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Labor conditions over rising RMB value
Gu Yuan
11/6/2003

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China’s global dumping of industrial products has created an urgent sense of crisis among industrialized nations. These nations, suffering from economic slowdown, have seen large numbers of jobs flowing to China. The lost jobs, in turn, have resulted in products flooding back to crush domestic competitors and worsen already depressed economies.

Nations all over the world blame the “Made in China” panic on the long-term self-devaluation of the RMB, also known as the Yuan, and have called on China to adjust its exchange rate. Yet there is still no sign of RMB exchange rate adjustments, with the current exchange rate 8.27 Yuan to the US Dollar. These nations have lost their patience and have ganged up to force China to float its exchange rate. The pressure is increasing for China to increase the value of the Yuan.

Is the RMB excessively undervalued? Does an undervalued RMB cause Chinese product dumping? These are only partly true. The real reason for cheap Chinese exports is low labor costs.

Data from the National Statistical Bureau in China shows that in 2002 there were 737 million employees in the country, which is 56.7% of the 1.3 billion total population, with a formally reported unemployment rate of 4%. This is only a grim peek into the Chinese labor market. With the deepening of economic reform, the labor market is steadily worsening as urban unemployment balloons. Ultra-low pay and ultra-high risk professions have become the last-ditch choice of many workers. In 1994, China introduced the minimum wage system, with wages differing by region. By 2002, the minimum hourly wages were 1.8 Yuan in Hebei Province, 1.79 Yuan in Shanxi Province,1.64 Yuan in Jilin Province, 3.9 Yuan in Jiangsu Province, 4.7 Yuan in Zhejiang Province, 2.24 Yuan in Jiangxi Province, 4.7 Yuan in Qingdao City, 3.43 Yuan in Shenzhen City, 4.5 Yuan in Chongqing City, 5 Yuan in Dalian City, and 4 Yuan in Chengdu City. The labor cost at this level gives Chinese products an absolute superiority in competing with those from countries with higher social spending in Europe and North America. These wages may be lower than the cost of keeping slaves in the US before the Civil War.

A slumping labor market in itself is not so terrible. The terrible thing is that Chinese workers are paid so little that they do not have any workplace safety assurance. At the beginning of this year, the CCTV program “News Crisscross” reported a chilling story on the “hardware capital” of China, Yongkang County in Zhejiang Province. In a study of over 7,000 hardware manufacturers, it was found that more than one thousand workers lose their fingers in industrial accidents each year. Some victims were nominally compensated, but others were forced to resign without any compensation. The rest of their lives will be filled with the mental burden of simply trying to survive.

Does anyone know how many of the Chinese products sweeping the world market are made by workers with broken fingers?

Compared to factories that break fingers, the mining industry in China is even more gruesome, with explosions and collapses occurring every few days. Between August 11 and 18 alone, there were three gas explosions with 97 miners dead and one missing in Shanxi, a province with a record number of mining accidents. Mining accidents in China kill over 5,000 people in China per year, but no officials have ever been held accountable for the mayhem. When the new leaders Hu Jintao and Wen Jiabao ran into the SARS crisis, which threatened the health of top Chinese leadership figures, they earned a wave of praise for introducing resolute measures to combat the epidemic, such as firing nonperforming health officials, pushing through new laws, and rapidly building a hermetically sealed Tangshan Hospital. In contrast, Hu and Wen did absolutely nothing to address mining accidents. The regime that only cares about lives of those at the top and ignores the dead bodies piling up at the bottom has made China famous for man-made disasters with numerous mining accidents, firework factory explosions, fires, medical accidents such as large-scale AIDS infections spread by selling blood, and factories full of workers with broken-fingers. Even if they don’t make world headlines, these accidents still deserve to be front-page news.

Products made in China cost only a fraction of their counterparts made in the US largely because of slave-like wages, absence of labor safety rules, and a nonexistent health safety network. Under the pretense of feeding and clothing the Chinese people and aiming for a well-to-do society, the Chinese government has turned China, with a population of 1.3 billion, into a gigantic sweatshop for the world. As long as they can collect taxes, the government has lowered the safety threshold to none. Ignoring or window dressing basic human rights and the welfare of workers lead to the death of 41 primary school pupils and teachers in a Jiangxi fireworks plant explosion in 2001. The primary school had been manufacturing powerful fireworks for three years before the tragedy occurred. It was not a case of negligence in safety inspection, but a case of no safety standards at all.

Since the accident, explosions large and small have occurred regularly in Chinese fireworks factories. In July of this year, a blast in Minhou County, Fujian province claimed more lives. The fireworks industry in China is still booming despite all these tragic explosions and the products are flooding the world market. Almost all the fireworks used in July 4th celebrations in the US come from China. How many among the cheering and celebrating crowds know Chinese workers lost their lives and their health making the beautiful fireworks? Would government-controlled unions in China ever fight for basic human rights and welfare for workers?

The Chinese economy has been growing almost 10% annually and Chinese products have flooded the world. In 2002, annual per capita take-home income is 7,703 Yuan in urban areas and 2,476 Yuan in rural areas. The working and living environment, education reach, health, and average income in China are still at the bottom of the world. The vast majority of Chinese have hardly benefited from a booming economy. On the contrary, the “newly industrialized” China is full of suicides of those who could not afford school tuition, patients who died for failing to pay hospitals for service ahead of time, workers who jumped from high-rise buildings to demand back pay, forced demolitions of homes, and baby girls abandoned or sold abroad. The economic development in China has failed to benefit the citizens, but has succeeded in fattening numerous corrupt officials. The lack of democracy in China is what separates it from other countries.

US Secretary of the Treasury John Snow visited China not long ago to express the US administration’s concern about the dangerously undervalued RMB. Yet how much would appreciating the Yuan help? Would a rising RMB under pressure really solve the world economic crisis caused by the dumping of cheap Chinese products? No. The low wages and horrendous working conditions of Chinese workers are the real culprit that is damaging the world economy, because workers in welfare states simply cannot hope to compete with their Chinese colleagues, whose lives are not valued. Therefore, instead of forcing the Chinese government to appreciate their currency, we should demand that they treat citizens humanely and reduce the enormous benefits gap that exists between their workers and those in foreign countries.


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