To What Extend Do Fdi Reduce Exploitation of Chinese Workers

Abstract

China has experienced tremendous growth since the invasion of foreign direct investments. By allowing foreign investors to establish themselves in the country, the economic environment of the country has experienced positive change therefore putting the country at a higher growth level than other developing countries. The paper mainly focuses on how foreign direct investments in china have influenced the workers of china by cutting down on the level of exploitation that was being experienced. As the country has always had a high population growth, the few available industries would subject the workers to harsh treatment that workers have to get submitted to because of their desperate situations. All this changed when the government introduced incentives that were aimed at attracting foreign investors.

Introduction

China unlike the other developing countries has been experiencing a large influx of foreign direct investments (FDI). This has therefore made the country to grow at a much faster rate because the government takes advantage of the immerging opportunities to expand its trade links. With the continued procedure it is clear that china’s gross domestic product will continue to increase over the years. According to OECD (2002), China is one of the countries that have continued to experience a rise in the population growth. The country has therefore been experiencing the challenge of feeding and managing its people. The invasion of foreign investment is something that has been advocated for by the government as a means that will help the nation to provide employment opportunities to its people. The large population with minimal job opportunities made the few companies available to take advantage of the people. The people were expected to do a considerable amount of work with little payment. The people who were desperate to earn a living were therefore faced with no alternative but to survive with the little income. The paper looks at the findings that prove that foreign direct investments have reduced the level of exploitation among Chinese workers.

Literature review

A study that was carried out by UNCTC (1992) revealed that foreign direct investments have boosted the economy of the county and has been a great relief to the people of china. China has been a destination for foreign investors who are assured of being granted permission to invest and also benefit from its cheap land available of labor. Investors are not only assured of the government’s protection but also from the fact that they will not lack manpower to work in their companies. The more investments that are made in the country, the more job opportunities are provided for the people. This generally means that the workers that have been working for the other companies can relocate and go to other well paying companies. Foreign investors are usually interested in quality performance and will hence look out for experienced workers to work in their companies. They also promise them good remuneration packages which are far much better than what their local counterparts can offer them. This in turn increases fear among local investors who continually loose their competent labor for foreign investors. This fear also makes them to treat their workers better and also give them good returns for their labor.

Foreign direct investments have hence boosted the living standards of the people of china who have not only benefited from employment opportunities but also the invasion of foreign technology. The workers that had the opportunity to work for foreign companies were given technical training. They therefore made them to adopt some of their technology which enabled them to establish their own industries. The workers who had to probably rely on their meager earnings for survival were able to make more money through their established industries. The availability of such alternatives has made the companies to be more lenient in the way they treat their employees. This has also in turn helped the country to be able to provide better social amenities and infrastructure for their people through the extra income they receive in form of taxes and duties.

In the book by Henley, J et al (1999) we find that foreign direct investments, originally immerged in china in 1979. During this period, the growth rate was slow and not many investors were attracted due to poor infrastructure. Later on between 1983 and 1991, the influx reached its peak as the investors identified economic zones that would give them a good return for their investment. The government took keen interest in foreign investments and hence made improvements in their infrastructures (Hood & Young, 2000). The government introduced FDI incentives in 1983 that were aimed at motivating investors to carry out their businesses in the country. This initiative bore fruits and by 1993, the country was identified as the largest in hosting foreign direct investments. Due to increasing number of foreign direct investments, the country adjusted their entry in 1994, the foreign direct investments however continued to boost the economy of the country and by 2001 china had recorded a fifteen percent increase in foreign capital.

Methodology

In the research methodology, a study was carried out to find out on the impact of foreign direct investments in china in relation to the Chinese workers. Interviews were carried out to determine how workers have been able to benefit from foreign investment procedures. There are various research methods that were used which include primary and secondary data. Historical data was used to compare how the workers were treated in the past years and the various improvements that have been made since then. In carrying out the research, the researchers visited a wide variety of companies such as manufacturing companies, business institutions and textile industries. Interviews were held for both skilled and non skilled workers in the effort to find out how they were being treated. A total of twenty two companies were used for the research where by ten of them were visited personally. Other statistics were obtained from twelve other companies through materials that were obtained from secondary sources. From the number of skilled workers that were interviewed 20% of them had been working for the past twenty year and were hence acquainted with the changes that had taken place in the employment sector since the immergence of foreign direct investments. Textile industries that were known to exploit their workers by making them work more and yet received less in the past years were selected for the research. The invasion of foreign investments into the country made the local companies to increase their salaries by 20% annually as most of the workers were being taken by foreign companies. Few workers that worked in Chinese companies some years back and retired were also interrogated in an effort to compare the amount of work they did, the number of hours they worked per day and how much they were compensated in return. We also sought to find out whether the amount of money that they received was enough to cater for their general family needs.

The data was collected through personal interviews either in person or through phone calls. We also managed to pose similar questions in the internet and received responses via email. Some companies were also able to give us some of their data that reflected how they paid their workers before the influx of foreign direct investments and how the same can be compared to how they are currently paying them. Apart from finding out how they benefited from increased remunerations, we also sought to find out if increased remuneration has motivated the workers into high productivity.

Personal interviews were done on the retirees and 80 percent of them admitted that they had to work for long hours yet what they received was not enough to take care of their family needs. Due to unavailability of convenient means of transport, they were also forced to walk long distances to their places of work and also carry food as they were given little time for breaks. 20% of them said that they had no time to see their children as they arrived home when they were asleep and left before they woke up. This was thus having a negative impact on their family. Shop floor workers were interrogated orally as a group and 85% of them said that their employers were treating them fairly with the fear that they will easily relocate to other better companies. The result differed from different cities of china and good working conditions were observed especially for those working in major cities. 90% of those that were satisfied with their current pay and the working conditions were recorded in Shanghai, Hong Kong and Taiwan. The results were mostly positive for the employees that worked for foreign direct investments, those that were working for Chinese companies were still complaining of poor pay and working environment even though it had shown improvement in the past five years. Compared to foreign direct investments, the companies rewarded them with an average of 5% salary increment annually which is barely enough for their needs.

Timetable

The table below shows the improved working conditions in china since the influx of foreign direct investments between 1979 and 2005.

The rankings were done as follows

1. poor
2. fairly good
3. good
4. better
5. excellent

Discussion

From the study that was carried out, it was found out that foreign direct investments had an impact on how the workers were subsequently looked at in china. Foreign direct investments came up with alternative employment opportunities that the people of china benefited from. Apart from the workers that were employed in such foreign entities, the government was obliged to make more constructions especially on the roads which meant that the Chinese people would also benefit from such extra employment opportunities (UNCTAD, 2004). The few local entities that the people were previously fighting for to get employment opportunities despite the poor wages and salaries that they received faced an exodus of employees. Foreign companies took in some of the experienced workers who obliged to leave their former companies as they were promised good remunerations. The local companies therefore had to pull up their socks before all employees left for other well paying companies. They had to increase the remuneration packages for their employees so as to fit in the prevailing competition.

With the emergence of foreign units in the country, the transport and communication system was improved. All this was done in the effort of the government to attract more foreign investments. The living conditions of the people was subsequently improved as they were able to access important facilities like health care, transport and schools more easily. Life also became manageable for the masses that had greatly benefited from good wages and salary. It also increased innovation and invention in china as people studied the technology that the foreign companies used to carry out their businesses. After some time, the technology was transferred to other local undertakings as others launched into cortege industries. The skills that were gained by the few individuals were transmitted to other individuals who realized that they could manufacture some of the products and commodities that they were importing. As the locals engaged into such manufacturing industries, the locals were able to obtain commodities at a cheaper price and thus reducing on the expenses that were involved in having to import such commodities.

In the words of Sun, Q. et al (2002) foreign commodities and services were also easily available to the people as the industries that manufactured them were located within their reach. They therefore had the advantage of obtaining such services first hand and at a much cheaper rate. It was also during this season that labor laws were introduced. With the increase of the people now working in china, the government was obliged to introduce laws that would be beneficial especially to the workers. The majority of people were now working and therefore held the economy of the country in their hands, they were able to come together to form unions that were aimed at pushing for the government and their respective employees to meet their demands. They therefore demand for a reduction in the number of hours that they worked per day. Earlier on, the employed had little time to spend with their families as they were expected to arrive at their places of work early and leave late. But as they jointly pushed for their demands, the government intervened by introducing labor laws that were to be adhered to by all employers.

Buckley, P. (1995) observed that some of the people also had the opportunity to travel abroad and experience life out of china. Foreign companies would either grant some of their best performing workers opportunities to study further or to work in their companies that were located outside china. This experience enabled them to learn many things that they would have otherwise never known had they remained in china. They had the opportunity to stay with other people that were not necessarily Chinese and hence acquired a lot from them in terms of carrying out businesses. They hence came back to their countries empowered and ready to change their lives tremendously. This was a period that saw a large percentage of them going outside for higher education. This improved their skills that made them even more informed of their rights. The more intellectual people become, the less they are exploited, this is due to the fact that education comes in with courage and confidence that enables one to defend themselves incase of a crisis. The people were therefore more informed and thus making the workers to demand for a fair treatment for the services they provided to their companies.

Conclusion

From the above analysis we come to realize the level at which Foreign direct investments have impacted on the working population of china. The people of china decided to embrace foreign entities with the hope that their economy will improve substantially. Despite mixed reactions that suggested that the invasion of foreign investments would drain the local industries and probably interfere with the cultural settings of the land, the country embraced the change. As a result, the country has been rated as one of the most industrialized nations. They did not only work for the western companies but aspired to gain something extra by acquiring the skills that they needed to establish their own. Even though there are still a large number of foreign entities in china, the country has also been able to establish their own industries both locally and internationally (Hood & Young, 2000). Most cities of the land are also well served with modern means of transport and communication. This has made easier for the country whose population is continuously growing to be able to feed the masses. Despite the other challenges that the country has to overcome with the invasion of foreigners, it has a lot to celebrate in terms of development.

List of References

Buckley, P., 1995. Foreign direct investment and multinational enterprises. London: Macmillan Press Ltd.

Henley, J., Kirkpatrick, C. and Wilde, G., 1999. Foreign direct investment in China: Recent trends and current policy issues. Oxford, UK: Blackwell publishers Ltd.

Hood, N. and Young, S., 2000. Globalization, multinational enterprises and economic development. USA: St. Martin’s Press, Inc.

OECD, 2002. China in the world economy: Working papers on International Investment.

Sun, Q., Tong, W. and Yu, Q., 2002. Determinants of foreign direct investment across China. Journal of International Money and Finance, 21(1), pp.79-113.

UNCTAD, 2004. The shift towards services. New York: United Nations paper.

UNCTC, 1992. The determinants of foreign direct investment: A survey of the evidence. New York and Geneva: United Nations.

Appendix

Questionnaire

1. Name of the correspondent:
2. Company worked for:
3. The period in which the correspondent worked for the company:
4. The amount of salary that the correspondent earned when he or she joined the company:
5. Salary at the end of his/her term period:
6. The number of working hours before 1979
7. The number of working hours between 1979 and 1985:
8. The number of working hours between 1986 and 1994:

Questions to be answered by Workers who are still employed

1. Is there a difference on the kind of treatment you are given as employees compared to five years ago?

   1. Yes
   2. No
2. Do you get enough time to be with your family?

   1. Yes
   2. No
3. If you had an opportunity to relocate from you current job, would you gladly do so?

   1. Yes
   2. No
4. If the above answer is yes then why?
5. With the immergence of FDI, can you really say that exploitation of workers in these companies has been completely done away with?

   1. Yes
   2. No
6. As an employee on an FDI, what more are you benefiting from apart from good remuneration packages?

To be answered by retirees

1. How can you compare life when you were still working and now?

   1. Extremely satisfied
   2. Somewhat satisfied
   3. Neutral
   4. Somewhat bad
   5. Extremely dissatisfied
2. How did the working conditions impact on your family?

   1. Very Much
   2. Much
   3. Not Much
   4. Not at all
3. Considering the distance you had to travel, how did you manage to arrive to work and back home on time?
4. Looking at the current working class, can you say that things are better now?

   1. Yes
   2. No