Alexandra Harney was a reporter and editor at the Financial Times. She has reported from Japan, China and the United Kingdom, among other places. From 2003 until early 2006, she was the FT's South China correspondent based in Hong Kong, where she still lives. A 1997 cum laude graduate of Princeton University with a degree from the Woodrow Wilson School for Public and International Affairs, Alexandra was born in Washington, DC and currently lives in Hong Kong. This is her first book.
Explain the title of your book: What do you mean by the “China price”?
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The “China price” is a term executives began using several years ago for the ultra-low prices of goods made and exported by China to the rest of the world.
At as little as a fifth of the price of comparable products made in America, the “China price” was, and often still is, unbeatable. It has set in motion a tectonic shift in the global economy, closing factories around the world, putting millions out of work in the West, and drawing billions of dollars in investment to China. It became a piston of growth in the Chinese economy, pumping wealth into the hands of entrepreneurs and hundreds of millions of Chinese workers.
But the system that created the China price has also left a tragic and costly legacy: a devastated environment, hundreds of thousands of sick and injured workers, an increasingly restive workforce, and a string of product safety scandals.
How did you get your incredible access to people throughout the book? We generally think of China as being so cloaked in secrecy?
I wanted to draw a picture of the people inside China’s industrial machine, to bring them to life for readers a world apart. To do that, I stayed for long stretches in industrial areas, walking people to work, sharing meals in workers’ dorms, sitting in parks on workers’ days off. I tried to be with factory managers and workers as they went about their daily lives. Sometimes that meant making up songs in Chinese, or watching endless hours of television with migrant workers waiting for something to happen, but I think it gave me unusual access to the people inside Chinese export factories.
One of the big coups you deliver in the book is exposing China’s notorious “shadow factory” system – can you explain what that is?
When I first began researching Chinese factories, I often heard executives at international brands and retailers talk about the “factory down the street.” These factories are essentially subcontractors that produce out of view of foreign buyers, sometimes substituting shoddy material, often working in grim conditions.
In this setup, the factory Western buyers see when they come to China is the “model,” also known as the “five star factory” because it’s as nice as a five star hotel. Legal working hours, no child labor, wages paid fully and on time – model factories have it all. Nearby, though, is a “shadow” factory, which produces the same goods for the buyer but by cutting corners on material or working conditions. The “shadow” factory, which I heard is common in southern China in particular, allows factory managers to save money and sell their goods at the China price.
Why should Americans care about the issues inside Chinese factories halfway around the world?
China’s rapid rise has consequences for everyone, not least of which the people who used to make what China now produces at lower cost. It was my interest in this very issue that prompted me to write The China Price. This is a country that is inspiring great trepidation among Americans, I wanted to get inside the factories that were setting off these waves of fear.
Of course, we don’t have to care. But it’s now impossible to ignore the issues inside Chinese factories: the product safety scandals, the job losses, and the price rises from Chinese factories aren’t affecting only Wall Street but Main Street as well. When these issues come up, it’s important to understand the system that produced them.
At the same time, as our awareness to climate change and other environmental issues deepens, China will loom larger in our minds. Any consumer who claims to care about the environment should consider the consequences of their buying choices. We have to consider the irony of driving our Prius to the mall to buy products made in polluting factories in China.
You say that, slowly, workers in China are beginning to get savvier about their rights – what’s happened to make this occur?
Several things have happened in China in the last several years to make workers more aware of their rights. First, the Chinese government has made a real effort to encourage workers to learn what their rights are, and to take steps to ensure that they are protected. Second, there has been a generational shift in the factories: many of the migrant workers who are now on the line in China were born after China’s 1979 one-child policy came into effect. These second generation migrants tend to be more demanding employees: they are pickier about where they work, preferring factories with better facilities and wages.
Their preferences, along with a rapid growth in factories in the Yangtze River Delta around Shanghai and a rise in rural incomes, have contributed to labor shortages in Guangdong province in the last several years. In response, the government is raising the minimum wage and strengthening labor laws. Forced to compete for workers for the first time in more than a decade, some factory managers are even building basketball courts and libraries, installing air conditioners and improving their cafeteria menus. All this, in turn, is going to be raising the “China price.”
What do you think of China’s efforts to improve laws that safeguard the health of their workers and the environment? What role does the west, and particularly the U.S., play in this?
China actually has very good laws about labor and the environment. Their working hours are more restrictive than those in the US, limiting employees to 44 hours a week, for example. Their environmental standards are stringent. What’s missing is enforcement.
Several new laws are coming into effect this year that try to improve workers’ rights. One new labor law will give employees a greater say in how their company is managed. Another will make it easier for workers to file complaints against their employers. These are all steps in the right direction. But they are only symbolic if not supported by strong enforcement.
My experience writing this book has made me more aware of the connections between our choices as consumers and the countries that make what we buy. By expecting ever lower prices, we are in a sense fueling this system that creates pollution and poor working conditions in China. The recalls of toys, toothpaste and tires made in China last year prove that what happens in Chinese factories affects all of us. If we expect China to clean up its act on the environment and labor, we – as consumers, investors and businesses – are going to have to pick up part of the tab.
In February, hundreds of thousands of workers in China were stranded by weather conditions which shut down many trains. How did this become such a disaster and what does it tell us about China?
The stranding of hundreds of thousands of people in southern China was the result of severe snowstorms that cut off electricity to the trains, just at a time when millions of migrant workers were returning home for the Chinese New Year holiday.
Their annual exodus from the coastal cities where they work to the farming towns where their families live highlighted the enormous manpower it takes for China to produce goods at such low prices. There are between 150 milion and 200 million migrant workers living in Chinese cities today, many of them young and living hundreds of miles away from their families, with few social benefits. They dominate the manufacturing, construction and coal mining industries.
The response to these peaceful crowds huddled against the rain and snow at train stations also showed what an important political, economic and social constituency China’s migrant workers have become. President Hu Jintao and premier Wen Jiabao both made appearances at train stations to reassure the crowds. Can you imagine President Bush turning up at JFK Airport when some American travelers couldn’t get home for the holidays?
When the workers returned to their factories, some plants held parties for them to ensure they didn’t resign and move to another factory with better pay or conditions – a common occurrence as a labor shortage grips southern China. Because they make so many of the goods we use every day, what happens to these migrant workers matters not only to China, but to the world.
Of course everyone knows the Olympics this year are in Beijing. How is China preparing for the games and the face they will be showing the world?
Like every country that hosts the Olympics, China is hoping to put its best foot forward and has embarked on a massive building program of glittering new stadiums, concert halls and swimming pools. And indeed, China has much to be proud of.
But what is most interesting to me is the things we won’t be seeing during the Olympics. China is already cracking down on its internal critics, most recently arresting activist Hu Jia on charges of “inciting subversion of state power.” Quietly, innumerable other lawyers, rights advocates, and labor activists around the country have been harassed, beaten and arrested.
Beijing is forcibly moving the people left out of its economic miracle – the homeless, petitioners for justice – out of the city. It is shutting down polluting factories during the Games and limiting smog-generating traffic to clear the air. There are reports that it is shutting down the schools for the children of migrant workers ahead of the Olympics. A key question will be what happens to these people after the Games. What face does China show after all the athletes and fans have gone home?
What do you think the next president of the U.S. will have to concern himself or herself with when it comes to China?
China is a hugely important player in every field – business, foreign policy, energy and the environment. The next president will have to balance American concerns about China’s growing economic clout with the need to engage this emerging superpower. I think product safety will continue to be an issue, as will China’s currency and foreign policy, the means and ends of which don’t always accord with our views. The economic links between the US and China are only going to deepen, and we need to find more ways to seek common ground.
Where do you see China going in the next ten years?
I think there are a lot of changes coming in factories that make the goods we use every day. China is going to make greater efforts to crack down on violations of laws, whether that is illegal coal mines, tax evasion or environmental pollution. It will try to encourage companies to shift into more energy-efficient, less polluting, more high technology industries. And as it grapples with a yawning income gap, China will look to better protect workers’ rights. All of this adds up to higher prices of Chinese-made goods for American consumers, and a long-overdue consideration of the unintended side effects of manufacturing.
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