The Truth about Living and Manufacturing in China Part 1:

Date Published 31st July 2008

I will be writing a series of articles about the truth of living and manufacturing in China. “China” is one of the most talked about subjects of modern times, and yet China is one of the most misunderstood and mythologized nations on Earth. As most of you are Engineers I will give you lots of facts so that you can decide – I’m sure you will appreciate that more than prose. Later I’ll put the prose on my website. I will also attempt to dispel some myths about China as I go.

The Truth about Labour & General Costs

Myth: A Dollar a day and a bowl of rice. Truth: More like a Dollar an hour plus OT, rice, meat and veg.

(Add 15% to cater for all additional taxes and insurance; values are monthly; vary wildly across China)

•Legal minimum wage in Zhongshan just over USD 113 (RMB 770) for about 160 hours – most companies comply (Shenzhen is the highest at USD 147, RMB 1,000)

•Low skilled manual worker about USD 160

•Medium skilled manual worker about USD 220

•Highly skilled manual worker about USD 500

•Master craftsman, no management responsibility USD 750

•Master craftsman, WITH management responsibility USD 1,200

•Chinese General Manager of a factory with hundreds of staff USD 3,000 to USD 5,000

•General office worker USD 160 to 220

•Skilled office accountant USD 400 to 600

•Degree qualified graduate with excellent English USD 380 to 450

I only wish someone had given me this information before I came to China.

Myth: Mostly sweat shops. Truth: With no air-conditioning, they sure can be in Summer.

Clearly the inference of ‘sweat shop’ is ‘work till you drop for practically no money’. In January 2008 the new labour law was introduced that limited workers’ hours to 40 per week. There was a general outcry, but not from the bosses. The unions went crazy on behalf of the workers. Most of these guys are hundreds, if not thousands of miles from home. They live in dormitories and have almost nothing else to do after work. They want to work as many hours as possible so that when they go home after a number of years they have enough money saved up to get married or start a business. For westerners to make the assumption that people in so called ‘sweat shops’ are slaves is a misconception. Sure there are vicious unscrupulous bosses all over the World who would wish to enslave their workers, but in China the majority treat their workers relatively well – the emphasis being on ‘relatively’. Skilled workers would simply move on if the conditions were not palatable. Skills are in huge demand in Guangdong and the workforce is extremely mobile.

Myth: Workers locked into their dormitories at night with bars on the windows. Truth: Absolutely true in some cases.

The general reason for the bars and locks is to stop thieves and potential rapists from having their wicked way, not that they are locked in against their will.

Myth: Child workers abound. Truth: There are child workers; but it’s not a simple issue.

There is a vast difference between enslaving anyone, whether children or adults, and underage workers who volunteer their services. Last year many bosses of mines and kilns were arrested and prosecuted after genuine slaves were released – age range from 8 to 80. This practice is totally illegal and punishment can range from imprisonment to death. Employing underage volunteers is also illegal, but the practice is common. It is only common because many of the minors turn up with very convincing fake ID’s and paperwork. Most children in the Countryside are expected to work from the moment they can walk – my co-Director James Li was no different. Their parents may only earn a few hundred dollars per year. Imagine being offered the opportunity to send their 14 year old child to the city to earn USD 100 per month. That’s a fortune in China. Recently In Dongguan many underage workers were ‘rescued’ by Police, much to the disappointment of the minors and parents alike. Many parents complained and when their children arrived back on the farm, they were sent straight back out to other cities to work. My Great Grandfather started down the mines at 11, and my Great Great Grandfather was a gate minder in a mine at 5. It is wrong. Sure it’s wrong, certainly in the context of our generally agreed social rules. But we must not be too critical as China has to undertake two centuries worth of development in just 30 years. At least it is not Government sanctioned as it was in many Western countries.

[Reframe: Imagine a country that allows 13 year old girls and boys to walk the streets of a rough town unattended going door to door every single day for one hour before school and one hour after school for slave wages, crossing busy main roads unnecessarily. One might think it is a “Paedophile’s Home Delivery Service”. Would you let your 13 year old do this? Well, we do – it’s called a Paper Round. Think about it?]

Myth: General costs are as low as the labour costs. Truth: General costs vary wildly in China.

General costs range from 5% to 150% of the West. Locally made tool-steel might be 15%, but some imported materials are up to 150%. German machine tools and cars are a good 30% more than in Germany. Electricity can be as high as in the west, but generally about 50%. Unleaded gas in Zhongshan this week is RMB 6.7 per litre (USD 3.78 per US Gallon) which is broadly the same as the US, and yet 45% of the UK. Office rental here in Zhongshan is about USD 12.00 per sq.ft. per annum. Medium quality factory space about USD 2.50 per sq.ft. per annum compared to USD 12.00 in poorer parts of the UK.

Myth: “I can get that in China for 10% of your price.” Truth: You sure can if you want to destroy your business. 35% to 65% is the range that will secure quality, service, and delivery.

I did not come to China to sell cheap rubbish to the west. I came here to set up a World Class facility, with the best machines, best materials, best workers, highest skills, fastest response, but at the same time to benefit from the ‘lower’ cost environment. It is a huge struggle to achieve given the lack of a fundamental skill base, but it is achievable. It is perfectly possible to build a totally western style factory with the best equipment and workers and still be less than half the price of Western competition. That is fact. The proof is the huge number of German and Japanese companies that have transplanted cloned factories into China and made it work brilliantly. Ironically, many of those companies are selling their products inside China at the same price as they would in their home markets. Given the costs noted above, one can understand why their China factories are so amazingly profitable. And contrary to numerous doom-and-gloom reports of factories closing in China, industry and manufacturing is more profitable and numerous than ever, and the value of China’s exports has doubled in the three years I have been here.