ANALYSIS/OPINION:
An outbreak of strikes in Chinas high-tech industries may not constitute what the Marxists call a “revolutionary situation.” But the unrest must alarm Beijing’s leaders, gripped in an unresolved transfer to the so-called “fourth generation” leadership.
Strikes are technically illegal in China. But a series of “walkabouts” at Japanese automaker Honda has continued despite repeated settlement announcements. The strikes have been spreading — so far largely to foreign-owned companies. They come on the heels of other government actions — including the bribery convictions of four top executives of the Anglo-Australian mining giant Rio Tinto Group — that have alarmed foreign investors.
That the unrest is taking place in Chinas critical high-technology sector is another blow. For while economists debate how much the countrys economic miracle is export-led, there can be no doubt it depends heavily on markets in the U.S., Europe, Japan and Australia. Those markets, already jeopardized by the sluggish worldwide recovery, are now threatening to go into double-dip recession.
The combined effects could test the very essence of “the China model” — recently highly touted by Beijing and some Third Worlders, and even by some admirers in the West. Until the real estate bubble and all that rose with it burst in the U.S., there was a growing worldwide acceptance of “the Washington consensus” — “neo-liberal” policies including market economics, private ownership, open trade and representative government.
Beijing has tried to challenge that consensus with partial economic liberalization while effectively limiting serious civil liberties reforms. The sine qua non of the strategy was encouragement of massive foreign investment, with its transfer of technology and spur to exports through subsidies and an undervalued exchange rate.
The strikes seemingly have been carried out by leaderless workers using tools of the digital revolution, tools that Beijing welcomed for economic development but which now threaten its political control. Not even a reputed quarter-million government agents monitoring the Internet have been able to block the strikers.
The implications are enormous for a leadership still trying to hang on to a tattered Soviet planning model. Most high-value Chinese exports — the generally accepted estimate in Beijings artful rendering of statistics is 65 percent — originate in the mainland branches of foreign multinationals. That a very large proportion of these are Taiwanese-owned — there may be as many as a half-million Taiwanese managers working on the mainland — is again political dynamite. (Over bitter domestic opposition, the current Taiwanese government is trying to work out a free-trade pact with Beijing to further economic integration and preserve Taiwans own export markets.)
A major strike has occurred at Foxconn International Holdings, a subsidiary of Hon Hai Precision Industry Co. Ltd., Taiwans largest company presided over by the islands richest man, Terry Gou. The electronic components company, whose products include Apple’s iPhone, was never noted for its largesse. Management also has been struggling with a spate of suicides that focused attention on poor working conditions. It has now announced 20 percent raises and an eventual doubling of wages on the assembly line, a part of which it is negotiating to pass on to its customers.
The People’s Daily, the Communist Party official organ, in an unusual self-criticism called on the All-China Federation of Trade Unions to act as mediator in the dispute. As a response to the unrest, the minimum wage in Beijing next month will rise by 20 percent from $117 a month, while the minimum wage in Shanghai has recently risen to $164.20. Guangdong province, including China’s main export center, the Pearl River Delta, currently has the highest hourly minimum wage, $1.44, according to the official media. Of course, in the welter of corruption surrounding all Chinese economic activity, its doubtful this wage floor is observed by the thousands of subcontractors, especially in low-priced garment and other labor-intensive manufacturing sectors.
It has been argued that competitive advantage of “the China price” is unassailable given the vast differences between labor costs in China and its Western, Japanese and South Korean manufacturing rivals. But even that claim could now be jeopardized with some Japanese companies already looking to Vietnam and other South Asian markets as alternative assembly sites.
Above and beyond the immediate issues, however, this new phenomenon questions whether Beijing can continue its half-pregnant love affair with capitalism. It is probably true, as some Chinese sources maintain, that working conditions in Taiwanese- and Japanese-owned factories were merciless. That would be a function of their more efficient imported management and worker discipline standards, combined with abysmally low Chinese wages. But a social revolution has been taking place wherein migrant workers from the countryside are striving to become legal, permanent urban dwellers with equal rights and access to the benefits of the coastal economic boom.
Even some Chinese economists have quietly argued against the country’s export-led model, saying it discourages the growth of domestic markets and indigenous research and development. They now may get more of a hearing. But any reorganization of the economy faces enormous difficulties and would threaten the regimes political control.
• Sol Sanders, veteran foreign correspondent and analyst, writes weekly on the convergence of international politics, business and economics. He can be reached at solsanders@cox.net.
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