Eye on China: Low-paid workforce a blessing and curse

Although I have lived and worked in China for several years, there are many aspects of the tough reality of modern China I have been shielded from.

Those that specialise in business and finance easily get a rather sunny impression of China's economic performance, at least based on the headline growth figures.

That good impression is fostered by the mainly US investment banks, which produce a great deal of research on China. These banks are keen on getting the big privatisation mandates, such as for the state banking sector, so criticism tends to be muted.

Chinese people themselves tend to be reluctant to make their country look bad. Even long-standing acquaintances will rarely volunteer negative information. Because of the marked cultural and political gap between foreigners and Chinese on many levels it's easy not to press the point.

Given the need to stay on good terms with contacts, contentious topics - such as human rights, the Korean War, Chinese hatred for Japan, repression of the Falun Gong and so on - are avoided.

You might think that human rights have little to do with business. That was basically my view. If anything, I assumed that increased economic activity would automatically reduce human rights problems by increasing wealth. But a conversation at a Chinese-medicine centre in Shanghai has led me to think that is not always the case.

My physio, a young and clearly intelligent 23-year-old, had been in Shanghai for five months.

First she complimented me on my Chinese, which I ironically agreed was excellent (etiquette stipulates you have to downplay your linguistic accomplishments but it gets very tedious). Unusually, she recognised my joke and it seemed to act as a trigger on her to tell me for the next hour or so just how the underbelly of China's economy works.

She comes from a village of 200 families of Hubei province, a relatively poor, inland province, despite its proximity to the Yangtze River, a major waterway.

The Yangtze is the delta's wealth-generating highway. Provinces benefit from being close to the river, unless the local governments are particularly corrupt or incompetent, as in Hubei.

At 15 she left her impoverished rural home, like most of the kids her age, to look for work in the booming coastal province of Guangzhou.

Working in a factory on the coastal strip can be a good, safe job if you are working for a reputable Chinese or foreign employer with the proper papers. That was not her case.

Because she was under 16 years of age, she was not eligible for residence and work documents, so she was forced to work illegally. She worked for a factory owned by a small-scale Taiwanese businessman, whose strategy for being competitive extended no further than employing numerous underage girls to produce dirt-cheap computer components.

She worked 18 hours a day, including weekends, for one year. Occasionally, she would get Sunday evening off (that is, she would only work 12 hours). For her pains she earned 300 yuan ($53) per month, with an extra 1.5 yuan for overtime. The factory owner provided canteen food and overcrowded dormitories for the staff.

Although she had liberty of movement, she said that many staff at these illegal factories end up being locked inside the factories for months, often without being paid. Sometimes they only regain their freedom if they trick one of their relatives to take up their place.

One of her cousins found himself in this situation when he was offered a job in a factory via a "friend". On arrival, he got suspicious of the filthy food, high walls and locked doors. He managed to hightail it over the wall a few days later.

He was unusual in that he was a man. Usually, male factory owners prey on the weakest members of society, namely young girls.

Dragging your family down with you seems to be a terrible theme in the coastal provinces. She also told me of high-pressure sales schemes in which you are locked in a classroom and instructed on how to sell.

Naturally, your first port of call, you are told, should be your impoverished family back home. These schemes cause elderly parents and relatives to send large sums of cash to buy non-existent or poor quality items at the urging of their offspring.

Foreigners will often be baffled to hear that Guangdong has a dreadful law and order situation. To us, the ubiquitous fawning and deference makes it hard to realise just how dangerous the province is to new arrivals from the countryside.

It's young girls that bear the brunt of the problem. One of my physio's friends was attacked during the short walk to the bus stop one dark winter morning at the end of a night shift.

Although three men attacked her she fought back. She was stabbed three times and had her valuables taken. She managed to stagger to the bus stop where the first motorbike taxi refused to give her a lift. The next one saved her life by whisking her to a small hospital, where she passed out.

Despite not having a penny on her, the hospital took her in. (There is no Government medical coverage for migrant labour.) She spent two weeks in hospital and her family had to pay the 20,000 yuan to the hospital, the equivalent of several years' wages.

There is a serious economic point to this story. The more China continues to rely on large pools of cheap labour, the longer Chinese (and foreign-invested) businesses can avoid the challenge of increasing productivity per worker.

Low productivity per worker keeps wages low. That locks China into its current model, of exporting cheap, simple goods to overseas customers while a large number of China's 900 million peasants and workers work in conditions of Dickensian poverty.

Any measure, whether it's hiking the exchange or interest rates - which forces businessmen to rely on good management, superior research and development and calculated risk-taking to turn a profit rather than exploiting 15-year old girls - can surely only be a good thing.

A government that extended a gentle hand to those in trouble would help, too. A decent social security system would reduce the need for the current high savings rate. At the moment, people save a huge proportion of their money to provide, for example, for a loved one lying injured in a hospital far from home.

That's hardly conducive for moving to a more consumption-based economic model, let alone a more caring society.

* The writer remains anonymous to protect his position in China.