The Future of Chinese Manufacturing

Employment and Labour Challenges

TACHIA Chin, Chris Rowley

• Publisher: Elsevier
• Year: 2018
• Print ISBN:
  9780081011089
• eBook ISBN:
  9780081012321
• Topic: Business
• Subtopic: Manufacturing
• Index: Business

The Future of Chinese Manufacturing: Employment and Labour Challenges gives context and analysis on employment and labor issues in contemporary China, specifically relating to manufacturing industries. With one fifth of the world's workforce, China has taken advantage of its cheap labor to serve as the world's factory, achieving stunning growth for two decades. This book covers the appreciation of RMB, constant increases in minimum wage, shortages of skilled workers in China's labor-intensive manufacturing sector, and the fact that many large multinational corporations (MNCs) must cut costs, and are thus shifting their main production bases to other developing countries. Under such a tough situation, and coupled with the global economic slowdown, manufacturing employment in China confronts severe labor-related challenges, such as high turnover rates, recruitment difficulties for workers, and a series of high profile labor strikes and publicity concerning working conditions. - Integrates human capital and cultural theories - Analyzes looming labor unrest and related workforce issues in China through a unique context-specific lens - Explores the roles that Chinese institutions and culture play in resolving problems related to these issues

Chapter One

Introduction: China's Manufacturing: Labour Challenges Ahead

Abstract

Along with the 2008 financial crisis, the 2010 Euro zone debt crisis, and the 2015 Brexit ‘yes’ vote, the world's economic and political situation has become more volatile and unpredictable, while global manufacturing industries are facing a new round of restructuring. Given that a viable manufacturing sector constitutes the cornerstone for a nation's social and economic growth, to sustain national competitiveness in this new era riddled with uncertainties, several of the top manufacturing countries have proposed strategies at the state level: the United States proclaimed a reindustrialization and manufacturing renaissance strategy in 2010; Germany advocated a new concept of Industry 4.0 in 2013; and the United Kingdom called for economic ‘rebalancing’ with the resurgence of manufacturing.

Keywords

Crisis; Economic; Financial; Global; Growth; Manufacturing

1.1 Introduction

Along with the 2008 financial crisis, the 2010 Euro zone debt crisis, and the 2015 Brexit ‘yes’ vote, the world's economic and political situation has become more volatile and unpredictable, while global manufacturing industries are facing a new round of restructuring. Given that a viable manufacturing sector constitutes the cornerstone for a nation's social and economic growth, to sustain national competitiveness in this new era riddled with uncertainties, several of the top manufacturing countries have proposed strategies at the state level: the United States proclaimed a reindustrialization and manufacturing renaissance strategy in 2010; Germany advocated a new concept of Industry 4.0 in 2013; and the United Kingdom called for economic ‘rebalancing’ with the resurgence of manufacturing.

China is no exception to this developmental trend. The government has also proclaimed the Made in China 2025 initiative, encouraging local manufacturing firms to upgrade themselves from the traditional labour-intensive to a modern high-tech, innovation-driven, and service-oriented manufacturing industry. In other words, moving towards higher value-added domains is the guiding direction of China's manufacturing transition.

However, this upgrading and transformation process has and will inevitably bring forth new and complex labour- and employment-related challenges for China's manufacturing as traditional jobs requiring low pay, manual dexterity, and physical skills are disappearing, coinciding with the appearance of more labour shortages, high-tech, and knowledge-intensive job opportunities. Yet the current manufacturing workforce in China is mainly composed of poorly educated migrant workers, many of whom come from poverty-stricken rural areas. Hence, it is not easy for these workers to upgrade their skills in adaptation to new job specifications and qualifications, particularly for those who are aged or have spent more than 10 years in similar positions. This situation sometimes creates a dilemma for companies. Old staff need retraining to meet new work standards while young migrant workers do not see manufacturing jobs as a good career choice as more and more such jobs will be replaced by machines.

In this vein, in recent years, manufacturing employment in China has been confronted with severe labour-related issues, such as high turnover rates, difficulties in recruiting young people, and shortages of skilled workers. While labour strikes, mass layoffs, and downsizing are deemed as a common business practice in Chinese manufacturing, the conflicts between production workers and management have become one of the major concerns that requires greater attention and deeper investigation (Chin & Liu, 2015). Hence, our book aims to elucidate the employment and human resource (HR)-related challenges that the Chinese manufacturing industry is facing in the new era of economic transformation.

1.2 Structure of the Book

In Chapter 2, using the auto manufacturing industry as an example, our book begins with an overview of the historical development of the Chinese manufacturing industry over the past three decades. It then introduces an empirical study that illustrates the role of the government as the most crucial ‘invisible hand’ in influencing goal orientation towards the creation of own brands among manufacturing firms in China.

In Chapter 3, three cases that focus on Singapore-, Taiwan-, and British-invested companies in China demonstrate how foreign manufacturers from different home countries cope with changes in the Chinese market and make strategic options when carrying out upgrading along global value chains (GVCs). In addition to addressing the contributions of foreign investment to the growth of Chinese manufacturing, this chapter also highlights the importance of acquiring institutional resources to compete in China.

In Chapter 4, two empirical studies are presented to introduce a typical, yet still under-researched, type of global start-up manufacturer emerging from China. Facing the recent global industrial and economic restructuring, such firms could not continue to rely on the export-oriented growth model of the past three decades to sustain profits. Hence, this chapter addresses a prominent ‘reverse internationalization phenomenon’, delineating why and how these Chinese entrepreneurial manufacturers are striving to transform their focus from international competition to local markets.

In Chapter 5, two studies are introduced to elucidate how Chinese harmonious culture—which is decoded and interpreted by Yijing’s eight-trigram model (Fung, 1997)—affects manufacturing employees’ attitude and behaviour at work. While China to date still has more than 100 million production workers, many of whom are recruited by the foreign-invested enterprises (FIEs), this chapter explores what fosters an attitude of openness to see the wisdom ingrained in Chinese harmonious culture and, most importantly, to link it with HR practices during the transition from a transitional labour-intensive and export-driven system to a modern service-oriented and innovation-driven manufacturing system.

In Chapter 6, from an emic Yin–Yang harmony perspective, we present a unique, indigenous circled 5C (conflict–clash–communication–compromise–consensus) model for helping to possibly resolve labour conflicts in China's manufacturing sector. While more and more Chinese manufacturers shut down their local factories and shift production lines to other regions with cheap labour, it is expected that the number of labour dispute cases and work activism will possibly continue to increase. This chapter helps to deepen our understanding of how to tackle labour conflicts in China's socialist market economy system.

In Chapter 7, considering the ongoing trend to build geographically dispersed manufacturing bases for cost advantages, cross-cultural management and corresponding language and translation-related issues are raising harsh challenges for Chinese manufacturers. To better describe this phenomenon, we introduce a research that proposes a novel, indigenous model delineating the dynamic and vital role of translation as a boundary-spanning tool in cross-border knowledge transfer within the intra-organizational networks of Chinese manufacturing firms.

In Chapter 8, we first make a brief summary of this book and then examine the prospect of future employment in China's manufacturing.

1.3 Conclusion

Overall, the overarching aim of our book is to delve into the root causes of relevant issues in China's economy today in a more comprehensive and contextualized way. We present several studies built upon the Chinese context to elucidate the distinctive growth patterns and models of Chinese manufacturing relative to those of the developed economies in the West.

In addition, it is worth noting that owing to the uniqueness of China's socialist market system, culture, and rich history, its manufacturing-led economic miracle and the above-mentioned labour-related issues cannot be fully explained or solved by the rationales underpinning Western business theories and practices (Chin & Liu, 2017; Redding, 2016; Rowley & Oh, 2016). Hence, in our book, to truly embody the cultural idiosyncrasy of Chinese employees, we employ a unique ‘Yin–Yang Harmony’ perspective to discuss labour–management relations that could better make sense, decode, and contextualize the phenomena that may be indigenous to China's manufacturing industry.

In sum, we aim to provide relevant theory, research, evidence, and practical insight and impacts for twin audiences: first, for academics globally to both expand and teach with; and second, for business and management practitioners and policymakers. Too often, for both ‘camps’, these domains are seen and treated as somewhat irrelevant to each other and sealed. We hope to break that seal.

References☆

Chin T., Liu R.H. Understanding labor conflicts in Chinese manufacturing: a Yin-Yang harmony perspective. International Journal of Conflict Management. 2015;26(3):288–315.

Chin T., Liu R.-h. Critical management issues in China’s socio-economic transformation: multiple scientific perspectives to strategy and innovation. Chinese Management Studies. 2017;11(1):12–18.

Fung Y.L. A short history of Chinese philosophy. New York, NY: Free Press; 1997.

Redding G. Impact of China’s invisible societal forces on its intended evolution. In: Lewin A.Y., Kenny M., Murmann J.P., eds. China’s innovation challenge: Overcoming the middle-income trap. Cambridge: Cambridge University Press; 2016.

Rowley C., Oh I. Business ethics and the role of context: institutionalism, history and comparisons in the Asia Pacific region. Asia Pacific Business Review. 2016;22:1–13.

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^☆ “To view the full reference list for the book, click here”

Chapter Two

Challenges for Manufacturing in China

Abstract

With one-fifth of the world's workforce, China has taken advantage of its cheap labour to become the world's factory—such as providing low-end, labour-intensive production services, that is, original equipment manufacturing to mature-market clients. This has helped to achieve stunning growth in the past three decades. The manufacturing sector has attracted huge foreign direct investment, making tremendous contributions to the gross domestic product (GDP), still accounting for 40.9% of total GDP (US$ 10.4 trillion) in 2015.

Keywords

Challenges; Employment; Investment; Labour; Manufacturing; Policy

2.1 Introduction

2.1.1 Labour Challenges of China's Manufacturing Industry

With one-fifth of the world's workforce (Chin, 2015), China has taken advantage of its cheap labour to become the world's factory—such as providing low-end, labour-intensive production services, that is, original equipment manufactur...

Table of contents

• Cover image
• Title page
• Table of Contents
• Copyright
• Foreword
• Chapter One: Introduction: China's Manufacturing: Labour Challenges Ahead
• Chapter Two: Challenges for Manufacturing in China
• Chapter Three: FDI Manufacturers and Their Upgrading Strategies
• Chapter Four: Branding in Reverse Internationalization: Evidence From Local Entrepreneurial OEMs
• Chapter Five: A Yin–Yang Harmony Cognition to Employer–Employee Relationships
• Chapter Six: Labour Dispute and Conflict Resolution: A Yin–Yang Harmony View
• Chapter Seven: Cross-Cultural Management: A Globalized Production Network
• Chapter Eight: Conclusion: Reflection
• References
• Index