Magazine article People & Strategy

Counterpoint: Xiaoya Liang

Magazine article People & Strategy

Counterpoint: Xiaoya Liang

Article excerpt

Xiaoya Liang, Ph.D.

Department of Business Administration

School of Management

Fudan University

Shanghai, P.R. China

Hosting the 2008 Olympics will become one of the most significant events in China. It presents a golden opportunity for China to demonstrate its economic prosperity and technological leadership. At the same time, the Olympics bring about some major challenges. For example, Fox and colleagues argue here that abused Olympic-related labor practices might cause China a huge potential public relation crisis if not handled properly. Taking an alignment perspective, Fox, et al., stated that China's Olympic mission is seriously misaligned with China's human resources practices in various Olympic projects. The authors go on to elaborate five factors to manifest this serious HR misalignment. I comment here on these factors by offering updates and alternative opinions.

1. China's economic growth has been based on a "low pay model." China has enjoyed an average growth rate near 10 percent for the past two decades. Many factors can be attributed to China's economic growth; however, no official statistics show to what extent low labor cost has contributed to China's economic success. At least in recent years, labor is not cheap any more. In a recent survey of over 1,800 manufacturing enterprises in the Yangtze River Delta Region, the authors found that on average the surveyed enterprises hired 67 percent of blue-collar workers and faced strong pressure on rapidly increasing labor costs (Wang, et al., 2007). Take the textile industry as an example: Labor cost in Wuxi is about nine times higher than in Vietnam. This year, some enterprises have had to raise the salary of floor workers two to three times. Thus, I would argue that Chinese enterprises have been able to offer low cost products by utilizing large economies of production scale, convenient industry clusters, and favorable government policies (such as tax reduction, subsidies, and land usage). If a "low-pay workforce" drives rapid economic growth, why have we not yet seen countries with even cheaper labor growing as fast as China?

2. Cheap labor has been supplied, predominantly, by migrant laborers moving from the rural farms across China to the metropolitan areas. China has a long-established dual structure system. Because of the residence registration system, many people are constrained in rural areas. Because of low productivity, poverty, and high unemployment in rural areas (unemployment in rural areas is estimated at least 150 million), many young peasants go to cities to get a job. …

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