This book review is republished with permission from research firm Access Asia‘s weekly newsletter.
It was supposed to be conventional wisdom that as prices rise, not least wages, so China’s manufacturing industry could move inland and gain access to cheaper land, cheaper inputs, cheaper workers and more of them. It hasn’t happened quite like that, according both our own experience and to Alexandra Harney in her excellent and highly recommended new book — The China Price: The True Cost of Chinese Competitive Advantage (Penguin). Regular readers, and Will Hutton, will know we’re not easily impressed by China books here at Access Asia, but Harney is definitely not one of the ‘Huttons’ (now the official designation for bad China books).
Many factories moving inland in the hope of lower costs and enhanced competitiveness and better margins are finding that, ‘…in China’s fast-forward economy, investors are finding things aren’t as cheap or plentiful as they used to be. And the workers aren’t pushovers either.’ The time scale is accelerated – one factory boss Harney interviews, who moved inland from Guangdong, estimated that he had, ‘…three, maybe five more years before his factory loses its competitive edge.’ And his wage bill was up from 5% to 15% of his costs and rising while commodity prices and logistics costs remained high. The price of the trek from inland to port was eroding any savings he might have made in other areas. Harney claims that those who have moved inland have at best saved 5-10% over coastal locations and, as noted above, that saving isn’t going to last long as a growing number of inland provinces introduce minimum wage levels, workers assert their rights and land prices rise. In many inland provinces wages have doubled in a year or so.
There’s a lot more to Harney’s book than this, and we hope it is widely read, though know that much will be familiar to our readers, who probably (hopefully!) have a bit more in-depth knowledge than the general reader. However, it’s well worth a read for both what’s got better – silicosis compensation; minimum wages; factory owners who ‘get it’ and are now voluntarily introducing CSR practises into their factories — and what’s arguably worse – illegal mining, the sophistication of dodging factory inspections — and, finally, and perhaps most importantly, what’s the same — the western consumers desire for cheap-as-chips clothes, appliances, towels (you name it) that demands the China price remain low.
Buy the book on Amazon