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The China Price: The True Cost of Chinese Competitive Advantage Review
In The China Price, acclaimed Financial Times correspondent Alex Harney uncovers the truth about how China is able to offer such amazingly low prices to the rest of the world. What she has discovered is a brutal, Hobbesian world in which intense pricing pressure from Western companies combines with ubiquitous corruption and a lack of transparency to exact an unseen and unconscionable toll in human misery and environmental damage. In a way, Harney shows, what goes on in China is inevitable. In a country with almost no transparency, where graft is institutionalized and workers have little recourse to the rule of law, incentives to lie about business practices vastly outweigh incentives to tell the truth. Harney reveals that despite a decade of monitoring factories, outsiders all too often have no idea of the conditions under which goods from China are made. She exposes the widespread practice of using a dummy or model factory as a company's false window out to the world, concealing a vast number of illegal factories operating completely off the books. Some Western companies are better than others about sniffing out such deception, but too many are perfectly happy to embrace plausible deniability as long as the prices remain so low. And in the gold-rush atmosphere that's infected the country, in which everyone is clamoring to get rich at once and corruption is rampant, it's almost impossible for the Chinese government's own underfunded regulatory mechanisms to do much good at all. But perhaps the most important revelation in The China Price is how fast change is coming, one way or another. A generation of Chinese flocked from the rural interior of the country to its coastline, where its factory work largely is, in the largest mass migration in human history. But that migration has slowed dramatically, in no small part because of widespread disenchantment with the way of life the factories offer. As pollution in China's industrial cities worsens and their infrastructure buckles, and grassroots activism for more legal recourse grows, pressures are mounting on the system that will not dissipate without profound change. Managing the violence of that change is the greatest challenge China faces in the near future, and managing its impact on the world economy is the challenge that faces us all. User Submitted The China Price: The True Cost of Chinese Competitive Advantage ReviewsNovember 11, 2008 A great addition on your bookshelf China is not so different after all. Their economy develops more or less along the same trajectory as many mature markets have gone before her. First, the trading of goods fueled by low labour costs. Technologies are copied and pirated to build up internal capability. Along the line, some threshold is reached and low wages for PhDs to work in factories just doesn't make sense anymore. Then came the value-added phase where quality and knowledge capitals becoming increasingly valuable. Volume and price alone is no longer the driving force behind the growth. Innovations and the beginning of the service sectors accelerate as the economy climbs up the value food chain. These aren't sequential steps, varying degree of each element are fighting for positions all the time. Japan went through the same path, so did Taiwan, Singapore and South Korea. Even Hong Kong, with its relatively small population, have followed similar paths with their clothing and toys industry. What is unique in China's case, is the sheer size and speed at which this is happening. Unlike previous markets, many Chinese cities with the population of smaller nations did not want to wait for the rest of the country to catch up. Viewing China as one single economy may be deceptive. Against this backdrop, Harney put a human face on this picture. She lives in Hong Kong, and speak both Japanese and Mandarin. The China Price is an intimate account of her journey to understand the competing forces at play, the duality of the nation's conscience and its place in a world of globalisation. It was not so much of an expose. The questionable accounting practices, the phony audits, the frustrating emphasis on personal relationship and the need to be in the inner circles and many other ills are well documented. Harney's ability to build trust with the factory peasant girls, with the widow of a gemstone worker who carried her husband on her back to seek daily medical care, the amputee worker's advocate who setup a legal advisory service with virtually no professional training except sheer gut and determination, makes this a unique business book. Wal-Mart features prominently in the book. Rather than spending millions on audits and feel-good trainings, Wal-Mart and others should examine their procurement strategy. Can extreme low cost manufacturing be sustained in the long term ? Are consumers addicted to China price like a drug ? Is this fueling consumer debt, dangerously ? May be the millions spent could be better utilised by helping the Chinese companies to move up the value chain. Those who understand the need of China to move to a more knowledge based economy will reap the benefits for decades to come. August 29, 2008 More on The China Price If you're interested in reading more recent reviews and commentary about The China Price, please see my blog at http://thechinaprice.blogspot.com and the book's website at http://thechinaprice.org. There are links on those sites to purchase the book through Amazon.com as well. August 25, 2008 The true cost of cheap merchandise This book gives an in-depth look at the human cost of cheap merchandise from China, both to Americans and to the Chineese workers that make them. August 15, 2008 The China price and the Walmart price Discussions of free trade sing its virtues, while the reality is something different: the unequal terms of that trade, especially vis a vis China and the United States, where two sets of rules are at work. One result is the 'China price' and the growing imbalance in trade relationships. The larger picture shows the other side to globalizaton: the exploitation of cheap labor, disregard of environmental law, and the generally totalitarian nature of this mutant form of capitalism. This book usefully presents the information absent from most public media discussions of the issues of free trade and is an eye-opener. However, the portrait given is of an unstable situation that can't last forever, whatever new mutation lies down the road. Residents of the United States have been caught up in an ambiguous contradiction, the destruction of domestic industry, and the addictive temptations of Walmartization. As the wheel turns from this unstable new development in global capitalism to the next combination, some awareness of the disinformation created by 'economics' discussions in the United States is needed to correct the long-term destructive character of this confused, yet to some very profitable, constellation of capitalist trickeries. August 11, 2008 Excellent Book On The Factory Of the World The China Price does a really good job explaining what goes on in China's factories and, in particular, the whole system that has been built up in China for avoiding monitoring by Westerners. Ms. Harney's thesis is that in many cases, Western companies producing goods in China know the prices they are paying make fair employment and decent environmental standards impossible. I recommend the book to anyone interested in how China has managed to achieve the China price and what the societal and environmental costs of that price has been. I also recommend it to anyone thinking of doing any manufacturing in China, be it on your own or through outsourcing. This book will teach you what really goes on in China manufacturing. May 8, 2008 Should be read I just finished reading the book here in Hong Kong (of course, it's not available on the mainland.) An aspect of the reporting I really admired was the author's obvious efforts at objectivity and even handedness. I've lived in China off and on for nearly 7 years, and can say without any doubt that many or even most Chinese people are really very nice, with compassion and human feelings. On the issue of corruption, yes it's rampant in China and extends into every activity. But, the Chinese are doing pretty much what any of us would do in similar circumstances, at least I think so. It's easy for us to condemn China sometimes, but on the other hand we didn't have to exist in this reality, and it's almost impossible to place ourselves in their shoes. My biggest gripe against China--the biggest threat it represents to the world and to its own people, and something I don't feel was discussed adequately in the book, is that the government of China has created a truly FASCIST STATE, and their efforts at reinforcment are getting stronger and more desperate. The wonderful, deep Confucian influences manifested through Chinese civilization were leveraged and transformed by Mao and his successors into a twisted form of Orwellian mind control. In China today, people are free to hold any opinion they choose as long as it's the opinion they are told to have. Promotion of nationalistic fervor in China through the education system and media equals or maybe even exceeds previous efforts of Nazi Germany, Imperial Japan or Peronist Argentina. It's a scary place. May 6, 2008 Good contribution to the China debate It's simply impossible to keep track of all the China-related books that come out these days. I mean, they're all over the place. I have a strong interest, both personally and professionally, and I try and read what I can, but quite a few of the recently released books seem to rehash the by now well-known theme of China as a manufacturing powerhouse and the correlating threat China may (or may not) pose internationally. This book, however, takes a slightly different take on things. In "The China Price: The True Cost of Chinese Competitive Advantage" (336 pages), former Finantical Times journalist Alexandra Harney delves into the ramifications, primarily for the Chinese, of the ever-growing demand for cheaper products. Harney focuses her research primarily on Shenshen (a city that has grown from half a million to about 12 million in a matter of 2 decades) and the surrounding Guangdong province. Harney demonstrates how a lot of Chinese companies escape the "social audits" many American companies nowadays insist on simply by keeping parallel/fake records on hours worked by/wages paid to Chinese employees. Indeed, the plight of many Chinese workers is deplorable, and not helped by the weak (if that) enforcement of Chinese labor laws by the Chinese government, and the absence of a strong labor union in China. How ironic is that, China being a (so-called) Communist country. Harney spices the book with lots and lots of personal stories of Chinese individuals she interviewed for the book, and that makes it for even more interesting reading. Harney ends her book with this great observation: "In the end, as much as the responsability seems to lie with Beijing, it also lies with the global consumer. Our appetite for the $30 DVD player and the $3 T-shirt helps keep jewelry factories filled with dust, illegal mines open and 16-year olds working past midnight." How true! And doesn't it strike you that the people who shop at, say, Wal-Mart every day are the very same people who tend to lament the fact that US manufacturing jobs are off-shored to China every day. We all make a choice, every single day. May 4, 2008 The other side of cheap imported goods from China This is an important book, for anyone who cares, about what exactly is going on in China regarding all those off shored jobs that are adding to US companies bottom lines. Imagine a pay scale and working conditions around the turn of the century in the US, with no EPA, OSHA, enforceable work rules and I think you get the picture of what is going on in China today. All the parties involved-- Chinese workers, manufacturers, US Importers and the like--all benefit to some differing degree at least in the short term. The workers get some income, the manufacturers get cash flow and US importers get more margin--for a while. Then the workers come down with all types of god-awful diseases because they work in terrible conditions, the manufacturers get caught in the never ending demand of pressure to reduce costs and the importers end up--in some cases--getting more than they bargaining for (menu foods,heparin). It's not a pretty picture. The present short term benefits to consumer and Chinese workers seem destined to change dramatically in the not too distant future--balance of payments with China creating major problems with the US and the Chinese workers will eventually get tired not getting their share of the wealth. The book zeros in on what's going on; I'd have appreciated a bit more forecasting on where this might end up. April 29, 2008 What's behind our consumer goods This book blends the underlying forces of globalization and economics with the touching anecdotes of Chinese workers. The writer does not come off as protectionist or alarmist (indeed, she suggests manufacturing will move from China as labor prices rise), but she does issue an important call to consumers that we should be more aware of our global supply chain. Fascinating trivia as well discussion where many of our favorite products come from. April 29, 2008 Interesting and Objective! China's share of the world's manufacturing output by value-added was 2.4% in 1990, and 12.1% in 2006. In 2006 its biggest exports to the U.S. were electronic machines and equipment; that year the U.S. imported $288 billion from China, vs. $55 billion exported. The Economic Policy Institute estimates a loss of 1.8 million job opportunities since 1981 as a result of this trade deficit with China. Meanwhile, direct foreign investment in China from 2002-2005 totaled almost another $250 billion that didn't go to the U.S. either. In 1980, American manufacturers produced 70% of apparel purchased in the U.S.; by 1990 it was down to 50%, and only 9% by 2006. America now only produces 1% of its citizens shoes; etc. for numerous other products. "The China Price" points out that there is intense competition within China - its coastal export regions have over 1,000 clusters producing specific products such as ties, socks, microwaves, etc., and within those clusters manufacturers have hundreds of direct competitors. This is due to ease of entry - available start-up funds and assistance from Chinese officials eager to increase employment. Chinese law limits overtime hours, requires a number of worker protections. Unfortunately, inspectors are typically overloaded, often corrupt, and frequently deceived by managers hiding factories that don't adhere to the rules. (These managers have also learned to deceive inspectors from American companies seeking to verify compliance with humane employment conditions.) At the same time, many workers will not stay if they don't get enough overtime to make the incomes they desire ("I didn't come here to sit!"), and fear of investing in government-mandated pension plans due to restrictions on their coverage. And then there is the obvious pollution, especially from coal (producing a greater proportion of electricity than in the U.S.), and liquid effluents. China's government is under enormous pressure from its citizens to provide jobs, particularly after the state-supplied sinecures have largely been eliminated. This, combined with even lower costs available in other nations (eg. Vietnam, India) do not bode well for America's "China problem" going away easily. (Common sens, plus Economic 101 tell us that it will continue until wage costs in China etc. roughly equal those in the U.S. In turn, that means we can look forward to eg. workers sleeping 12 to a room in factory-provided housing, and much reduced access to pensions and health-care - unless trade restrictions are imposed.) The "bad news" about "The China Price" is that it often offers questionable or impossible statistics - eg. ". . . saved 80% to 100% . . ." (impossible to cut costs 100% - unless the product is delivered scot-free), "nearly one-third of the air over L.A. and S.F. can be linked to Asia" (what does that mean?) that damage the credibility of the book. Bottom Line: "The China Price" explains why they are so price-conscious, and warns us that they're next move is likely to be into R&D, branding, and U.S. marketing (the "soft three" dollars of every four dollars spent in the U.S. for Chinese-manufactured products). For more The China Price: The True Cost of Chinese Competitive Advantage reviews click here.
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