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Chinese Competition

Who is not afraid of the Chinese competition? And who does not want to outdo it? These were the relevant questions in the pre-Covid-19 global context. Now that in the post-Covid-19 Indian context, there is fervent sloganeering of “Atmanirbhar India” and social media campaigning to boycott Chinese products. It is worthwhile to know how the Chinese manufacturers had masterminded their competition before Covid-19 engulfed the whole world.

Everybody knows that China is the manufacturing heart and soul of the world and in hardware electronics, it is “the assembly hub for final products in Asian production networks”. Economies of scope factored into humongous economies of scale with heightened flexible and fixed automation characterize Chinese manufacturing. Integral to this juggernaut are the garbage labour contracts and labour rights deficits, as found in the Chinese auto industry. They testify to how China has deliberately created the low road labour abuses as part and parcel of state supported predation in the global production chains in respect of consumer electronics as well. This is now well-known with respect to the Chinese factories such as Foxconn and Wintek in Apple’s empire. Common to both the auto economy and the iEconomy is the increasing use of rural to urban migrant workforce.

Consider Chinese auto production and labour therein. Recent research shatters the thesis of job-for-life (i.e. open ended employment contracts) and high skill requirements of final assembly work under lean production. No wonder that the ideologues of lean production as a high road strategy are not enthusiastic to talk about the incredible Chinese innovations in super-exploiting labour for increasing profits, which might be imitated sooner or later by the auto companies in the rest of the world, in a world under the World Trade Organisation (WTO) that exposes producers in each country to the threat of import competition, potentially with zero tariffs. The Chinese low road is coming out like “an explosive whoosh of air from a burst balloon” to prove the point that just like “bad money drives out good money” à la Gresham’s Law, bad benchmarks in labour exploitation drive away good benchmarks. The race to the bottom hypothesis is the unbeatable ultimate hypothesis about the future of work and employment relations in the 21st century manufacturing.

The Chinese automobile industry witnessed an overall decline in employment since the mid-1990s due to downsizing through mass layoffs. For those workers who are inside the factories, lifetime employment is being progressively replaced by short-term labour contracts. The principles of Taylor’s scientific management and principles of Fordist mass production—assembly line production, intense work pace, and heavy workload—have been applied at the major auto firms. Practices of lean production like just-in-time, quality circles—workers participative programmes-and teamwork have been widely adopted at the major auto firms as well. Chinese management frequently referred to the emergent need to practice lean production to improve productivity, product quality, cut costs and increase flexibility and profits for the company in order to survive in the intensified competition of the domestic and international markets. The gruelling nature of production work has remained largely the same as in the old Fordist mass production. There are escalating grievances among the Chinese autoworkers about the tedium and intensity of work, about long working hours and compulsory overtime, the arbitrary exercise of managerial authority, and the declining of real wages.

Two distinct regimes of labour control have emerged among the Chinese lead firms, viz., “lean and-dual” and “lean-and-mean”. The lean and dual model is derived from the original Toyotist model which offers employment security to a core labour force in exchange for cooperation but at the same time creates a large buffer of less privileged workers without the same rights and benefits. The lean and mean model came from the US and Western European automobile firms that emulated the cost-cutting measures of Japanese lean production without the related employment policies.

Take a concrete flavour of the recent fieldwork in China as follows: “At the major Chinese automobile firms, I found, on the one hand, that some firms establish the lean-and-dual version of labour control by hiring both formal contract workers (i.e. workers with legal labour contracts) and temporary agency workers on production lines. Hegemonic relations were established between management and formal workers based on high wages, generous social benefits, better working conditions, and relatively secure employment. However, despotic labour control characterizes the conditions for agency workers who have low wages and high turnover rates. On the other hand, I found that some firms apply generalized despotic labour control to their entire workforces by pursuing a low-wage, high-turnover strategy of mass production without guarantees of job security. This can be identified as the lean-and-mean version of labour control. The crucial difference between lean-and-dual and lean-and-mean models of labour control, is whether an employer adopts labour force dualism and to what extent the employer offers job security to its core labour force….The agency workers were mainly from the nearby suburbs or countryside and were in their early twenties with an average of nine to twelve years of education. The agency workers first sign labour contracts with a labour service agency and are then sent by the agency to automobile plants to work on assembly lines for short terms ranging from three months to a year. Although their working terms at the auto plants can be renewed, agency workers are subject to being returned to the labour service agency without any compensation when the auto companies do not need them—simply because agency workers do not have legal labour contracts with the auto plants for whom they actually work. Agency workers usually get one-half to two-thirds of the payment received by formal workers for the same work, and they

are not eligible for the benefits offered by the auto plants to their formal employees….Firms can cut labour costs substantially by using agency workers on production lines instead of hiring formal workers, especially given that many assembly-line jobs are easy to learn and do not require much training….(Core workers are) a large number of old workers in their thirties or forties with open-end labour contracts. By adopting labour force dualism—by adjusting the number of agency workers, usually at unskilled positions, in response to the fluctuating domestic car market in China—the automobile companies can avoid laying off their formal workers while still being able to lower labour costs and increase flexibility. However, some negative effects of using a dual labour force have emerged with the growing use of agency workers and the feelings of injustice and resentment among agency workers raise the issue of labour control. Management has encountered increasing sabotage, absenteeism, and walk-outs by agency workers with clear demands for wage raises, benefits equivalent to those of formal workers, and equal treatment. As a result, the lean-and-dual firms are becoming more cautious in hiring agency workers in direct production….Lean-and-mean firms do not use agency workers in their direct production. Instead, the firms sign one-year renewable contracts with all of their production workers. While companies have found it economically rational to place a heavier emphasis on competitive wages and a replaceable young workforce in China in accordance with the traditional Fordist techniques, management nevertheless realizes that the best way to reduce costs and increase productivity in the long run is to gain workers’ cooperation; otherwise, high labour turnover disrupts quality circles and other lean production techniques. However, it is very hard to gain much workplace commitment and loyalty from the production workers without the promise of job security. For those companies in a good position to offer their workforce more generous labour contracts, …, management can ease the confrontation by offering workers improved wages, better working conditions and more workplace autonomy. But if workers’ wages start declining,…there is immediate rise in worker protest and sabotage. Thus, both versions of lean production have contradictions and limits.”

There is a trend among the lean-and-dual firms to shrink the size of the core workforce with open-end labour contracts by employing new workers on short-term contracts. Besides, there is also a trend of increasingly using student trainees from high/middle technical schools all over the country on a yearly basis. The student trainees are even cheaper than temporary workers because they are not considered full-time employees even though they do indeed work full-time..Given China’s oversupplied labour markets and the relatively low-skill jobs on automobile assembly lines—which indicate that auto firms can easily replace their line workers with young and cheap temporary workers—the credibility of the promise of employment security to formal workers becomes less convincing. Moreover, China’s entry into WTO with the potential for increased competition from automobile imports that this entry entails, is widely expected to put additional pressure on all automobile firms and thus to lead to still more downsizing of the core workforce and more exploitation of the temporary workforce. The Chinese factory unions are under the leadership of the Chinese Communist Party. When it comes to people vs. profits, the Communist Party prefers the latter. As such, the unions are assisting more the management to mobilize workers to increase productivity and profits of the enterprise than assisting the workers in terms of representing and safeguarding their interests.

Any disruptions that arise due to labour unrest can be quickly sorted out because “The same assembly line production…homogenizes and deskills workers and makes it preferable to draw on latent reserve armies of labour with little or no industrial experience. Basic training for most assembly line positions can be carried out in a matter of days or weeks. The relatively high wages paid in the auto industry attract a wide range of candidates. The seamless replacement of production workers on automobile assembly lines and a large supply of newly proletarianised labour, including rural migrant workers with little or no industrial experience, suggest that the marketplace bargaining power of Chinese autoworkers is quite weak….As such, there is good reason to expect that the dynamic of labour-capital relations in the Chinese automobile industry will move toward a lean-and-mean model.”

This pessimistic picture of China is further enunciated as we vividly find the sky-and-earth differences in how labour is dealt with in America vis-à-vis Ford’s first-line auto-parts subcontractor in China. One can only imagine how horrendous the working conditions could be in the auto subcontractors below the first-line ones, in China.

In this pessimistic conclusion, what is clear as a future benchmark is that the long-term and stable employment contract that emerged in English law and that was glorified as a seminal feature of a good job during the golden age of capitalism in the post-war period is currently and potentially dead and gone in the lean and mean world of work. Thus, we are back to the future in terms of 19th century conditions of work, i.e. the times prior to the emergence of internal labour markets based on tenured employment contracts. Since the benchmarking craze of the late 1980s and early 1990s was nothing but imitating the practices that seemed to characterize successful enterprises, there is no reason why we should not expect the labour practices of the Chinese assembly plants as the new benchmark, especially if Chinese assembly plants ably supported by their ruthless parts suppliers, succeed under the WTO regime’s ultimate goal of integrating the world economy with zero cross-border protection.

How the Indian employers in the Gurgaon industrial region, for example, are emulating or even more aggressively reinventing the Chinese predatory labour practices can be gauged from the realities unearthed by GurgaonWorkersNews (2007 onwards). In fact, the despotic “discipline and punish” labour regimes in the Chinese factories are rampant everywhere in the Indian industrial landscapes as well.

Now that in the Covid-19 context, the migrants in India have left for their villages due to their inhuman treatment by the state as well as their employers, and many of them have died in the process, which indeed exemplifies shameless ‘exodus constitutionalism’, it is a moot question as to how “atmanirbhar” resurgent urban-industrial India will emerge, leave alone “atmanirbhar” rural development.

By Annavajhula J.C. Bose
Department of Economics, SRCC.

Annavajhula J.C. Bose. 2012. Chinese Low Road and Global Race to the Bottom. Asian Journal of Research in Business Economics and Management. Vol.2. Issue 11. November.Upendra Baxi. 2020. Exodus Constitutionalism: Mass Migration in Covid Lockdown Times. The India Forum. July 3.
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