China on the brink of huge social changes

By Paul Lin 林保華
Monday, Jun 14, 2010, Page 8

Looking at the employee suicides at Hon Hai-owned Foxconn Technology Group’s plant in Shenzhen, China, as a mere labor dispute is superficial. It is easy to see that Hon Hai chairman Terry Gou (郭台銘) is a visionary entrepreneur from his response to the events. In one week, he raised workers’ salaries twice — a total of 122 percent.

The raise satisfied workers, stunned competitors and forced the Chinese government to consider the long-term impacts of the decision on China’s development.

The first of these is that the working conditions of Chinese workers will greatly improve and they will receive more respect. The fact that the first move was made by a Taiwanese company instead of a state-owned Chinese enterprise will improve the image of Taiwanese businesspeople. Although under pressure to act, a Taiwanese company responded faster and more effectively to social pressure than the Chinese government.

Second, the salary increase is likely to trigger a reaction among workers throughout China and force other enterprises to follow in Foxconn’s footsteps. The Chinese government will not have any good reason to suppress such a reaction and the awareness among workers that they must fight for their rights will greatly increase. In other words, unless factory party committees and labor unions do not get on board with the rapidly changing environment, they will lose support quickly.

Third, increased worker income could help the Chinese government to meet its goal of stimulating domestic demand. Rising personnel costs will eliminate weaker companies, which will force structural economic reform. It will also force some foreign investors to leave China and cause potential investors to think twice before opening factories there, which will affect economic growth.

Finally, the Chinese government finds itself in an awkward position. It will be forced to welcome pay raises offered by foreign companies, even though that will hurt the interests of “red compradors,” intermediaries who facilitate government contacts. In addition, growing awareness of human rights among workers is bound to worry the government. Social movements are certain to increase in future, but is the Chinese Communist Party (CCP) able to reform itself?

The Foxconn suicides have raised disturbing legal issues that may never be resolved. Will its competitors stop trying to bring the company down?

China’s central and local governments and various interest groups continue to wrangle over the Foxconn incident. However, there will certainly be changes to China’s development model. In the worst case scenario, a CCP too enamored of its power and privilege will refuse to reform. China would then become a bloody battleground where civilians and officials fight each other. In such a situation Taiwanese businesspeople would come under more pressure and many would possibly return to Taiwan. For this reason, it is important that President Ma Ying-jeou’s (馬英九) administration does not remain indifferent. Rather than help China, it should instead try to do the following:

First, it should ensure Taiwanese businesspeople are able to return safely to Taiwan without the Chinese government taking over their businesses.

It should also create a better investment environment to help returning businesspeople start anew and take a fresh look at controversial foreign worker policies that could hinder the growth of Taiwanese industries.

Finally, Taipei should be very cautious, as China is on the verge of tremendous political and economic change, and avoid rushing into an economic cooperation framework agreement.


Paul Lin is a Taipei-based political commentator.


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