Low-Wage China Reels in Business

By Woellert, Lorraine | The Washington Times (Washington, DC), February 2, 1997 | Go to article overview

Low-Wage China Reels in Business


Woellert, Lorraine, The Washington Times (Washington, DC)


****REFUSING TO PLAY BY INTERNATIONAL RULES, BEIJING SPARKS TURMOIL IN NEIGHBORING NATIONS.****

As decades of double-digit growth abate, unemployment drops and wages soar, East Asia's Tiger economies are hearing a giant sucking sound from a place where unskilled labor is still cheap and easy to come by: China.

Recent violent strikes in South Korea could be a harbinger of widespread unrest as Asia confronts a competitor it can't outdo.

"It's sort of a downward spiral," said Phil Fishman, assistant director of international affairs at the AFL-CIO. "There's clear evidence that Asian economies are experiencing a flight of labor-intensive, lower-skilled jobs."

China's growing dominance and unwillingness to play by international rules already have proven hard to deal with, especially for the United States, where consumers have developed an appetite for cheap Chinese-made toys, shirts, games and electronics.

In recent decades, South Korea and Taiwan led a brisk surge in growth among Asian nations based largely a seemingly limitless supply of cheap, skilled labor. Other countries such as Malaysia, Indonesia and Vietnam have followed, entering the global marketplace by luring foreign manufacturers.

Economists viewed the changes as a healthy economic progression based on the presumption that, at some point, the globe's supply of labor would tighten and workers would be able to negotiate bigger paychecks and more workplace protections.

That model did not take into account an oddity like China, where a Communist government controls the economy and offers a massive pool of obedient and unskilled workers - 1.2 billion of them. The result is a manufacturing migration to the world's most populated country, which also happens to have a central government that keeps wages low and squelches any sign of labor unrest. Even South Korean corporations, unwilling to pay higher wages at home, are shipping factory jobs to China. The footwear and textile industry that helped to vitalize South Korea 20 years ago is virtually nonexistent there today.

This corporate race to the bottom of the wage scale in Asia could leave smaller developing economies reeling in its wake. Manufacturing jobs already are bypassing Vietnam, Indonesia and Malaysia, where foreign investment has slowed or stagnated, in favor of China, where it has almost tripled in three years, to $33 billion. The result is worker unrest.

Many nations have begun to crack down on illegal immigrant workers who once were tolerated because there were more than enough jobs to go around. Malaysia is planning to evict some 1 million illegal immigrants.

Such developments are part of a natural progression as economies mature, experts say. In South Korea's case, labor and financial reforms are vital if the nation wants to compete with developed countries.

"You actually have to free the markets up so that labor as well as capital get moved freely about, [otherwise] you'll end up in a situation where you won't be able to compete in certain segments of industry," said Virendra Singh, vice president of Asia services at the WEFA Group, an economic consulting firm in Bala Cynwyd, Pa. …

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