Industry Market Trends

The China Price: The True Cost of Chinese Competitive Advantage

Apr 29, 2008

In The China Price: The True Cost of Chinese Competitive Advantage, acclaimed Financial Times correspondent Alexandra Harney explores the hidden price tag for China's economic juggernaut.

Acclaimed Financial Times correspondent Alexandra Harney uncovers the truth about how China is able to offer such amazingly low prices to the rest of the world. She has discovered that intense pricing pressure from Western companies combined with ubiquitous corruption and a lack of transparency exacts an unseen and unconscionable toll in human misery and environmental damage.


A landmark eyewitness exposé of how China's factory economy competes for Western business by selling out its workers, its environment and its future

In The China Price, acclaimed Financial Times correspondent Alex Harney uncovers the truth about how China is able to offer such amazingly low prices to the rest of the world. What she has discovered is a brutal, Hobbesian world in which intense pricing pressure from Western companies combines with ubiquitous corruption and a lack of transparency to exact an unseen and unconscionable toll in human misery and environmental damage.

In a way, Harney shows, what goes on in China is inevitable. In a country with almost no transparency, where graft is institutionalized and workers have little recourse to the rule of law, incentives to lie about business practices vastly outweigh incentives to tell the truth. Harney reveals that despite a decade of monitoring factories, outsiders all too often have no idea of the conditions under which goods from China are made. She exposes the widespread practice of using a dummy or model factory as a company's false window out to the world, concealing a vast number of illegal factories operating completely off the books. Some Western companies are better than others about sniffing out such deception, but too many are perfectly happy to embrace plausible deniability as long as the prices remain so low. And in the gold-rush atmosphere that's infected the country, in which everyone is clamoring to get rich at once and corruption is rampant, it's almost impossible for the Chinese government's own underfunded regulatory mechanisms to do much good at all.

But perhaps the most important revelation in The China Price is how fast change is coming, one way or another. A generation of Chinese flocked from the rural interior of the country to its coastline, where its factory work largely is, in the largest mass migration in human history. But that migration has slowed dramatically, in no small part because of widespread disenchantment with the way of life the factories offer. As pollution in China's industrial cities worsens and their infrastructure buckles, and grassroots activism for more legal recourse grows, pressures are mounting on the system that will not dissipate without profound change. Managing the violence of that change is the greatest challenge China faces in the near future, and managing its impact on the world economy is the challenge that faces us all.


Dreaded by competitors, "the China price" has become "the lowest price possible," the hallmark of China's incredibly cheap, ubiquitous manufacturers. Financial Times editor Harney explores the hidden price tag for China's economic juggernaut. It's a familiar but engrossing tale of Dickensian industrialization.

Chinese factory hands work endless hours for miserable wages in dusty, sweltering workshops, slowly succumbing to occupational ailments or suddenly losing a limb to a machine. Coal-fired power plants spew pollutants into nearly unbreathable air. Migrants from the countryside, harassed by China's hukou system of internal passports, form a readily exploitable labor pool with few legal protections. The system is fueled by Western investment and, Harney observes, hypocrisy. Retailers like Wal-Mart impose social responsibility codes on their Chinese suppliers, but refuse to pay the costs of raising labor standards; the result is a pervasive system of cheating through fake employment records and secret uninspected factories, to which Western companies turn a blind eye. But Harney also finds stirrings of change; aided by regional labor shortages, rising wages and intrepid activists. Chinese workers are demanding -- and gradually winning -- more rights.

Packed with facts, figures and sympathetic portraits of Chinese workers and managers, Harney's is a perceptive take on the world's workshop. (Mar. 31) Copyright 2007 Reed Business Information


Financial Times reporter Harney paints a vivid portrait of factory life in the country that sells consumer goods for the lowest price possible. With a manufacturing workforce of 104 million people, China dominates global production of consumer goods, selling everything from clothing to computer parts at half or even one-fifth the amount that it would cost to make them in the United States.

The author, who lives in Hong Kong, focuses on the consequences of China's ceaseless pursuit of economic growth, from unethical business practices to pollution to an epidemic of occupational diseases. Drawing on interviews, she takes us into factories and their dormitories to show youths who have flocked from the countryside to take dangerous manufacturing jobs.

We meet 17-year-old Li Gang, who worked 18 hours a day, seven days a week to earn $39 monthly as a zagong ("dogsbody"), the lowest-ranking employee in a plastic-bag factory; and Li Luyuan, 20, who sleeps in cramped quarters with a dozen other girls, trying to save enough money from her job producing DVDs and sweaters to buy a new home for her parents. These migrants are taking legal action to win better working conditions, posing a challenge to efforts to maintain the China price. Harney brings us into model factories, where rules on working hours and product safety are followed, and into the "shadow" factories (often operated under contract to the same owners) where anything goes in the drive to produce cheaper products. Despite efforts by companies buying consumer goods from China to enforce a code of conduct, most suppliers falsify time cards, hide the use of unapproved materials and otherwise engage in dishonest practices. Western importers know it and often look the other way.

In the face of growing labor unrest and pollution, Chinese officials hope to move the economy away from reliance on exports by fostering domestic consumption. Essential reading for anyone concerned about how dangerous pet food and children's clothing manufactured in China make it into American stores.