The idea of development zones and export bases had emerged in the early 1960s without much result.
The first Special Economic Zones (SEZs) was created in near Hong Kong and then in other Chinese cities. Exports were boosted by a steady devaluation of the Yuan, whose value almost halved against the US dollar between 1980 and 1985.
At this period, exports began to surge. For example, in 1985 exports reached $25 billion compared to $10billion in 1978.
The SEZs were created with special privileges such as tax breaks and subsidies to attract foreign investment, technology and expertise.
With to the new economic plan, China today boasts to be the world’s fastest growing major economy with an amazing growth rate at around 9.5% per year. China is also the world’s largest exporter and second-largest importer of goods after the USA. It has the world’s second-largest economy with nominal GDP at 34.06 trillion Yuan (US$4.99 trillion). Although the average income in China is US$3,700 per capital, this is still low and puts the PRC behind roughly 100 countries. China is also a permanent member of the United Nations Security Council and G-20.
China’s success is due several factors such as good infrastructure, medium level of technology and skill, relatively high productivity, favorable government policy, an undervalued exchange rate but overall a cheap labour.
According to Michael Poters says that China uses low exchange rate and subsidy to boost its exportations, [Course Notes] currently it is the first exporter in the world before Germany.
Primary, secondary and tertiary industries were worth 10.6%, 46.8% and 42.6% respectively to the total economy in 2009.
http://www.chinability.com/GDP.htm
China’s middle class population (defined as those with annual income of least US$17,000) benefit most from the situation with about 100 million and the “super-rich” are estimated to be 825,000, according to the Hurun Report.
Now the Chinese represent the second-biggest consumer of luxury goods behind Japan with more than a quarter of the global share. China currently is ranked 29th in the Global Competitiveness Index. Some Chinese companies are in the world’s top 10 most valuable companies. These include first-ranked PetroChina (world’s most valuable oil company), third-ranked Industrial and Commercial Bank of China (world’s most valuable bank), fifth-ranked China Mobile (world’s most valuable telecommunications company) and seventh-ranked China Construction Bank.
In the first semester, China had a growth about 10% but with some consequences.
Today, China is an important actor in international trade. However, this amazing growth is not without adverse effect. Indeed during the 20 last years, the country has had several disputes due to three mains factors.
They have been explained by the government which declared that it was the fact of the economic boom and the entry into force on 1 January 1995, a labour law, stipulating the rights of workers.
According to statistics, conflicts increased in collective companies and in companies with foreign capital.
The first conflict factor is the staff movement, the high-skilled person. “State companies are facing the flight of their best people,” explained one European lawyer.
“They are attracted to mixed companies with more appealing salaries. But employment law is not really equipped to deal with this situation. Employment contracts are still very recent and the case law is thin.”
The second reason is linked to the work conditions. China has a very hight productivity, but at what price? The plants of the “Special Economic Zones” situated in southern China which receive lot of workers came from disadvantaged provinces with very low wages. We can quote, for example, a fire at a factory in Shengzen where 87 employees died because they had been locked in their dormitory built into the factory. Their employer, a native of Hong Kong, feared they would steal the toys during the night. This illustrates the ill-being and the discomfort which reigns inside some Chinese factories.
The third reason is which may be advanced to explain the emergence of these social conflicts is a certain evolution in the mentality and aspirations of young workers. Born after the opening reforms, they are not willing to accept the same holding as their parents suffered.
Furthermore with the development of communication technologies, they are much better informed than before, are aware of their precarious situation and their strength.
“The new generation of workers is less willing to settle for a low paid job and a boring life,” said Lai Desheng, labour economics professor at Beijing Normal University on “Christian Science Monitor”.
Finally, workers are also helped by improving the quality of products manufactured in factories – as explained by Jim Leininger, an employee of a company in human resources.
He says: “The trend towards high quality and productivity requires more skilled workers and they therefore can demand higher wages.”
Moreover, Chinese also want to enjoy China’s wealth. But if the companies raise the wages, China risks lose it comparative advantage which is the remuneration of its employees. And if a country loses it comparative advantage, it will be less include in the international trade.
According to Ricardo and Smith an every country need a comparative advantage.
There are disputes inside of the country, but there is also pressure outside. China is pushed by the G20 and by the US to revaluate the Yuan. The relationship between these two countries “continent” is stretched because the US is supported by EU and Japan want to rebalance the economy, cut down the deficit and decrease the GDP countries which are in trade surplus.
Some US legislators and think-tanks say the Chinese currency is undervalued by as much as 40%, causing imbalances in bilateral and global trade flows.
In the first half of 2010, industrial conflict in China became more intense with protests spilling out of the factory into the public domain. As mentioned above, Chinese mentalities changed and they want to enjoy the wealth of their country. Although the right to strike is not acknowledged by the Constitution, for some years there have been more than 100 strikes and walkouts in China. But theses collective actions are a way to the employees to push the government to take in consideration their ill-being and therefore take rulings.
For example, on 17th May 2010 hundred workers created a social movement in Honda to reclaim an increase of wages and better work conditions.
During the first semester at the same Honda strike date, we attended a wide suicide wave close to Hong Kong.
In the electronics giant Foxconn, which is the main provider of Apple, Dell, Sony, Nokia or Acer, the suicide threats were strong. Foxconn decided to install anti-suicide nets on the roof, seal bars on the windows and promised wage increases based on performances.
Finally, this international company announced that it would stop its recruitments and move to another region where the labour cost is more competitive.
China is a country with a “bad” repartition in terms of wages, work regions, education.
Indeed the People’s Republic of China regions which are the most developed are the eastern coastal, but the government wants to adopt a new politic which will permit to promote the development of all the country.
Moreover, the fact that some companies move to villages, some employees do not want to go into town to find work and prefer to remain close to their family.
http://www.mazerolle.fr/Economie-chinoise/Chapitres-du-cours/Disparites-regionales-et-amenagement-du-territoire-chinois.pdf
Therefore, companies in the town experience a shortage in workforce and thus the labour force has more power to face companies.
Today the balance between supply and demand is favourable to unskilled workers in China.
As a result, factories and local governments in southern and eastern China are forced to remain attractive, granting them almost all kinds of benefits, including overall wage increases.
Definition: This entry provides the total US dollar amount of merchandise exports on a free on board basis.
These figures are calculated on an exchange rate basis, i.e., not in purchasing power parity (PPP) terms.
This diagram illustrates the talk above, that is to say that China stays an actor important in the worldwide. But with these social conflicts, the exportations decrease slightly because the price becomes slightly more expensive hence the labour force becomes more expensive too.
All these have consequences in that some Chinese companies are even beginning to look outside China for goods to sell domestically. But the Chinese purchasing power is increasing so if we follow the Keynes theory, the interaction between the global demand and the global supply decided the level production and the level employment.
This means that the Gross Domestic Production will remain stable.
After all these tragedies, the Standing Committee of Guangdong Province People’s Congress on 21st July accepted to review the draft of its Regulations on the Democratic Management of Enterprises.
In June 2010, the Guangdong Provincial Party Committee wanted that the preparation of the draft Regulations be faster. This was because the labor conflicts started to be very dangerous for the society and the government wanted calm down the situation and to construct harmonious labor relations.
Thereafter, two new chapters were created to the draft Regulations: the fifth chapter − “collective wage consultations” and the sixth chapter − “dispute coordination and management”.
In July, after sending the draft to the Provincial People’s Congress for deliberation, the drafters were seeking opinions from four sources: the government, workers, state-owned enterprises and non-state-owned enterprises.
Ou Guangyuan, chairman of the standing committee of Guangdong’s People’s Congress, enlightened that “the main object of this legislation is to resolve the problem of inhumane conditions and excessively low wages at enterprises.”
Finally, the draft regulations also recognize the reasonableness of workers using strikes or other forms of collective action. Article 51, for example, indicates that “if an enterprise management fails to respond to a workforce demand for collective bargaining, or fails to arrange such negotiations, that employer may not terminate workers’ employment contracts on grounds of stoppages or go-slows”.
In conclusion, China is a world social entity in movement, unsure of itself but which a rising power on the world stage. The nature of industrial conflicts demonstrates that China suffers both from the consequences of its entry into the modern and from the crisis of modernity. The Chinese Communist Party, which has put everything on economic success, is now faced with its own contradictions. The lack of political and social dialogue constructs a delicate situation in China now. This is because the fear of social explosion associated with a dynamic economic downturn has become, with the nationalist card, the only guarantor of stability of power.
But economic modernization is not enough. China has to be able to solve these social problems, such as amending its policies, for this Chinese government to take into consideration the ill-being of its inhabitants.
According to a French Sinologist Jean-Philippe Beja, there is deficiency cyclical which is a part of a structural trend of reducing population growth.
Moreover, in 2015 it is estimated that the workforce will begin to decline. Especially in the number of 15-24 year olds, who represent the bulk of the labour force employed in factories producing for export.
Despite this reduction of potential employees, the workforce will naturally abundant. But in return, it is likely that this reduction will play on for workers. Indeed, it will get easier as improvements in working conditions that remuneration.
For the stable development of that society, it is essential to ensure that enterprises establish democratic management, normal mechanisms for wage increases and harmonious industrial relations.
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