Made in China October 20, 2003 Print this article Email to a friend Get cracking: Chinese workers open macadamia nuts by hand. Picture: Supplied Next time you buy something - anything - chances are it came from a factory in China. It may have been nice and cheap, but at what cost to Australian jobs? Hamish McDonald investigates. When Australian mums and dads buy their kids a Paddle Pop or Calippo Frost at the beach this summer, few will bother to read the fine print on the wrapper. If they do they will see, close to the seam or under a fold, the words "Made in China". For the past three years, all icy poles sold under the venerable Australian brand Streets have been made in a Shanghai factory. Streets’s multinational owner, the Anglo-Dutch food and detergent giant Unilever, says no jobs were lost in the move and claims it was difficult and expensive to produce such "seasonal innovations" in Australia. Industry sources in China say Streets has cut costs on these icy poles by a staggering 40 per cent, even allowing for refrigerated shipping to Australia. For the 200 workers still making Streets ice-cream at the Australian Unilever plant in Minto, in Sydney’s south-west, and another 60 workers at the Norco factory in Lismore making Streets brands under contract, losing their jobs to China is a constant threat, according to the Australian Manufacturing Workers Union. "They’re told that if they don’t become more competitive in respect of labour costs, the company will have to look at sourcing their ice-cream elsewhere," says AMWU organiser Jennifer Dowell. advertisement But who could compete with China on labour costs? The AMWU has a log of steady job losses in the past three years, many to China: 50 from Rheem, 900 from Sunbeam, nearly 800 from Email factories, hundreds from lift-makers Otis and Schindler, more than 400 from railway rolling stock makers Clyde Engineering and Goninans, and 60 from Barbeques Galore. Unions say metalworking industries are in such decline that Australian technical colleges are no longer teaching the skills for them. Chinese competition is now advertisement hitting the car component industry, with potentially devastating job losses ahead for Victoria and South Australia. Even Mexico, where labour is relatively cheap, says it has lost 218,000 jobs to China since 2001, and more are still leaving. More than a year out from the United States presidential election, China is fast becoming the whipping boy for the "jobless recovery" in the American economy, and the European Union president, Romano Prodi, worries aloud about the "de-industrialisation of Europe". On a recent trip to Beijing, Australian Prime Minister John Howard was careful not to buy into this argument, playing bilateral trade as a "win-win" deal, with Australians getting cheap goods from China while selling ever-larger volumes of raw materials. He is certain to play on this theme again when the Chinese president, Hu Jintao, visits Australia this week. China is enjoying a strong surplus in its dealings with Australia — it exports $14 billion to Australia, while Australia’s exports to China are about $9 billion. Even Paddle Pops are now made in China. Picture: Quentin Jones To understand why factory jobs are moving to China, look to Futian, a small port-city on the steamy coast of China’s Fujian province. In the Guoshi Footwear factory that makes four million pairs of Nike and Adidas look-alike running shoes a year, Zhang Ning, a 22-year-old woman from an impoverished village far away in mountainous Sichuan, is happy to be earning 800 yuan ($A141) a month, plus three meals a day and a bed in a cramped company dormitory. Guo Qidi, the factory manager and a member of the family that owns it, says his 2000 mostly migrant workers are happy to work nine days straight, with just a single day off, to earn 40 yuan a day overtime. His Sandic brand shoes ship out for around 50 yuan or $8.80 each, about half the cost of the Nike runners pouring out of the American giant’s tightly guarded factory down the road. Further south in Shekou, three Australians have turned their tiny catering equipment business in their home town of Geelong into a China-based manufacturer called Volume Tableware, with sales to Europe as well as Australia, and a workforce of 270. Brothers Adam and Dean Montgomery and Aaron Keating were dissatisfied with the quality of porcelain they were importing from China, so they set up a joint venture five years ago with a Chinese partner to make their own. A year later they went solo and have since set up their own plant making electric dish warmers and other restaurant equipment, run by 27-year-old Keating. The operation is sucking in orders from around the world. On the floor of Volume’s showroom are designs for a range of souvenir pottery for an Irish distributor, which recently closed down its own plant in Galway that had employed 150 people. Volume has also just bought up production lines from two British table glassware manufacturers who went out of business; they will be installed in a new 400-worker factory. For $US9 million, says Dean Montgomery, 30, they will set up a glass factory that would otherwise cost $US45 million to build with new equipment. The average pay for production line workers is 800 yuan ($A141) a month, plus a dormitory bed and three meals a day, with managers getting between 1500 and 3000 yuan a month. Casual workers can be swung into the operation for 30 yuan a day flat. These are not unskilled workers, Montgomery says, but have up to eight years experience in the industry. "When you see them put a line on a plate you know there is nothing unskilled about those people," he says. Since China made its abrupt switch from a state-directed economy in 1978, it has attracted a staggering 420,000 foreign enterprises to the country, turning once-torpid towns such as Futian into cities with office towers, trade exposition halls, garish entertainment precincts, shopping malls, their own airports and freeway links, with factories sprawling across reclaimed marshland, paddy fields and fishponds. A seamless stream of container trucks funnels into new container ports such as Yantian on the Pearl River, where bulldozers are levelling hills to clear more stacking space for cargo. And always, out of deeply impoverished provinces such as Sichuan, come tens of millions of young job seekers ready to work for even less than the 700 yuan official minimum monthly wage. Nor does the foreign investment flow show much sign of slackening. The South Korean electronics giant, Samsung, recently announced it was shifting all its personal computer production to China, following a trend set by Japanese and Korean makers of colour TVs and DVD players. Like these consumer electronics firms, foreign car makers are rushing to meet demand from China’s estimated 200 million middle-class consumers who have recently gained access to credit cards and car finance from Chinese banks. China’s manufacturing explosion is not all negative for other low-cost rivals. Its huge appetite for high-level components such as semiconductors is benefitting existing producers in the Philippines and Malaysia. This year’s sudden epidemic of the SARS respiratory virus has also reminded everyone of the risk involved, not just from disease and disaster, but political convulsion. "It’s been a wake-up call for industry," says Volume’s Dean Montgomery. "The big investment banks are advising their clients to have an alternative manufacturing base in case China gets shut down." Even so, much of the new investment that would have provided jobs in Java and Luzon, for instance, is now going to China, and remaining factory work in rich countries such as Australia is under more threat. Even high-tech producers such as US bearings maker Timken, which moved into China in the 1990s at the same time it shut its Ballarat factory, keeps a wary eye on its 3000 Chinese counterparts, and not just for fakes of their own products — a constant worry for foreign investors. "We see them coming up the quality curve as well," says Timken’s Beijing representative, Jim Gresh. Whatever the issues, though, none of the simplistic remedies being touted by Western politicians — a float of China’s currency, the removal of subsidies and tax breaks for exporters, or the domestic market openings promised under China’s World Trade Organisation membership — can do away with the fact that Zhang Ning and scores of millions like her are happy to work in factories for 800 yuan a month. If the price is right It is called the "Milan", sells through a Porsche dealership, and is claimed to be the topselling motor scooter in Australia. This fashionable, retro-styled vehicle also happens to be made in China. "I think people are price-sensitive and they couldn’t care less," says Vmoto dealer Paul Davies, who believes the scooter has been so successful because it "looks Italian", but costs only $2000 to $2500. Honda has also introduced a Chinese-built model, the Today 50. A decade ago, University of Wollongong researchers predicted the typical Australian shopper’s "strong negative bias" against Chinese-made clothing — because of perceived inferior quality, poor fit, and less fashionable styles — meant the biggest offshore competition for local garment makers would come from Europe. It seems consumer sentiment has changed. China now supplies 68 per cent of all imported clothing and footwear sold in Australia; half of all imported toys and sporting goods; one-third of imported furniture; 61 per cent of travel goods and handbags; and 23 per cent of household equipment, according to a report this year by global banking group ABN-Amro. "It was originally an issue for consumers, but today the fact is most of your clothes and shoes are made there," says Felix Vogelrest, whose luggage company, Paklite, shifted manufacture from Sydney to a Chinese contract factory in 1989. A stroll through any department store reveals well-known brands, from Kambrook kitchen appliances to Samsonite luggage, making up these figures. In the past five years, sales of Chinese-made lounges have tripled and now match those from Italy, according to the Bureau of Statistics. Even the Swedish furniture giant IKEA lists China as its top supplier. And while still synonymous with cheap T-shirts, Made in China is increasingly turning up in unexpected — and expensive — places. China is the second-largest supplier of computers (15 per cent) to Australia, and the third-biggest source of motorcycles (11 per cent), says ABN-Amro. Greg Elliott, professor of management at the Macquarie Graduate School of Management, is an expert in the marketing field of "consumer ethnocentrism" — why shoppers look at country of origin labels, and which they prefer. "If it was a choice between China and Japan, they would choose Japan," Elliott says. However, so long as an import is of "reasonable quality", these preferences fly out the window when it comes to price, particularly if you are young, well-educated and male. "The heart would say buy Australian, and might even say don’t buy Chinese, but the head would say it is all down to price."