Liang Hongfu

Cheap labour is nothing to brag about

By Liang Hongfu (China Daily)
Updated: 2006-03-07 06:03

In a popular television talk show on business strategy, a panellist picked the acquisition of Thompson by TCL to illustrate the culture clash that usually poses the most daunting challenge to Chinese buyers of foreign companies.

Labelling French workers as "lazy folks," this person questioned if TCL, or any other Chinese enterprise, could "make" their foreign workers work as hard as their Chinese counterparts. "Our workers know no Saturdays," he said. "They work six, sometimes seven, days a week with no complaints."

Another panellist chimed in and said that Western workers work only eight hours a day five days a week and take their annual leave as if it was "sacrosanct."

The two panellists then started attacking the "welfare state" which they regarded as the root of all evils that have led, in their collective opinion, to the "decline of the West."

The host, who is said to be an MBA from a well-known US business school, ooh-ed and ah-ed in agreement, while other guests broke out in laughter whenever the denouncement of Western ways became virulent.

Such a farcical display of ignorance and bigotry is not only an insult to the intelligence of the audience but also, more damagingly, a false representation of the psyche of Chinese corporate leadership.

The overseas acquisitions of TCL and other mainland enterprises have been discussed and analyzed at great length and in minute detail. It is clear that cheap labour could not have been a reason behind any of these overseas mergers and acquisitions.

In most cases, mainland enterprises make overseas acquisitions to gain market access, technological know-how or managerial expertise. That is because many mainland business leaders know that the future of economic growth relies on their efforts in moving up the value-added chain rather than on the continuous large supply of labour and land.

Concentration of capital is needed to help kick-start the industrialization of an under-developed economy. As a result, the benefits of development at the initial stage are usually reaped by the small segment of the population that is more entrepreneurial than the vast majority of people.

This imbalanced distribution of new wealth will inevitably create social tension. Some economists believe that left alone, market forces will eventually ensure the filtering of wealth down to the other segments of society because the increase in demand should give workers greater bargaining power in wages and other benefits.

But as we all know, markets are imperfect. For example, collusion among the oligarchies in various industries can prolong the economic adjustment process, creating unbearable social stress.

More than 20 years of economic reform has lifted hundreds of millions of people in China out of poverty. But the huge imbalance in the development of the fast growing coastal regions and the rest of the country and the widening income disparity between the rich and the poor in the cities cannot be ignored.

It is in the interest of the business community to take heed. Higher wages, improved social benefits and more leisure time can be a boon to businesses because increased income and a greater feeling of security about the future will most likely encourage the public to spend more on housing and a wide range of consumer goods.

Workers in France as well as other developed countries enjoy a fairly high standard of living, which should be a goal to aspire to. Our hardworking and compliant labourers, particularly the many millions of migrant workers, deserve no less.

Email: jamesleung@chinadaily.com.cn

(China Daily 03/07/2006 page4)