Inside the Crisis Facing the Migrant Chinese Workers Who Power American Companies
An aging population, a trade war, and now a pandemic have left the Chinese working class reeling
On March 2, the Organization for Economic Cooperation and Development (OECD) released a report entitled “Coronavirus: The World Economy at Risk.” The report is heavily focused on China and how the country’s projected slow growth of under 5%, due to stagnating industrial production and consumer demand — and the outbreak of the new coronavirus — will have a ripple effect on the rest of the world. Thanks to these factors and the ongoing tariff war, U.S. brands have been scrambling to diversify manufacturing into other countries like Vietnam, where Google is reportedly set to begin manufacturing its Pixel smartphone next month.
This will have major effects on the global GDP and relations between the United States and the world’s second-largest economy, but those most affected will be Chinese workers. Half a billion people from China’s rural provinces have either been left behind or headed off to the cities to earn scraps in the factory towns. During China’s boom years, wages went up, and the country made incredible strides in reducing extreme poverty, but things had been cooling off even before the coronavirus hit. The tightening of the economy during the pandemic could have devastating effects on the people who can least afford it, as manufacturers flee or drive costs down as far as they can.
The forgotten people who have been building the world’s products are the subject of a new book by Dexter Roberts, reporter and former China bureau chief at Bloomberg Businessweek, The Myth of Chinese Capitalism: The Worker, the Factory, and the Future of the World. Roberts, who lived in China from 1995 to 2018, wanted to know more about the effects of the country’s staggering growth on the workaday folks in the hinterlands. Crisscrossing the country many times — think Marco Polo with a MacBook — he tells the stories of the people who suffered its costs, like Bai Yaojie, a 21-year-old worker at the Foxconn factory in Guandong making $220 a month, who says living at the Apple supplier, which features “suicide nets” in the high-rise dormitories, is “extremely boring, and life is meaningless.” The Myth of Chinese Capitalism is filled with hard truths and humane moments, a necessary corrective to the “economic miracle” narrative that takes a look at the human toll of China’s economic rise.
Roberts spoke to Marker about China’s economic stagnation, the Trump trade war self-own, and that nasty virus rocking the entire world.
I think there is a general awareness of what goes on in the factories, but ‘The Myth of Chinese Capitalism’ is astonishing in what migrant workers go through. They are all Chinese, but it seems like two separate states; the poverty seems almost structured.
It is. It’s a system intentionally designed to economically disenfranchise almost half the population. The “world’s factory” model has been based on artificially low wages for the workers. Now, there’s a huge wealth gap between rural and urban Chinese. China has some of the fastest-growing income and wealth inequality in the world right now, not too far from Russia. The real difference in China is you have policies like the Hukou household registration, which has been called internal apartheid. You also have the dual system of land, which makes it extremely difficult for people sitting on rural plots too tiny to grow crops that actually make money. It stands in direct contrast to the real estate holdings in the cities, which is behind the explosion of wealth.
Do you think American companies know what goes on in their factories, or do they farm out the dirty work to third parties and wash their hands of abuses?
Decades ago, companies weren’t so sure what went on and didn’t really want to know, but that argument is long gone. We had students on U.S. campuses protesting companies, and sweatshops became a big issue. Now most big brands and retailers know about it, and they put a lot of effort in trying to see who their multiple lower-tier suppliers are or maybe even force their suppliers to stop farming out so much work. But the reality is it still very much goes on.
Factory owners are simply turning on the electricity, because usage numbers are how they show they’re back in “business.”
As the Chinese economy starts to slow, the economics of manufacturing products there becomes tougher and tougher. The tendency for these producers is to basically cut costs as much as possible. One way to do that is to seek out sub-suppliers that don’t pay minimum wage or offer holidays or sick leave or don’t have proper environmental protections in the workplace. We’ve seen it with Taobao as well, the world’s biggest e-commerce site. Through the wonders of online shopping, any small entrepreneur can have a wildly viable business. The World Bank talked about how wonderful it is as a global model for poverty alleviation, but those Taobao facilities are returning to the worst practices of underpaying employees, underage workers, environmental devastation, lack of worker safety, and so forth.
Since the coronavirus hit at a time when China is losing factories due to rising wages, the U.S. trade war, etc., is the country at a major crossroads?
Manufacturers dependent on low costs have been moving out for a while now. I did a story on textile manufacturers emigrating to Cambodia in 2012. Today, Mexico and Malaysia are cheaper than China for average manufacturing wages. The demographics have also been a major issue: It’s an older workforce, which began to shrink a couple years ago, in part because of the one-child policy. Throw in a two-year trade war with the U.S., and there’s a lot of pressure on multinationals to diversify their supply chains. Apple told Foxconn to start producing iPhones in India, which hasn’t gone as planned, but it’s emblematic of the changes in the Chinese economy. For the coronavirus to hit now is a really big deal. There is going to be a substantial shift in the core diversification of supply chains out of China.
Has anything been accomplished with Trump’s trade war?
I think a reckoning with our trade relationship was overdue. Earlier administrations perhaps didn’t move as quickly as they should have on dealing with Chinese business practices that aren’t fair. Whether it’s an arm-twisting technology transfer, or all of the problems with intellectual property rights, or explicit and implicit subsidies for Chinese companies… These were enormous issues when I arrived in China in 1995, so for 25 years I’ve been hearing these are problems that need to be fixed, and they haven’t been. Unfortunately, I think the way the Trump administration has gone about it has not been effective at all. The tariffs hurt American consumers. It’s a tax we’re imposing on ourselves, even if the Trump administration would never admit it.
And then we got the “Phase 1” trade deal, which are basically agriculture purchase promises from the Chinese. A lot of people who follow the ag markets closer than I do say China can’t buy that much, because it’s a tremendous surge. And that was before the coronavirus. They will almost certainly not meet the agreements.
What are you hearing from your people over there about the coronavirus?
My sense is that in the big cities, the coronavirus is more under control. Some of my friends and family are going back into the office at least a few times a week or working from home. Starbucks is back in business, with the caveat they don’t let you sit down or even come in. You can order online with WeChat Pay and pick up a latte at the door. So there are improvements in the cities, but I don’t think things are returning to normalcy outside the urban areas.
The coronavirus has slammed China hard, but it will eventually pass. What will remain is the fact that China is still on a multiyear economic slowdown.
Pronouncements went down from the central government that it’s time for companies and factories to reopen. In many cases, the local authorities have no desire to reopen because the surest way to lose their jobs is if there’s a coronavirus outbreak in their town. We saw what happened to two senior officials in Hubei, which is par for the course when there’s a crisis in China. I think the economic impact was more severe than Xi Jinping and the top leadership realized initially. So Beijing announces factories are reopening, but in a lot of cases, owners are simply turning on the electricity, because usage numbers are how they show they’re back in “business.” Migrant workers haven’t come back, because they aren’t sure they’ll still have a job or a place to live. Neighborhoods are kicking them out and blaming them for the coronavirus, but Beijing wants the world to think China is getting back to business as usual.
Having lived in China during the years of economic explosion, do you feel like the country is better off than when you first visited?
It’s undeniable that the lives of many Chinese people, especially urbanites, improved when they joined the World Trade Organization in 2001. The middle class has gotten much larger—it’s why we’ve seen a global boom of Chinese tourists and in overseas real estate markets, even here in the United States. Last year, Xi Jinping announced a plan to eliminate absolute poverty by the end of 2020 for all 1.4 billion citizens, to have per capita GDP equal to $10,000 U.S. dollars. It’s a good plan, and even with the coronavirus causing economic uncertainty, I think they will get there, but there is still the question of overall distribution. When I arrived in 1995, the gap between urban and rural incomes was roughly three to one. A quarter-century later, income inequality has gotten much worse.
Obviously, the coronavirus has slammed China hard, but it will eventually pass. What will remain is the fact that China is still on a multiyear economic slowdown. One of the things I take aim at is this idea that the middle class will just magically keep getting larger. It’s certainly the argument Beijing has been pushing forever: bold projections about how big the middle class is ultimately going to be. I don’t think it’s going to happen. I think as long as they keep the household registration policy and dual land system, they’re going to stall out. China is not going to bring all these rural people into the middle class if they continue treating them as second-class citizens.