The China Price – The true cost of Chinese competitive advantage
By Alexandra Harney The Penguin Press, $25.95
Anyone running a company that outsources manufacturing to China, or is thinking of doing so, needs to read this book. In 319 well-written pages, Alexandra Harney describes the practices used by unscrupulous companies and their owners in China to extract greater profits from western partners, to the detriment of their employees and western consumers alike.
The result is unsafe working conditions, a polluted environment – and goods for western consumers that are often badly made and sometimes downright dangerous.
Harney, a former Financial Times journalist, shows just how difficult it can be for a western company, even with the best of intentions, to find a reliable outsourcing partner. For example, some Chinese groups establish model factories, clean and well-maintained with happy workers, which are shown to western managers when they come calling, with assurances that all the rest of the company’s factories are run to the same standard. In fact, they are dark, dirty and dangerous places.
It should be added that Harney chose deliberately to study the consumer goods manufacturers of Guangdong province, the sector and region where the worst problems have occurred. From the beginning of China’s economic reform, greedy entrepreneurs who are willing to cut corners have flocked to this area to take advantage of gullible western customers. Not all of China should be measured by this yardstick.
The western companies that use these manufacturers are often unaware of the real conditions under which goods are made. Even when they are, Harney says, they have little choice. The west has become hooked on cheap consumer goods, and China is its primary source. Until we cure this addiction, the problems will go on. But “cheap” is a relative term. The real costs of the goods we buy from China are hidden. Defective goods and environmental damage have their own price that one day must be paid, not just by the Chinese.
There is, of course, nothing new here. Similar things happen in any country experiencing rapid economic growth; very similar tales can be told of India, for example. In the US at the turn of the last century, writers such as Theodore Dreiser and Upton Sinclair described the appalling working conditions, shoddy products and adulterated food emerging from American factories in much the same terms as Harney uses of China. Similar abuses occurred during the industrial revolution in Britain.
In the UK and in the US, consumers and workers reached the end of their tether and put pressure on government to act. China’s different social and political structure means we are unlikely to see the emergence of large-scale activism in the same way. But it is certain that change will come. The Chinese people are aware of the environmental damage being done to their country and, as time passes, more are demanding their share of the economic wealth pouring into the country. Managing that change will be a critical test for China’s government.
So, what is to be done? Harney suggests that the chief agents for change will be the Beijing government, which must enforce its own regulations more stringently, and western consumers, who must wake up to the hidden costs of the goods they buy. She overestimates the power of both. Western consumers can hardly begin boycotting Chinese goods at this stage. And in a country of 1.3bn people, Beijing’s role is one of oversight, not detailed enforcement.
Real change needs to begin with the provincial governments and here there are hopeful signs. In January, Guangdong’s government announced a clampdown on old and polluting factories. It plans to shift the economy of the region towards cleaner, high-technology industries. Of course, this might just shift the problem elsewhere, but there is hope that China’s other regional governments have learned from Guangdong’s early mistakes.
Harney provides a valuable insight into the worst problems of outsourcing and how they occur. Change is needed, and change will come; we must begin to prepare for it.
