Teenage labourers, torn between corruption and administration, and a communist nation with capitalist ambitions and home to the cheapest goods one can ever desire: that pretty much sums up China these days. Their price does the trick, and that too every time. What drives the Chinese? "I believe we are all fundamentally the same: we all want a better life for ourselves and our children. The Chinese are no exception. But unlike some other countries, they are still emerging from an era of great isolation and deprivation. Take, for example, Li Luyuan, one of the women whose story I tell in the book. She comes from a poor family of watermelon farmers in eastern China, but dreams of a job as a saleswoman, far from the life her parents live," remarks Ms Alexandra Harney, author of The China Price.

Most Chinese are optimistic about the direction in which their country is moving, she adds. Li Luyuan is willing to sacrifice everything - a steady income as a factory worker, a social life with her friends, a space in a factory dormitory - to realise that goal. Business Line caught up with the former Financial Times journalist, who now lives in Hong Kong, over electronic mail.

When we asked Ms Harney about inflation, this is what she had to say: Inflation is affecting China as profoundly as any other country. "But they, too, are paying more for their food, and thousands of factories are closing down in China because of inflation." Read on.

Excerpts from the interview:

What is the true cost of Chinese competitive advantage? Are Chinese the only ones who are paying for it?

The true cost of Chinese competitive advantage is the teenage boy who loses an arm to a machine after 18 hours on the assembly line. It's the 400,000 Chinese deaths linked to air pollution every year. And the cost of Chinese competitive advantage is also the cloud of Chinese pollution that is blowing over Japan, South Korea and even the west coast of the US, the dozens of Americans who have died from tainted heparin made in China, and the millions of people around the world who have lost their jobs due to competition with Chinese factories. We all pay the China price.

Should a buyer really bother about the condition under which goods are being made by hapless and underpaid Chinese workers, as long as he/she gets the `China' price?

Whether or not we care about the conditions in Chinese factories, we are all deeply dependent on them. The world has become addicted to artificially cheap Chinese goods. So what happens in Chinese factories - whether it is a neglect of workers' rights that leads to a surge in labour lawsuits and higher prices for Chinese-made goods, or a disregard for safety standards that prompts the recall of millions of products, or a rapid rise in material costs - affects us all directly.

In India, especially for the Left-minded political groups, China is a great example. But your books tells us about one internal `hukou' handbook of 2000 that describes the system as being friendlier to what they call as `high-quality people' and tough on `low-quality people.' Is China still a communist nation?

China is communist in name alone. The country that once venerated its workers now allows millions to toil without proper healthcare or a living wage. Its levels of income inequality now rival some Latin American countries. These contradictions are at the top of the Chinese Communist Party's "harmonious society" agenda, which aims to engineer greater social stability by evening out some of the sharp differences in living standards that have resulted from the rapid growth of the past three decades.

How do Chinese employers motivate their workers? Is there a system like that at all?

Just as it is difficult to describe all Indian employers in one way, it is impossible to paint all Chinese employers with the same brush. That said, the pace of Chinese economic growth has undoubtedly exceeded that of management development. Today, turnover among Chinese managers and staff is extremely high; some factories lose their entire workforce every year. Motivating and retaining employees - and perhaps most importantly, encouraging creativity - are skills that Chinese companies will need to develop to remain competitive.

You have talked about the endemic corruption of Chinese government agencies involved with coal mines in one place. How is China doing much better than any other country currently, even with corruption?

Corruption is rife in China, within the government and in private enterprise. It fattens officials while the farmers they govern starve. But corruption is not the real source of China's economic success; its people are. The 105 million manufacturing employees, who work investment banking hours, often in sweatshop conditions, are the reason for China succeeding where others have not.

To be sure, government policies, that recognised the importance of foreign investment, have helped pave the roads and build the telecommunications infrastructure, and maintain an undervalued currency and a stable political system - all of these have played a role too. None of this is corruption; its hard work and clever policymaking.

The Americans had about a hundred years to reach a level of socioeconomic development and the luxury to protect employee rights. Is it fair then to expect the standards to be similar for newly industrialising countries such as China?

Herein lies one of the inherent contradictions of outsourcing production: multinationals expect goods to be made under developed world conditions, but at developing world prices. They want cheap goods and abhor a scandal.

While it is not fair to ask factories to provide something (fair wages, adequate rest and insurance) and then not pay them enough so they can afford it, it is perfectly fair for multinationals to ask Chinese factories to follow the Chinese law.

The trouble is - in China as elsewhere - most multinationals are not prepared to pay more for goods simply because they are made under legal conditions. As India's export manufacturing sector expands, more Indian factories will face the same contradiction.

Tell us about what makes Chinese click, especially at a time when everybody else around the world is trying hard to. Is there something about them that makes them unique?

I believe we are all fundamentally the same: we all want a better life for ourselves and our children. The Chinese are no exception. But unlike some other countries, they are still emerging from an era of great isolation and deprivation. Take, for example, Li Luyuan, one of the women whose story I tell in the book. She comes from a poor family of watermelon farmers in eastern China, but dreams of a job as a saleswoman, far from the life her parents live. She is willing to sacrifice everything - a steady income as a factory worker, a social life with her friends, and a space in a factory dormitory - to realise that goal.

With a population as large as theirs, what makes them so confident about their economy? In the current scenario, inflation fears are heard everywhere.

Most Chinese are optimistic about the direction in which their country is moving. But they, too, are paying more for their food, and thousands of factories are closing down in China because of inflation. In The China Price, I tell the story of Sam Chan, a towel factory manager in Hunan, a rural province in central China.

Sam estimated that he had three to five years before his factory would no longer be competitive because of the rising cost of yarn and inflation in workers' wages. Eighteen months later, just as The China Price was being published, he closed his factory. Inflation is affecting China as profoundly as any other country.

At the end of your investigation which traces appetite for goods to veritable sweatshops being run behind `model' factories: what have you managed to conclude? Is there a space for another `China'?

I believe that China has run out of road with its low-cost labour strategy. The China price is rising, and this presents an opportunity for other countries, especially India, to win more of the export processing business. But any other country that hooks deeply into the global supply chain, particularly in labour-intensive consumer goods, will face the same pressures from multinationals to continually lower prices. If they are not careful, these countries will pay the same price - socially, environmentally - as China has.

D. MURALI

KUMAR SHANKAR ROY

(This article was published in the Business Line print edition dated August 7, 2008)
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