Posted on 06/27/2009 10:02:43 AM PDT by Lorianne
Dongguan, in the heart of Guangdong province, is one of China’s largest manufacturing and export bases for toys, furniture, shoes and textiles. The situation there is far worse than in the rest of China (see The toy makers of Chenghai). “A lot of factories have closed,” says Mei Hua, 26, a worker from Jiangxi province, now living in the Chenghai district of Shantong. “My parents still live in Dongguan. They say hourly wages have gone down again, though they were already lower than they are here, and it’s not as easy to get a job in a factory as it used to be.”
To keep the migrant workers (mingong or peasant workers) employed, the city council has launched a vast infrastructure renovation project, using budgets allocated under the central government’s national revitalisation plan. Dongguan has been transformed into an enormous anthill inside which thousands of workers are toiling away.
The city’s problems can’t all be blamed on the global crisis: its economy took a nosedive well before foreign demand began to fall in 2008. “Since mid-2007 many of the foreign business people who were renting here, especially people from Hong Kong, Taiwan and South Korea, have left and we have thousands of empty apartments. There was a direct, immediate correlation with the fall in the sale and leasing of factory premises,” says Cheng Wanhang, who sells industrial space for one of the Dongguan branches of real estate group Century 21.
Dr Liu Kaiming, founder and executive director of the Institute of Contemporary Observation, a non-governmental organisation based in Shenzhen, explained: “Since early 2007, production costs have gone up by 20-30% [owing to the rising cost of raw materials], labour costs have gone up by 10%, and the yuan has gained 20% against the dollar and the euro, which means costs have gone up by around 50% overall.” Wages have risen over the last few years owing to a chronic shortage of labour, which in early 2008, Liu estimates, was around four million workers in Guangdong province alone. Rising costs forced manufacturers and buyers based in China out of business (they were already working on small margins). Chronic over-production by Chinese industries of this type meant that they were unable to pass their costs on to the customer.
Dongguan, as Mei Hua confirms, is well known for its low-skilled workforce – and consequently the mediocre quality of the goods it produces. The toy scandal has only served to reinforce this image. In the autumn of 2007, millions of toys made by certain companies in Dongguan were turned down by foreign customers, including the American firms Mattel and RC2, on the grounds that their paint contained too much lead or that their plastic parts were too fragile.
Something else about factories in Dongguan may explain why there have been so many closures: the nationality of their owners. “All the businesses in Chenghai are owned by local people,” explains one of the directors of the toy manufacturers’ association. “They have devoted their entire lives to these factories. They’re laying off workers so as to be able to hang on until things pick up again. But most of the factories in Dongguan were leased by people from Hong Kong, Taiwan and South Korea. When their profit margins shrank and the banks became less willing to supply credit or head office decided it needed to cut costs abroad, they couldn’t cope and pulled out. They could afford to do that, because they hadn’t invested much money.”
The idea of “investment-free business” was first introduced in Guangdong by Hong Kong entrepreneurs some 20 years ago. “They would go to a village and offer them a deal: we’ll provide the machines and the orders; you provide the premises and the workers,” explained Fabrice Turries, a partner at consulting firm Palazzari and Turries, which has been operating in China and Hong Kong for more than a decade.
The central government initially approved of this system, until it realised that it gave too much power to local authorities, which showed little regard for social and environmental standards. “So in 2006,” Turries continued, “Beijing launched a massive cleanup operation involving tighter regulation, aimed at limiting the damage and forcing Chinese industry to move up-market.” Which is why Hong Kong investors started to go elsewhere, especially to Vietnam where costs are still low.
The introduction of new regulations in November 2008 concerning “abnormal withdrawal by foreign investors” supports this explanation. Bruno Grangier, a lawyer at the Shanghai offices of Gide Loyrette Nouel, said that unless they wind up their company in accordance with the law, the shareholders could be held liable, with the company, for any losses incurred by the company’s business partners. These measures also target Chinese entrepreneurs whose companies are registered in tax havens. Many of them held two passports and absconded after transferring all their money abroad.
So the government was partly responsible for the difficulties already facing Chinese industry; yet since summer 2008, it has been trying to blame everything on the global crisis. Chen Xiwen, a senior rural planning official in the central government, announced in January that 20 million migrant workers had lost their jobs or failed to find employment or gone home as a result of the fall in manufacturing and industrial activity.
This statement should be taken with a pinch of salt. The official news agency Xinhua revealed that the figure of 20 million was only based on “a survey of 150 villages nationwide”. And in any case, millions of migrant workers go home every year at Chinese New Year, and this year’s migrations were in no way out of the ordinary. Last, the National Bureau of Statistics announced at the end of March that, in addition to the 11 million unemployed migrant workers in the cities, another 14 million had stayed home in the country after the New Year, a claim that every migrant interviewed since has denied and that experts view with scepticism.
At the National People’s Congress in March, the mayor of Dongguan, Li Yuquan, warned that the city needed to “mend the roof before it rains”. Dongguan had already suffered the loss of 66,000 jobs in January and February 2009 and had 440 factories, employing a further 48,000 workers, which were in an “unstable” condition. He feared the situation would lead to social unrest. And in fact, since summer 2008, the media have carried more reports on demonstrations by workers who have been made redundant.
However, as a European industrialist based in Dongguan points out, they have failed to mention that this is not a new phenomenon. And that more often than not the migrants are getting together not to protest about losing their jobs, but to make sure of getting the unpaid wages due to them. Once their demands have been met, they go off in search of new jobs, because factories in the province are still taking on workers. Coincidentally or not, this propaganda started just when western leaders were loudly demanding that China, less affected by the financial crisis and with colossal cash reserves, reach deep into its pockets to help rescue the international financial system – one way perhaps of politely turning a deaf ear to those whom the Chinese government regard as primarily responsible for the crisis.
Last time the world went in to an economic meltdown it stayed there until WWII came along and created an instant employment guarantee.
It also enabled a right wing crazy to take over.
This time though we have a left wing crazy who we’ve allowed to take over.
So how long til the war?
just around the corner.....
WWIII, or CWII?
Maybe all those "shovel ready" jobs that the Obamassiah promised were actually in Dongguan?
***’Mend the roof before it rains’: The financial crisis seen from China ****
Ths financial crisis as seen from the Obama admin.
The window she is broken and the rain is coming in,
If someone doesn’t fix it I’ll be soaked clear to my skin,
But if we wait a day or two the rain may go away,
And we won’t need no window on such a sunny day!
Manyana, Manyana! Manyana is soon enough for me!
It also enabled a right wing crazy to take over.
*********************************************
If you’re referring to Hitler you should recall that he was the leader of the National SOCIALIST Party ,, he was most certainly LEFT wing...
If you’re referring to FDR (although I doubt it) he too was a left wing loonie.
Remember that FDR created the camps for the Japanese-Americans. He dared go no further, but he would have if he had thought he could get away with it.
You are right in calling then totalitarians but I would contend that I am also correct , totalitarians are a subset of socialists ,, nobody will argue with the observed truth that ALL Socialists have as a goal control over others ,, Stalin , Mao , Pol Pot etc. just went farther down that road than most.
If there is no uprising here in the US soon we will quickly move from being France to becoming something much more sinister.
Thanks for posting this. Twenty minutes long but interesting. Some of the “Free Traders” on this board should see the fruits of that practice.
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