China deals with the pain of downturn

Scott Tong Dec 19, 2008

China deals with the pain of downturn

Scott Tong Dec 19, 2008


Tess Vigeland: Over the last few days, China has been celebrating a big anniversary. Thirty years ago, Beijing inched open the door to free-market reforms, and we all know where that led. Today, China is the world fourth-largest economy, giving third-place Germany a run for its money. But here’s the subtext to all this crowing: The frail global economy is hitting China hard. And that’s raising the usual questions about social unrest in an authoritarian country. Marketplace’s Scott Tong joins me now, from the road. Nee-how, Scott.

Scott Tong: Nee-how to you Tess. How are you?

Vigeland: I’m fine thanks. Tell us where you are and what you’re seeing.

Tong: I’m in a gritty factory area in southern China called Ho Che. You’ve probably not heard of this place before, but it puts out tons of shoes and sofas that get exported all over the world. So this is the center of low cost labor in China and I’ve seen signs of worker dissatisfaction since I’ve been here. Yesterday my taxi driver said that on Christmas day all the cab drivers that are in an area of more than 10 million people are planning to strike and just down the street from my hotel yesterday I saw about a dozen shoe factory workers protesting at the local labor department office — their factory shut down, the boss skipped town, and he owes many of them back wages, which you’re also seeing in much of China.

Vigeland: Well, those don’t sound like terribly new issues to China, Scott.

Tong: Well, Tess, they’re not new in China, as you say — labor abuse, wealth inequality — we’ve heard all those things before, but they tend to get magnified when the economy slows down here. And the thing we have to remember is the Communist party is an unelected government, and their tacit social contract with the people is we’ll make you wealthier than you were before, we’ll create jobs for you, so long as you keep your head down and don’t complain. And that deal gets tested at a time like this.

Vigeland: Scott, how do we know if these signs will add up to some sort of political event? Social strife?

Tong: We don’t. The other night I had dinner with a big group of furniture workers, and they all make something like 50 cents an hour. And one of them said, “You know, unless something big sparks a big social event in China, the Chinese workers have an amazing ability to just suck it up.” In Chinese they say “We can eat bitterness.” So, will this ever get to critical mass? That’s a debate in China.

Vigeland: You know the economic slowdown is predicted to get even worse as we move into next year, should we assume that political pressures will too?

Tong: Here in China everyone expects them to. First of all, early in the year in 2009 is Chinese New Year, when the workers tend to go home, back to their villages and they talk to their friends and they hang out and the test will be when they come back to the factory areas of China, if they can’t find enough work, where is their anger going to be directed?

Vigeland: As things heat up, Scott, I wonder, how could that storm come back to hit the U.S.?

Tong: We could see the signs of a trade war. What Bejing might do to keep these factories afloat and to keep the jobs available for the export workers is to lower the value of China’s currency, provide other kinds of subsidies that many are another kind of protectionism and if Washington fires back, particularly the new Obama administration, we don’t know where that kind of things leads. Something else to keep in mind Tess is how China got here as far as some of these labor issues is connected to the American consumer. When the U.S. company, the brand-owner comes and it hammers down the price that pays for the China price, as they call it, they’ve got to cheat on the quality and sometimes the managers or the factory owners, they cheat their workers and you get some of these labor issues. Something to keep in mind, how it’s connected indirectly to the American consumer.

Vigeland: Alright. Marketplace’s Scott Tong joining us with a reporter’s notebook from the Guangdong Province in China. How about for that notebook, a little bit of a language lesson? How do I tell you Happy New Year?

Tong: Shin ying qwai la. Happy New Year.

Vigeland: Shin ying qwai la to you, Scott.

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