China is not the model

The original article was published in the ” Equal Times “.
China is becoming the hegemonic power of the 21st century. The economic crisis that has profoundly shaken the West since 2008 has only accelerated this process.
(AP/Ng Han Guan)

Through a combination of its own merits, the mistakes of others and a global crisis that has thrown the world off balance, China has become the big winner of globalisation. Over the last decade, whilst many countries battled with the effects of the recession and others suffered irretrievable losses, China managed to weather the crisis better than any of the world’s great powers.

Its image and, above all, its political and economic role on the international stage have since been significantly bolstered. With the crisis, China’s internationalisation went beyond guaranteeing its supply of raw materials from Africa and Latin America. Its presence is now global and far-reaching.

Its trade with the rest of the world has seen an eightfold increase since it joined the World Trade Organisation (WTO) in 2001. It has accessed Western markets ahead of forecast, buying strategic assets and the technology it was lacking. It is financing and heading hundred of infrastructure projects throughout the developing world. And with its multi-million dollar loans, it has become the financial saviour of a good number of countries. According to the economic research firm the Rhodium Group, China’s foreign investment will reach US$20 trillion by 2020.

China’s resurgence is taking place amid signs of weakness in the West, where the evidence of economic decline is, for many, now perfectly clear. It is this economic uncertainty that has given root to the idea, in many countries, that China is crucial to our recovery and future wellbeing.

This is why there is no shortage of governments trying to accommodate China at all costs, be it by offering a favourable investment climate, avoiding political disagreements or excluding human rights from bilateral trade agendas.

But, over and above the opportunities, China’s global rise also represents a challenge in terms of labour, environmental and social standards.

This is most apparent in the developing world, where China is financing and building dams, roads, railways, football stadiums and other infrastructure. The criticism voiced in Mozambique, Zambia, Peru, Ecuador, Sudan, Burma, Angola and other countries where I have investigated the labour conditions offered by Chinese multinationals, in situ, with some honourable exceptions, is undivided.

“They offer the worst conditions of all foreign investors,” summarises a trade union activist in Zambia, where industrial strife in Chinese mining projects is routine. We are talking about low wages, limited knowledge transfer, precarious health and safety conditions and dealings between Chinese foremen and local workers that are often tantamount to maltreatment.

This is primarily owed to the fact that as the financer of many of these projects, it is China that lays down the conditions. The host state, for its part, be it due to their negligible bargaining power or because the local political elites are anxious not to damage relations with the country likely to become their main trading partner and investor, do not always require Chinese companies to comply with labour standards or the law.

In Peru, where 36 per cent of all mining investment is Chinese, the biggest projects are those generating the greatest conflict: regular strikes and violence stemming from the poor pay and safety conditions, or the social and environmental impact of their mining operations. It comes as no surprise, therefore, that the poor labour standards in Chinese projects is, probably, the one factor with the most damaging impact on China’s image abroad.

 

A model of conflict and injustice

The labour, environmental and social practices of Chinese companies operating overseas are no other than a replica of the economic model in place in China. This model is a source of constant conflict.

The China Labour Bulletin (CLB), an NGO based in Hong Kong, documented 2,205 demonstrations, strikes and labour incidents in China during the first ten months of 2016, whilst pointing out that this only accounts for “about ten and 15 per cent of all incidents of workers collective action in China”.

The CLB also documented 501 work accidents in the Asian country in 2016. The problems arising from poor labour and environmental standards have, in fact, been steadily evolving over the last forty years.

So has injustice. Following Mao Zedong’s death in 1976, cheap labour was one of the five incentives, along with tax breaks, cheap land, lax environmental legislation and an undervalued yuan, that allowed Deng Xiaoping’s China (1978-1989) to attract the foreign investment deemed necessary to dismantle Maoism and move towards a market-driven economy.

The combination of cheap production and the fall in tariffs after China went on to become a member the WTO, together with the attractiveness of a potential market of hundreds of thousands of consumers, gave rise to an exodus of foreign companies to China, where they relocated part of their production.

The Chinese economy reaped enormous dividends from becoming the ‘world’s factory’.

Alongside gargantuan public investment in fixed assets, the export sector has undoubtedly been one of the engines of China’s growth, decisively contributing to its economy having grown at a rate of over nine per cent on average since 1977. But the cheap labour that continues to fuel the ‘world’s factory’, the same cheap labour that has built the infrastructure and has urbanised the new China for the last four decades, is still being kept out of the picture when it comes to the rewards of the so-called ‘Chinese miracle’. This is sufficiently demonstrated by comparing GDP and wage growth. Whilst GDP shows an upward curve, the wage curve was practically flat until very recently.

In a more just country, part of the wealth generated would have been shared with the working class that made it possible. It would have been shared through an increase in wages, a trickling down of the wealth to these working classes. The wage increases, however, only came, and were only partial, in 2010, when the Chinese government found itself obliged to successively increase the minimum wage to ease the growing social tensions.

That same China, although now more confident in its own strengths and, perhaps, more convinced than ever about the merits of its economic model, is the country that is internationalising itself, in giant strides, across the globe.

This means that China’s investments and business operations in many countries replicate its own development model: prioritising economic growth above all else, with no regard for the side effects, no respect for standards and no time for transparency.

The perception that this model works, having lifted millions out of poverty whilst the Western liberal democratic model provides no response to the challenges of the 21st century, is leading local elites in many countries to view the Chinese model favourably. But, as seen in China, this model above all benefits the elites. And it is the most powerless who pay the price.

 

This article has been translated from Spanish.

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