From made in China to created in China

  • Corporate News
  • Monday, 18 Dec 2017

Chinese worker checking a machine making blankets for exports at a factory in Yiwu, east China's Zhejiang province. - Reuters

THE email came barely two months before Christmas, in 2007. My editor wanted an article about manufacturing in China. Products being sold around the world were made in the country and he wanted to prick the conscience of consumers before the festive season shopping orgy began – so the focus was to be on labour conditions and the quality of products. Especially toys.

There was no better place to start than in Yiwu, the Zhejiang province manufacturing powerhouse and a favourite low-cost market for retailers.

Christmas goods were already halfway to tinsel-dressed shelves across the globe, but Valentine’s Day would be next, so the factories were still hard at it. Stuffed hearts bearing the words “I love you” in all imaginable languages – albeit with spelling mistakes here and there – filled the first factory I managed to sneak into.

Breaches in labour laws were easy to spot. In fact, it was hard to find anything that met European standards. Young women handled toxic materials without protec­tion, bent over sewing machines for more than 14 hours a day with no over­time pay. They lived in filthy dormitories provided by the company – and paid highly for the privilege. The factory floor was dirty and cold; employees wore thick jackets and complained of pain in their fingers.

Workers at the factory had money deducted from their salary for a range of reasons. “They set impossible targets and fine us when we don’t meet them,” Wen said. There were also charges for food and lodging.

Workers at a nearby toy factory smuggled me in one night so I could photograph moun

When I filed the story, the editor had just one question: “Did you see child labour?” I hadn’t, but the rest fitted Western preconceptions of manufacturing in China. A few days later, in Kunshan, a city in Jiangsu province, the world’s largest cooperative group opened its first industrial park outside Spain. Four companies from Basque Country conglomerate Mondragon Corporation had joined forces to push for synergies.

Three of them – bicycle maker Orbea, fitness-machine manufacturer Wingroup and disposable medical product specialist Oiarso – shared a strategy: even though the corporation’s motto is “Humanity at Work”, they wanted to take advantage of low wages (legal minimums were similar to those in Zhejiang) and government incentives to produce cheaply and export. Only Orkli, a manufacturer of valves for gas equipment, intended to sell within China.

On average, workers at the industrial park earned 1,500 yuan a month – at that time equivalent to �150, or a tenth of what a European worker would pocket – and appeared happy with the arrangements: food was free and edible, overtime was duly paid and working conditions could have been described as humane.

Businesspeople called it a win-win situation, so Mondragon announced grand plans. In 10 years’ time, the chairman forecast, 14 companies would have built factories in the 500,000-sq m park, employing 3,000 people. Wingroup expected to double its output in a couple of years, and Orbea would make 60,000 bicycles annually.

Then the world changed. As financial turmoil in the United States developed into a full-scale economic crisis, orders slumped in traditional markets. China, then the fourth-largest economy, was suddenly presented with the opportunity to become even more powerful, but the question was, how?

Underwear exporter Qian Anhua was among the first to provide an answer as, despite huge economic incentives from the state, factories across the manufacturing provinces of Guangdong, Zhejiang and Jiangsu were closing en masse.

“We need to improve the quality of products and the productivity of workers, as well as their working conditions,” he told me, in early 2011. Qian was, and remains, the chairman of Antex, a textile giant based in Hangzhou, Zhejiang’s capital.

Some of the world’s most famous underwear brands were among his clients. “We have invested a lot of money in technology. In some departments, 90% of the machines are already controlled by a computer,” he explained. “This allows for an improvement in quality and a big increase in competitiveness.”

“With its traditional export markets crumbling, China found that it couldn’t rely on trade for growth any more,” recalls Pedro Nueno, president at China Europe International Business School.

At the same time, leaders launched campaigns to upgrade its industry and get rid of the ‘Made in China’ label’s negative connotations.” Carmaker Great Wall has been one of the many brands trying to promote the new “Created by China” tag. In July 2011, at its headquarters in the northeastern city of Baoding, Hebei province, I was shown a state-of-the-art facility and an impressive test circuit.

Great Wall was exporting cars to 80 countries, mostly in the developing world, but a year later, it would open a plant in Bulgaria. “We need to learn from other countries,” Wang said. “Not only the technology, also the management skills. We send white collar workers to learn there and bring back the knowledge.”

Now, Great Wall leads the domestic market

Fast forward to 2017. China leads global trade and is the second largest economy in the world – it sur­passed Germany in 2008 and Japan in 2010, and is now larger than both combined. It has built the world’s longest high-speed railway network and produces its own trains. It has taken to the skies with the indigenously developed Comac ARJ21 and C919 commercial jets, and it has revolutionised the online marketplace.

Although economic growth has almost halved, according to the World Bank, the average wealth of the population has more than doubled.

The minimum wage in most provinces has increased to about 2,000 yuan per month, reliance on exports has fallen and domestic consumption now drives 60% of the country’s growth.

According to financial services provider UBS, the country produces five times more STEM (science, technology, engineering and maths) gradu­ates than the US (where many study before heading home), and it will surpass America in research and development investment next year.

Hi-tech development areas have sprung up across the country, with provinces and cities competing to attract investment.

“Made in China 2025”, an ambitious 10-year government plan design­ed to boost innovation in manufacturing, is “just another excuse for protectionism”, claims Carlo Diego D’Andrea, vice-chairman of the European Union Chamber of Commerce in China. While Chinese investment in Europe grew 77% last year, European investment in China fell by 23%.

“Chinese companies are taking advantage of fairness in Europe and barriers in China to compete,” says D’Angelo. Despite his pre-election rhetoric, Donald Trump for one is not holding China to account for that.

“After all, who can blame a country for being able to take advantage of another country for the benefit of its citizens?” the US president asked during his November tour of Asia. — South China Morning Post

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