A two week-long strike of 1,900 workers at the Honda auto parts unit in Foshan, southern China, has ignited sparks of labour activism that could alter the economic character of the world?s fastest growing economy. China, which became the factory of the world by virtue of humongous influx of foreign direct investment attracted by the country?s cheap and plentiful workforce, appears entirely different following the unprecedented strike in Honda?s Foshan facility.
The oddity of a worker?s revolt being allowed by the ?market socialist? Chinese Communist Party (CCP) to carry on unhindered for so many days, paralysing operations of a Japanese corporate giant like Honda, sticks out like a sore thumb by breaking an established pattern.
The economic miracle, which Deng Xiaoping and his successors stewarded since the 1980s, was premised on a rigidly ?disciplined? urban proletariat that migrated from the impoverished countryside for assured but low wages. It was prohibited from forming spontaneous unions in the booming industrial and special economic zones. The official All China Federation of Trade Unions (ACFTU) monopolised workspaces as the sole legitimate representative of all labourers, but invariably sided with the management in disputes.
Human rights bodies have recorded cases of ACFTU?s notorious ?yellow cap? officers themselves acting as front-line enforcers by physically intimidating Chinese workers who dared to oppose chronically depressed wages or hazardous working conditions. Alexandra Harney?s book, The China Price, produces detailed evidence of a Dickensian universe wherein two generations of the vast blue collar labour pool were exploited through coercion and lack of choice to make ?Made in China? commodities, the number one choice of Western consumers.
This regime of labour-repressive rapid industrialisation rested on Chinese exports marching out and conquering world markets, thereby accumulating trillions of dollars of foreign exchange reserves, oiling wealth creation and maintaining high employment levels. But this saga of ever-expanding export-driven growth was exposed for its weaknesses since the global economic downturn of 2008. A steep slump in Western consumption of Chinese products raised spectres in 2009 of an economy that was unsustainably structured.
As the chorus arose for a redirection of China?s growth from undependable export markets to steady and reliable domestic consumption, the CCP had to move mountains yet again in its history of social re-engineering spurts. The need of the hour was to create a domestic consumer class that would engender demand for goods and services, converting China into a ?normal? economy where greater spending by local households triggers the virtuous cycle of production, employment and profit.
Last month, US Treasury Secretary Timothy Geithner certified that China had indeed registered progress in the monumental task of ?rebalancing its economy towards domestic consumption and away from exports?. Beijing?s gargantuan stimulus package and related lending policies gave a fillip to sectors like healthcare, education and retail that boost domestic consumption.
But given the low baselines of the average Chinese worker?s wages, the only fiscally viable route to a consumption-based economic model is to promote more and more citizens into the ranks of the middle class by increasing their average incomes. The Honda workers? strike fits into this bigger scheme of an economy that is going through tremendous churning to adjust to the reality of dulled Western demand for Chinese exports. The CCP is gradually relaxing the ACFTU?s iron grip over workers? grievances for better compensation in a bid to confect the missing mass, middle class. Labour shortages as a result of demographic decline had already begun pushing wage levels upwards since 2005, but the lid on worker unrest was kept tight until the ?rebalancing? need arose.
That the CCP even permitted the Chinese media to initially cover the Honda workers? demands from the factory premises was a sign that the gates had been opened for a state-approved incline in minimum wages through hard bargaining with employers. Though the Foshan Honda strike in the industrial heartland of Guangdong province has received maximum global attention, it is noteworthy that the Chinese state has acquiesced in other recent collective actions for wage enhancement by workers at a parts factory of South Korea?s Hyundai in Beijing and in outlets of the American fast food chain, KFC, across the country.
Chinese state mouthpieces have not shied away from publicly castigating Taiwanese electronics company Foxconn?s unfair working terms, which drove 10 Chinese workers to suicide. ACFTU has even started playing the unlikely role of a champion of poorly remunerated workers. It is now singing a new ironic ex post facto tune that ?the average income of senior executives is nearly 18 times as much as the income of grassroots workers in state-owned enterprises?.
Will the Chinese economy become less competitive as a result of this concerted strategy of forcing wage hikes by pressurising corporations that had assumed the state would forever stand by them like a rock? Some capital has already deserted China for lower cost alternatives like Vietnam and Indonesia, but the CCP is gambling on retaining FDI by dangling the carrot of an enlarged Chinese domestic market pie. With huge sunk investments that have piled on for decades in China, the cost of relocating elsewhere is another factor preventing a general exodus of multinational corporations.
The controlled nature of the labour strikes thus far also leaves the CCP the option of cracking down if they spread like wildfire. Chairman Mao Zedong let ?a hundred flowers bloom? in 1956 and then restored order with lethal force a year later, after Chinese people grabbed the limited freedom to seek more profound political changes. The continued strength of the state to regulate and orchestrate society suggests that the China love story for foreign investors may not end any time soon.
The author is associate professor of world politics at the OP Jindal Global University