"Rethinking Globalization" Term Paper by Helena Ng
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Issue:
"Is Globalization with Establishments of Transnational
Corporation a Blessing or a Curse to China?"
~ An analysis through two transnational corporations in the light of
Neoliberalism ~
Name:
Ng Pui Yee, Helena
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Preface
The purpose of writing this paper is two folded. This paper not only serves as a term
paper for the course 'Rethinking Globalization', but is also customized as a set of teaching
material for AL geography which I am currently teaching.
The most distinctive features of this term paper are as follows:
1.
I collected primary data from the managerial staff of the two firms through face-toface interviews. They are my former students who are now working in a large scale
textile and clothing firm in Huizhou and paper processing firm in Shenzhen
respectively.
2.
All maps in this term paper showing global pattern of raw material procurement and
international markets of products are all plotted by the writer using Geographic
Information Systems (GIS) specifically for this term paper for MALS.
3.
I adopted an 'Enquiry Approach' in the study. The title is a debatable issue who
does not have a definite right or wrong answer. Then I designed a concept map
plotting all the major ideas before putting the details into paragraphs. This is the
way that we have to conduct Liberal Studies in secondary school setting.
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Table of Contents
1.
Introduction
4
2.
Flow Chart and Concept Map
5
3.
What is meant by "Globalization"?
7
4.
What is meant by "Transnational Corporation"?
8
5.
How did China open up to the outside world since 1980s?
9
6.
Case Study 1: A Textile and Garment Enterprise in Huizhou
10
7.
Analysis in the light of Neoliberalism
12
8.
Case Study 2: A Paper Processing Company in Shenzhen
17
9.
Analysis in the light of Neoliberalism
18
10.
Impacts of Transnational Corporations brought to China
20
11.
Conclusion
23
12.
Afterthoughts
25
13.
References
26
14.
Appendices
27
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1
Introduction
This paper attempts to analyse the impacts of globalization on China in terms of
economic development, environmental protection and labour affair with the
establishment of Transnational Corporations (TNC). The paper is divided into the
following parts. The first part covers the basic concepts of globalization, transnational
corporations and Neoliberalism contributed by the giant of globalization studies David
Harvey. The second part is an analysis of the two manufacturing industries in Shenzhen.
From the operation of the enterprises and the problems that are revealed, the writer will
examine how far Neoliberalism is valid in explaining the situations in China. The third
part closely examines whether globalization is a curse or a blessing to China. The
positive impacts and negative impacts of globalization would be discussed with regard to
environmental, economic and social perspectives. A concluding statement is made at the
end of the essay.
The framework of my study is visualized through the following flow chart and concept
map.
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Figure 1: Flow Chart Showing the Approach of My Study
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What is meant by 'Globalization'?
According to the giant in globalization studies David Harvey, the most important concept
is the time and space compression. "…It is the shrinking of the world to a 'global village',
virtual disappearance of space through time."
Figure 3: Space Time Compression in Globalization
In Conditions of Postmodernity, 1989, p.241
As summarized by Professor Poon Ngai, "…the elements of globalization include
transborder capital, labour, management, news, images, and data flow." Also, "… the
most common features are the transnationality of production, commerce, consumption,
socio-cultural reproduction and politics…other features include increased instability of
market, organizational decentralization of firms, flexibility of production, privatization of
public finance, and increased social inequality and social exclusion…In short,
globalization is a compression of time and space which privileges the capitalist
economies over non-capitalist and socialist societies."
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According to a popular reference book "Human Geography" written by Paul Knox,
globalization is interpreted as 'interconnectedness of different parts of the world through
common processes of economic, environmental, political, and cultural change.'
4
What is meant by the term "transnational corporations"?
Transnational corporations are defined as "companies that participate not only in
international trade but also in production, manufacturing, and sales operations in several
countries." (P. Knox, Human Geography, 2004) In other words, a transnational
corporation is one that operates in many different countries regardless of national
boundaries. The headquarters and main factory are usually located in economically more
developed country, whereas the branch factories were in economically less developed
countries such as China. The establishments of transnational corporations in less
developed countries facilitate the globalization process.
Developed Country
Developing Country
Transnational Corporation
(people, knowledge/skills, equipment, goods)
Figure 4: Transnational Corporations control transfer of technology, capital and skills
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How did China open up to the outside world since 1980s?
Described as one of the major promoters of Neoliberalism, Den Xiaoping took the 1st
steps to liberalize the controlled economy 1978. (M. Szeto, power point 2 slide 35)
Since 1980, China has established five Special Economic Zones so as to better effect
reform and stimulate economic growth. Taking Shenzhen as an example, it now
integrates science and industry with trade, and benefit from preferential policies and
special economic managerial systems intended to facilitate exports.
Figure 5: Recent Industrial Development in China, P. Knox, Human Geography, p.580
China is now called 'world factory' which means most of the world's industrial
productions are carried out in China. "The repositioning of China as a 'world factory' in
the new international division of labour is without doubt a project of global capital, which
provides the bedrock for nurturing a new Chinese working class in general, and a new
worker-subject, the Chinese dagongmei (打工妺), in particular." (Lee 1995, 1998; Jacka
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1998; Pun 1999; Xu 2000). It provides hundreds of thousands of jobs in secondary
economic activities. Lots of Chinese, no matter male or female, have shifted their
occupation from a farming society to an industrial world.
For choice of locations of transnational corporation, labour supply and availability of
cheap and abundant land are main considerations for labour-intensive industries and
those which needs extensive area of flat land for factory units. "Cheap labour and low
prices for land are not the only reasons for the current relocation of transnational capital
to China. Diligent, well-educated Chinese women workers who are willing to toil for
twelve hours each day, who are suitable for just-in-time global production, and who are
potential consumers for global products are all factors that contribute to tempting
transnational capital to relocate to China." (Croll 1995; Davis 2000; Chen et al. 2001);
Pun 2003; Yan 2003).
6
Transnational Corporation Case 1: A Textile and Garment Enterprise in
Huizhou (惠州), Guangdong
Interviewee:
Mr. Kelvin Chin, Manager, responsible for the business
order from major clients Espirit and Polo Ralph Lauren.
"During peak season, we have to work for more than twelve hours a day, to make sure the production is in
time." Kelvin said.
Figure 6
Figure 7: Kelvin was the team leader of Pearl River Delta Field Study when he was studying in Form 6
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Name of the enterprise:
Nam Suen Group (南旋集團, 惠陽南旋毛織廠有限公司)
Investor:
Invested by Hong Kong investors in 1990
Capital:
US$ 67 million
Number of employees:
14,000. Most of them are workers from different parts of
China. The managerial staff is from Hong Kong for
supervision of daily production and management.
Area of the factory:
360,000 sq. metres (equivalent to a total area of 90 standard
HK secondary schools)
Main products:
Annual production reaches 30 million pieces. Processing of
wool and woolly apparel.
Market:
International markets in the US, Japan and Europe. Clients
include Espirit, NEXT, UNIQLO, Tommy Hilfiger, DKNY,
Marks & Spencer, Fred Perry and Polo Ralph Lauren.
Technology:
The production is mostly automatic with the use of
advanced machinery. The number of woolly apparel
making machines is the largest among Asia. Some parts of
the apparel have to be handmade by workers.
Machinery:
From Japan and Germany
Scale of production:
Eight production lines, 2000 Shima and Stoll automated
knitting machines
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Head office:
In Hong Kong, responsible for sales and marketing,
accounting, shipment and merchandizing of raw materials.
7
Analysis of this transnational corporation in the light of Neoliberalism
According to Dr. Mirana Szeto, the basic concepts of Neoliberalism includes the
promotion of the global exploitation of the world's resources namely cheap labour, raw
materials and markets in the most efficient way possible.
The factory typically displayed the characteristics of Neoliberalism. Obviously, the
procurement of raw materials, machinery and market of the products made by Nan Suen
show the global flow of materials, capital and finished products. The following map is
the graphically presentation of the global pattern of raw material procurement and
distribution of products.
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7.1
Are the impacts brought to Mainland China positive or negative in terms of
economic and social development?
7.1.1 Positive economic impacts:
The enterprise typically belongs to labour-intensive industry. With its large scale of
operation offering 14,000 job opportunities, the enterprise boosts up the local economy of
a whole village Shui Hou (水口鎮). It helps the whole village to transform from a
traditional agricultural community to an industrial town. Within the premises, there are
supermarkets, post office, hair saloon, restaurants, sports ground and even library.
Other types of industrial production such as Opal (奧寶化粧品廠) have been set up in the
same village recently, to take advantage of the existing infrastructure. This demonstrates
the attraction of agglomeration economy.
7.1.2 Transformation of local community
According to Kelvin's observation through working for the firm for years, the followings
are found to be true in Shui Kou Town. "The local residents suddenly became rich, with
their official identity changed from rural people to urban citizens and, with their
economic status or class position totally altered." (Prof. Pun Ngai, Globalization and
China: Shenzhen, slide 26) "The living standard of the village was comparatively higher
than any other cities in China. Every family was well furnished with electric appliances,
a color TV set, hifi disc and air-conditioners. (Prof. Pun Ngai, Globalization and China:
Shenzhen, slide 28)
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These statements are applicable to the people of Weizhou in which thousands of people
are now working in secondary economic sector. However, they endure very unfavorable
working conditions and even resulted in death and injury in a large scale conflict in June
2006.
7.1.3 Negative economic and social impacts
On June 25 2006, a serious confrontation between the workers and the employer occurred
in the premise, resulting in at least 2 deaths and 63 injured. (see appendix A). It is
reported as the most serious conflict between the employees and employers in Mainland
in recent years. All production lines were suspended for a few days.
The incident was extensively reported by different media agencies. (see appendix B).
After the dispute, the Director Mr. T.C. Wong promised the workers to have a pay rise of
20% and improve the living condition of the workers and the way of delivering wage.
The dispute causing death and massive injuries is indeed a social trauma. The violence is
a result of oppression of the Chinese workers by global capitalism, producing particular
labour exploitation along lines of class and rural-urban disparity.
The followings are some unfavourable working conditions revealed by the workers.
Poverty Wages
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Workers cannot object to or refuse working overtime. The overtime compensation rate is
the same on Saturdays and Sundays. There is also confusion on calculating overtime
compensation rate. This violates the Chinese Labour Law by underpaying workers.
Extremely long working hour
Workers have no holiday for two weeks when production orders are huge. Workers have
to hit a fixed production quota everyday no matter how many hours it takes. It is not
uncommon to find workers working over 12 hours every day. This is in violation of
Chinese Labour Law on working hours, guaranteeing at least one day off a week.
Dormitory
10-16 workers stayed in a room which housed 8 double-bunk beds. Ventilation in the
room was poor. No shower was available in the dormitory and workers could take a 'bath'
with a bucket of water.
7.2
How can the workers economically and socially benefit more from working
for the transnational corporations?
Under the prevalence of Neoliberalism with labour exploitation in China, strong
recommendations on protecting the workers of China are made as follows: There should
be effective governance to ensure that the firms comply to the Chinese Labour Law.
Regular inspection of the labour working environment and dormitory is needed. Sudden
inspection should also be implemented. Secondly, there is a need to establish a
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monitoring mechanism to ensure that workers' rights are protected. Workers should be
able to air their opinion freely and make decision in such a monitoring system.
The improvement of labours' working condition is by no means easy to be done. Joint
effort should be made by different stakeholders including the capitalist, the workers, the
government, the NGOs such as SACOM and even the consumers.
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8
Transnational Corporation Case 2: A paper processing company in
Shenzhen
Interviewee:
Mr. Ronald Yim, Manager, is responsible for daily
supervision of staff, merchandizing and sales of products
Figure 7
"I have to socialize with the clients by drinking liquor in dinner and even bringing them to nightclub…"
Ronald said.
Name of the enterprise:
Shing Cheong Paper (Shen Zhen) Ltd. (成昌紙業)
Location :
Shenzhen
Value of stock:
About ¥200 - 300 million
Workers (民工):
From Guangdong and other provinces such as Hunan (湖
南), Hubei (湖
北)
Figure 9: Office in HK offers producer services such
as sales & marketing and accounting.
~ photo taken by Helena Ng in August 8, 2006 ~
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9
Analysis:
9.1
How does the operation of the firm displays the elements of globalization?
Similar to the first case study, there is a global pattern of raw material procurement and
distribution of products.
Capital:
Hong Kong entrepreneurs
Raw materials:
1.
Paper pulp from Indonesia and Finland.
Paper pulp from trees that are planted in Shangdong under
afforestation program
2.
Semi-finished paper product from Japan, South Korea, and
Mainland China.
Market:
The printers in Mainland making up 95% of the total sales
Producer services:
Merchandizing and accounting services are all carried out in HK
headquarters.
Machinery:
The state-of-art paper making machineries are from Germany and
Finland.
Client:
World's largest publishers including Oxford University Press,
Longman Publishing Company, Macmillan, Bookbuilder and
Phoenix Publishing Company.
9.2
How far can the workers economically benefit from working in this firm?
According to the information given by Ronald, the average monthly wage of the workers
ranges from ¥700-800 per month. The workers are not paid at the end of the month.
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Instead, there is one-month delay of payment (押糧). Under this policy, it is less likely
for the workers to resign because they will lose a month of labour wage. As well, there is
not much safety device for the workers. There have been accidents of workers who cut
their fingers when using the chopping machines for paper.
9.3
What are the potential labour problem revealed?
It seems that unskilled or semi-skilled labour are unlimited in supply because of huge
population size of China. However, in recent years, the company suffers from a shortage
of labour. There is a phenomenon of northern shift of paper firms in recent years. For
instance, large paper plants including Sunpaper Group and Goldeast Paper have been
established in Shandong Province because of favourable locational factors.
As more and more firms are established in Northern part of China, the firms in Shenzhen,
the southernmost of the country, are no longer attractive to the some workers from
northern provinces. They have to spend long travelling time and costly transportation fee
to go home for festivals.
10
What are the impacts of such firms brought to Mainland China in terms of
economic development and environmental protection?
10.1
Economic Impacts
10.1.1 Positive economic impacts:
Firstly, the firm offers lots of job opportunities for semi-skilled and non-skilled labour.
Such firms absorbed much of the excessive labour force from primary sectors such as
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agriculture and fishery. The second impact is the economic linkage effects. Related
economic activities such as retailing also prosper because of increased income of workers.
The consumption power of local people has increased significantly. They spend money
on daily necessities, as well as other goods and services such as fashion, cosmetics,
electronic appliances and entertainment.
10.1.2 Negative economic impacts:
Local labour force is poorly paid compared to the huge profit that the firm earns annually.
With wages of several hundred yuan per month, the workers have to work for at least ten
hours every day. Most of the profits enter the pockets of the capitalists. There is an
outflow of wealth.
In the rise of Neoliberal Theory, there is a viewpoint of 'widening global rich-poor gap
even further' in the process of globalization. (Mirana Szeto, The Globalization of
Neoliberalism, slide 42) The operation of the paper processing firm which results in great
profit gain by the investor clearly demonstrates the polarization of wealth distribution.
10.1.3 Negative economic implications:
The demand of paper in Mainland China is ever increasing during the past decade.
However, the supply of paper is so great that it exceeds the demand of local market. For
example, the production of paper in Dongguan only reaches three million tonnes per year.
For those products which are sold in local market, the enterprise has to pay revenue tax to
the Chinese Government. However, for those products which are for export, the
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government does not receive tax from the enterprise. According to regulations, Chinese
Government even provides subsidy to exported products. In this aspect, Chinese
Government suffers from economic loss instead of reaping the economic gain from the
enterprises.
10.2
Environmental Impacts
10.2.1 Environmental Degradation
Taking paper processing plant as an example, the first impact is air pollution with the
emission of pollutants into the atmosphere. The source of pollutants is mainly from the
combustion of fossil fuels. The consumption of electricity for the paper processing is
immense. The yearly electricity bill reaches two million yuan annually.
Apart from the case study I cited, numerous industrial productions in Pearl River Delta
account for the worsening air quality in Guangdong and the adjacent areas. Guangzhou
has become one of the 10 worst-polluted cities in the world (CEN, 1997). Air quality is
directly related to energy consumption patterns.
The environmental impact of burning coal, that is particle and carbon dioxide emissions,
and acid deposition, have local, regional and global effects. Locally, particle emissions
contribute to respiratory health problems. In the long run, such effects have the potential
to contribute to heightened international tensions (Stranks and Strizzi, 1996).
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Furthermore, there is an exponential rise in nitrogen oxides, sulphur oxides and carbon
dioxides emissions due to increase in number of motor vehicles and industries in the
province. These pollutants lead to acid rain and photochemical smog, which adversely
affect crop yields.
Based on health concerns, sulfur dioxide has considered as health irritants. It interacts in
the atmosphere to form sulfate aerosols, which may be transported long distances through
the air. Most sulfate aerosols are particles that can be inhaled. It would increase morbidity
and mortality from lung disorders, such as asthma and bronchitis. Nitrogen oxides react
with volatile organic compounds to form ozone. Ozone impacts on human health include
a number of mortality risks associated with lung disorders. The most hazard effect will be
lung-cancer.
The total quantity of industrial waste residue in the Delta area in 1994 was about 6
million tonnes. Basically large amounts of municipal solid wastes in many cities in China
were transported to the suburban districts and dumped into the low-lying land directly
without any controlled disposal.
To sum up, the qualities of air and water have worsened with the fast industrial
development in China over the past decades.
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A concluding statement of the issue:
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"Is globalization with establishments of transnational corporation a blessing
or a curse to China?"
The act of turning China into a world factory, with establishments of so many
transnational corporations in her territory, certainly generates wealth and facilitate
economic development. Though in certain situations China is not economically
beneficial with the operation of enterprises, the overall economic gain is greater than
economic loss. It is logical to conclude that globalization is a blessing to China
economically.
However, with worsening air quality and degradation of hydrologic environment, as well
as the solid waste disposal with improper management, China has done little to alleviate
the problems. Transnational corporations bring in huge amount of capital and high
technology for industrial production, making quality manufactured products in good
prices available in the world market. Yet, such industrial production at the same time is
criticized as the process of export of pollution from developed nations to China. While
the developed nations are pleased with pollution 'not in their backyard', China is suffering
from serious environmental degradation with depletion of resources and worsening
pollution problems. Globalization, in the context of fast industrial development, is a curse
to China with regard to environmental quality.
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Afterthoughts
It seems like yesterday when I taught the topic of globalization in AL Geography class
and led a group of students to Pearl River Delta for field studies. Today the students
whom I taught are now working in different enterprises in Pearl River Delta. Through
meetings with those graduates, I collected valuable first hand information about the
operation of the enterprises they are currently working for. Their practical working
experiences and observation of the operation of the firms provide me new insights of the
impacts of globalization on Mainland China in terms of economic development,
environmental protection and labour problems.
I cherish the opportunity to re-establish connections with my graduates who are
contributing themselves physically and intellectually in enterprises in Pearl River Delta.
Helena Ng
August, 2006 at HKUST
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Acknowledgements:
南昌紙業有限公司
南旋集團有限公司
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References:
1. Hardt, Michael & Negri, Antonio, Empire, Cambridge, Massachusetts: Harvard
University Press, 2000
2. Harvey, David, A Brief History of Neoliberalism, Oxford University Press, 2005
3. Harvey, David, The New Imperialism, Oxford University Press, 2005
4. Knox, Paul, Human Geography: Places and Regions in Global Context, Third
Edition, Prentice Hall, 2004
5. Pun Ngai 2005. Made in China: Women Factory Workers in a Global Workplace.
6. Waugh, David, Geography: An Integrated Approach, Third Edition, Nelson Thornes,
2002