China’s developmental strategy has been
based on cheap labour, foreign direct investment (FDI) and the assembling of
pre-fabricated parts for export to North American and European markets. This
export-oriented growth strategy in low value added production sectors has,
however, come under pressure as a result of the global economic crisis and a
decline in global demand. In his presentation at Nottingham University on 17
February, jointly hosted by the School of Contemporary
Chinese Studies and the Centre for the Study of
Social and Global Justice, Florian Butollo from Jena University in Germany
investigated whether China’s attempts at industrial upgrading in response to
the crisis have also resulted in ‘social upgrading’ for its workforce.
The
cheap labour, export-oriented strategy under pressure
China’s developmental strategy since
1979 has predominantly been based on attracting FDI through its asset of a vast
army of cheap labour. Over the years, China has been transformed into an assembly
platform for pre-fabricated goods, being put together in China and then
exported to markets in North America and Europe. Apple products and their
assembly in Foxconn production plants are just one of the most prominent
examples of this strategy. As Florian Butollo made clear, however, this
strategy, which had yielded export growth rates of 20 per cent per year at
times, has increasingly come under pressure as a result of the global economic
crisis since 2008.
First, the crisis limited the demand in
China’s most important export markets in North America and Europe. Second, even
China has increasingly run up against the limits of its resources as far as
land, material resources and cheap labour are concerned. In fact, labour
shortages have resulted in a slight increase in wages. Finally, as this growth
strategy is based on cheap labour, wages have been suppressed for many years
and domestic demand levels played a subordinate role in development.
In order to respond to the crisis, China
has embarked upon a strategy of industrial upgrading, moving from low-value
added to higher-value added production. In line with the dominant thinking
within the so-called Global Value Chain literature, industrial upgrading is
expected to result in social upgrading. Thus, the Chinese leadership is hoping
to re-balance the economy towards higher domestic demand levels through this
strategy. While industrial upgrading did occur, however, the question is
whether this has been accompanied by social upgrading?
The
continuity of low-skilled, cheap labour
Drawing on empirical examples from his
recent book The End of Cheap Labour?Industrial Transformation and “Social Upgrading” in China (Campus Verlag,
2014), Florian Butollo provided ample evidence that social upgrading has only
taken place on a small scale. Industrial upgrading did occur in the textile
industry, for example, ensuring China’s continuing competitiveness in the
global textile trade. Nevertheless, the introduction of new, modern machinery
and the rationalisation of the production process have resulted in fewer workers
and no improvement in wages or skills. While a small proportion of workers
became highly skilled to maintain the new machinery, the larger part of the
workforce has actually become de-skilled.
The human fashion industry experienced
higher demand for design and marketing functions with some Chinese companies
successfully establishing their own brand in China itself. Nonetheless, there
was less scope for process upgrading and the skills and wages of the workforce
remained largely unchanged. In fact, lean production methods resulted in
de-skilling.
Finally, Chinese companies have
increasingly become successful in the LED lighting industry, in which success
depends on innovative capacity. However, here too, although the share of the
skilled workforce tends to be larger with up to 30 per cent, the vast majority
of workers remains low-skilled and cheap labour. Consequently, the workforce
has become polarised, but the wage levels in the industry are not higher than in
the textile sector.
Overall, Florian Butollo concluded that
industrial upgrading has only resulted in social upgrading for a small minority
of the workforce. Low-skilled migrant workers with little training and a high
turn-over rate remain the standard worker in the Chinese production system. Hence,
it is questionable whether this strategy of re-balancing the economy will be
successful. If there have been gains in the form of higher wages, then because
of labour shortages, not because of industrial upgrading.
Collective
labour agency as the dynamic underlying social upgrading
Reflecting on the dynamics of ‘social
upgrading’ in Europe especially after World War 2, when welfare states were
established in industrialised countries, it is understandable why industrial
upgrading would not automatically result in social upgrading. Ultimately, it
was the collective organisation of workers in trade unions as well as workers’
parties, wrought in often bitter but successful struggles of industrial action,
which forced employers into making concessions.
Considering that there have been numerous cases of large-scale strikes in China recently, the Chinese working class seems to pursue exactly this strategy. If the global labour movement wants to assist Chinese workers, it should support their demands for the rights to form independent trade unions and collective bargaining with employers.
Prof. Andreas Bieler
Professor of Political Economy
University of Nottingham/UK
Andreas.Bieler@nottingham.ac.uk
Personal website: http://andreasbieler.net
18 February 2015
Considering that there have been numerous cases of large-scale strikes in China recently, the Chinese working class seems to pursue exactly this strategy. If the global labour movement wants to assist Chinese workers, it should support their demands for the rights to form independent trade unions and collective bargaining with employers.
Prof. Andreas Bieler
Professor of Political Economy
University of Nottingham/UK
Andreas.Bieler@nottingham.ac.uk
Personal website: http://andreasbieler.net
18 February 2015
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