often do so through massive collusion by managers who fake worker job-cards to reflect legal working hours — most work more than double that time — and coach factory hands to provide inspectors with prescribed answers.

Chinese entrepreneurs say they are forced into such chicanery because they would rapidly go out of business if they followed such codes of conduct and compliance programmes in a market in which there are hundreds of competitors for every product.

Little of this attracts worker protest partly because of China’s political system but mostly because of the visible wealth-creating opportunities embedded in China’s factories. But Harney shows how they are increasingly paying the price in terms of health and social costs. The lung disease silicosis has become endemic from badly ventilated factories and poor pollution control measures — whole villages have been afflicted. Like elsewhere in the developing world, workers injured in the line of duty (much of it from carelessness brought on by overwork) have little recourse to redress.

The book is certainly thought-provoking but it is, ultimately, written from the perspective of the West, where maturing economies are able to offer their workers the luxury of a reasonable standard of living. One of the grimmer truths to be derived from western industrial history is that worker rights have scarcely been a priority in the early stages of industrialisation — the Dickensian world of the Industrial Revolution is testimony to that. China and many emerging economies are at that stage of evolution and, given that country’s feverish investment in technical education, will eventually move up the value chain.

It would be all too easy for Indian and western readers to link China’s questionable labour practices to its lack of democracy. Those who do so should remember that 85 per cent of workers in India, the world’s largest democracy, work in conditions that are as bad, if not worse, as those extracted by the  

THE CHINA PRICE
THE TRUE COST OF CHINESE COMPETITIVE ADVANTAGE

Alexandra Harney 
Penguin USA 
$15, 337 pages

image
Business Standard
177 22

Behind the China Price

Nothing has altered global business models quite so dramatically as the Middle Kingdom’s extraordinary skills in manufacturing a vast number of goods at ever-lower prices — the phenomenon that is simply referred to as the This ability to leverage an enormous population into a competitive advantage has, in turn, created one of the fastest and most revolutionary social transformations in modern history.

Admittedly — and particularly when set against the struggles of other emerging former Communist and socialist economies — it is difficult not to admire China’s economic miracle. But this book is a contrarian offering from the dewy-eyed literature on the China phenomenon. It focuses on the human costs of the — both to the people who make it possible and the consumers who thrive on it.

The central premise is not startlingly novel. Western enterprises desperate to gouge market share from competitors and maintain the margins to generate shareholder returns have long held a nudge-and-wink attitude to China’s questionable labour practices. Since the has lubricated the profit and loss accounts of most the world’s largest corporations, international censure has been sporadic, half-hearted and opportunistic.

Even so, the book remains an absorbing read because Harney avoids the “bleeding hearts” approach favoured by an emerging breed of China critics. She fully acknowledges China’s achievements miracle and its impact on incomes and standards of living but relies on meticulous reporting — no mean feat in a country in which freedom of information is hardly an acknowledged right — to make her point.

Harney shows, for instance, how western statutory insistence on better labour standards in China’s factories combined with extreme and constant price pressures have exacerbated the situation for China’s workforce and encouraged large-scale corruption.

As Harney explains in the introduction, “In order to get to the China Price, China has made economic growth its primary aim and let many laws go unenforced. This policy has created a new kind of uneven playing field, where factories that follow the law are handicapped. Operating without the threat of government censure, factories take shortcuts to save money and lie about their business to placate international buyers.”

So we have stories of the visiting Wal-Mart inspector speed-checking her way through a factory — quite unaware that another operation nearby, owned by the same entrepreneur, supplies the world’s largest supermarket chain with the same goods at the same price but without any of the facilities and benefits in the inspected factory.

Factories that pass muster often do so through massive collusion by managers who fake worker job-cards to reflect legal working hours — most work more than double that time — and coach factory hands to provide inspectors with prescribed answers.

Chinese entrepreneurs say they are forced into such chicanery because they would rapidly go out of business if they followed such codes of conduct and compliance programmes in a market in which there are hundreds of competitors for every product.

Little of this attracts worker protest partly because of China’s political system but mostly because of the visible wealth-creating opportunities embedded in China’s factories. But Harney shows how they are increasingly paying the price in terms of health and social costs. The lung disease silicosis has become endemic from badly ventilated factories and poor pollution control measures — whole villages have been afflicted. Like elsewhere in the developing world, workers injured in the line of duty (much of it from carelessness brought on by overwork) have little recourse to redress.

The book is certainly thought-provoking but it is, ultimately, written from the perspective of the West, where maturing economies are able to offer their workers the luxury of a reasonable standard of living. One of the grimmer truths to be derived from western industrial history is that worker rights have scarcely been a priority in the early stages of industrialisation — the Dickensian world of the Industrial Revolution is testimony to that. China and many emerging economies are at that stage of evolution and, given that country’s feverish investment in technical education, will eventually move up the value chain.

It would be all too easy for Indian and western readers to link China’s questionable labour practices to its lack of democracy. Those who do so should remember that 85 per cent of workers in India, the world’s largest democracy, work in conditions that are as bad, if not worse, as those extracted by the  

THE CHINA PRICE
THE TRUE COST OF CHINESE COMPETITIVE ADVANTAGE

Alexandra Harney 
Penguin USA 
$15, 337 pages

image
Business Standard
177 22