Made in China

by Bruce Anderson, July 2, 2008

They glide silently through the Golden Gate, ships so large they briefly obscure great swathes of Marin as they move deep into the San Francisco Bay. The seagoing dirigibles with the faraway names are stacked to their captain's bridges with box car size portable containers stuffed with everything from men's underwear to baseballs, all of it made in China.

The wild assortment of labor-intensive goods will glide past Alcatraz, swing right at Treasure Island, slide beneath the Bay Bridge before making a huge left to the Port of Oakland. From Oakland the goods will be trucked to MammothMarts throughout the Western United States, a container of bird baths here, a million ballpoint pens there. Without this unending arrival of sea borne China trade, there would be no big box stores in America.

What's the China end of the supply like?

We asked a "lao wai" businessman — lao wai is Chinese for white person or foreigner — how all this stuff gets from China to our neighborhood Walmart.

"Call me Lao Wai, which is Chinese for white person or foreigner. Using my real name may make it hard for me to work in China so I won't use it. China is very sensitive about criticism.

I've worked in China for ten years. I speak the language, although I wouldn't claim to be fluent. China has changed a lot, but long, hard hours are still the norm for ordinary working people.

I basically design products for the US market and then work to get the item produced and shipped to the client in either the US or Canada. Sometimes I work with a Chinese factory, sometimes with an American or Canadian company.

The prevailing Chinese mindset is to throw labor at production rather than apply workers carefully, strategically, but that's all going to have to change because labor is beginning to demand basic protections, but there's still a lot of unpaid or illegal overtime, sometimes amounting to the hundreds of hours per month.

Case in point: I was the general manager for an American company's production in China. This company, which was based in the US, had repeatedly delayed finishing its registration with the Chinese authorities, so health insurance, social security and personal tax was not paid for the workers. We're talking about an American operation. This problem of shoddy labor practices isn't just on the Chinese end.

This company operated unregistered for some time. They said they would get registered, but there always seemed to be delays and, of course, the delays saved the American company lots of money in registration fees. They'd make excuses like this: 'We're sorry — something came up in October so we will come in December and make everything right.' December came and registration was postponed again.

By the time I realized what was happening, the company I was managing in China was far in debt. I felt that if I left the suppliers here in China would never be paid, which would have ruined their businesses and would destroy some of them financially. At times we were over six months behind in payments for materials and labor. As soon as the debts were paid I sent a final demand to headquarters in the US to register the company and pay the taxes within a certain deadline. When this did not happen I resigned.

All the while, my Chinese workers were racking up overtime and not being paid the required insurance. Overtime production was demanded due to shipping schedules for Orchard Supply Hardware (OSH) and Target. We had to have the stuff ready. Most of us, including me, were working over 300 hours per month to fill these orders. Employees had to clock in and out, so it is not guess work that they were logging what amounts to nearly 16-hour days for about six months straight. Some workers were clocking more than 320 hours per month. These records were consequently 'lost' when I asked the American company that the workers be paid for all their extra hours of labor.

At times, my American headquarters did not send enough money to pay the crew their normal wage, let alone their overtime. In one case I used money borrowed against my house in the US to meet payroll; in another I took out a personal loan in China to pay bills.

Headquarters' excuse back in the US was they just didn't have the money, a statement which is also recorded during a subsequent deposition. When the overtime pay was not sent to us in China, I told my company that the people working overtime would need an equivalent amount of time off in the summer when things were slow. This was agreed to; but when summer came instead giving the workers back their overtime I was sent an order to reduce the crew size. The reason — 'that's just the way this business is.'

It wasn't due to poor performance on our part. We had out-performed the target production cost by more than 10%. And the overtime work we were doing was not an occasional thing; it went on for months, during which time many containers with goods made directly for OSH and Target were shipped to the US.

I took my company — the American company that had ordered the goods for OSH and Target — to court to recover my unpaid salary and commissions and expense reimbursements. I recovered only a small percentage. Although my personal loss was settled through court-appointed arbitration in the US my lawyer said there was nothing he could do to get the workers in China their compensation because they were covered by China law and outside California or US jurisdiction.

Our China office had been conveniently broken into and all the worker records were stolen. This happened about a week after the American company and their lawyer were confronted with the situation. The theft meant that the workers had no evidence, no time cards, to prove they'd worked all those unpaid overtime hours

It is very hard to get something done about the overtime or any other in-house cheating in China. If something is said in the way of a complaint, and it becomes known, the complainer will be fired for some made-up reason and it will be hard for him to find work again in whatever area of the country the plant is located in. If the person does try to say something who does he say it to? What are the likely results? The pressure on the worker to keep his mouth shut is enormous.

The Chinese factories are very sensitive about worker complaints because complaints at least have the potential of losing the factory an American client. But anybody who complains is either fired or moved to where they have no outside contact with a foreign business person or inspector.

The Chinese worker has recourse in theory through the Chinese grievance procedure, but that process is dominated by bribes from the owners of the factories and the system itself is bogged down with huge backlogs of complaints.

In my case, the overtime case where an American company stiffed my workers for thousands of dollars in overtime, I contacted people who are supposed to be monitoring human rights and was told by them that they were only concerned with political rights. 'We don't take cases like this,' they said at China Labor Watch and Human Rights First. I was finally able to talk to Human Rights Watch, but that didn't go anywhere either. I had a conversation with them in San Francisco; they said they were a fund raising branch and didn't work on these cases. I finally tracked down a man named Arvind Ganesan in England. He informed me that they worked more on political rights than labor rights. Maybe it was because I told them it was an American company that had stolen worker overtime that they lost interest. Who knows? All I know is that if a person on the ground, a grassroots person, wants to do something about abuses of labor there is little support or help from these human rights groups. Just try to find a service number listed for human rights issues for the box stores. I found Target's number after writing to lawyers, and after having my complaints forwarded a couple of times before someone contacted me.

I've called Target, written to them, sent them photos of the working conditions and told them about the overtime work. It took a long time, several letters and phone calls, just to get to the right person at Target, and then in the end nothing happened.

I have worked on trying to get the overtime pay for my workers for over two years. In some places I was treated like a criminal for even bringing it up. The big box stores have the real power; if the time had been taken by Target to check into the middleman on the China end there would have been motivation to solve the problem, but that didn't happen. Target was non-responsive, and the workers were screwed. This is an instance when the information was given directly to the big American box store — complete with documentation — and nothing was done.

The big box stores will say they want to do something about abuses but they seem to love the cheap prices too much to follow through.

Why couldn't there be a US national hot line that was required to be posted in factories that sell to the box stores? It would probably be overloaded real fast because there'd be a lot of frivolous calls, but it would also be one way for people who have knowledge of problems and abuses to make them known.

Workers can go to court here in China, but the process is not only over-loaded with cases, the process is corrupt; it's easy for a Chinese factory owner to bribe hearing officers to make the factory owner's problems go away.

I know of a factory producing for Costco and some of the other major stores where the employees were working such long hours one guy died of exhaustion. He hadn't had a day off in a month, and he was working very long hours. He had complained about being tired but couldn't quit because he would have lost over a month of income. His family was given 30,000 RMB, about 4,000 US, as compensation.

Many Factories work like this: wages, as much as a third every month, are withheld from the worker so workers can't easily move to a better job. Or move at all. If they quit and go to another factory they will lose the withheld wages which, incidentally, accrue no interest during the long period they are withheld for. The money is finally paid to the worker at the end of the year. This practice has been going on for a long time; the Beijing government has recently been making progress to stop it, but it is still prevalent.

The average worker saves a lot, although some workers take to gambling and drink because they are away from home for such long periods of time. The dormitories common to most factories are typically rent-free, or the worker is charged a reduced rent, so workers are able to send a lot of money home.

Most of the factories I know charge a fee for room and board, though greatly discounted from market value. If the factory charges 200 rmb ['renminbi' or yuan, or 'the People's currency,' about seven rmb to the dollar] per month for room and board the worker may only be making 200 rmb more than if he was working in his home town. He is away from his wife, who may be working in another town altogether anyway, and his children are often raised by the grandparents. As a result, not as many rural workers are leaving to work in the cities; it's getting a lot harder for the large east coast Chinese factories to find the numbers of unskilled or relatively unskilled workers they require because more people want to stay at home and work.

It's the large factories that sometimes have the most problems. One factory in our area that makes a lot of electrical appliances has about 30,000 workers. The factory I'm working with averages 5,000 to 8,000 workers, depending on the season.

Another example from my work: You can't sue anybody if you want to go on doing business. Let's say I try to sue TrueValue or K-Mart for buying something I designed but was not paid for. My work has simply been stolen but I have no recourse, as happened to me when another factory stole a design of mine and produced and sold it to one of the American big boxes. If I try to sue for the theft, I will create major enemies for myself in China where the theft actually occurred. So, if you cheat me there is little I can do about it — I just move on and work for someone else.

American buyers come to China constantly, many of them representing the big box stores. WalMart, you will probably be surprised to learn, is serious about human rights issues, but the Chinese factory inspectors they hire to audit the factories have a reputation for being easy to bribe. WalMart does have people who work for them who are serious about doing real factory evaluations to the point of cutting off violating factories if they don't get into line with fair, humane labor practices. If these factories don't shape up, WalMart will actually go some place else to buy their goods. When WalMart won't do business with the scofflaws it has a real positive effect because everyone hears about it.

I have refused to implement the overtime hours demanded by the factory I'm working for because of that episode where the workers were not paid for their overtime hours. I have been ordered to work the crew overtime though I would not be required to work overtime myself. I told them I would be glad to work overtime myself but that it was counterproductive to have the employees work overtime.

If the crew does work overtime on occasion as directly demanded by the factory owner, I give the workers time and a half off later. If they work over four hours of overtime I give them a day off. This is under my control where the pay is not. (I currently manage one of the development departments for one of the largest factories for home decor in the province.)

I have insisted on eight hour work days for my crew based on our efficiency, but I was told that my crew needed to work like the other departments — 12 hours per day two days off per month. I refused because my crew was putting out more in 8 hours per day than other producers are putting out working their crews for 12 hours a day.

This mandatory overtime doesn't really have anything to do with what is needed, but is done in order to maintain the Chinese working culture. In one case where I was working to develop some products for K-Mart, Sears, and Martha Stewart Everyday (MSE), my crew out-produced the other crew of the same size by roughly 4 times. The other factory crew of 8 men worked about 12 hours per day with no days off for a month. I worked a crew of 7 people for 8 hours per day 6 days a week.

The output was almost 5 to 1 in favor of my crew. The owner congratulated me and said, 'See what can happen when you work overtime.' I told him our crew had not worked one day of overtime for the entire period, which promptly ended our conversation.

After I pointed out to the owner that it wasn't necessary to work people like slaves, the criticisms started being aimed at the disparity of work time between my people and his, and the difficulty I was causing for his supervisors to control their crews. Their crews wanted to know why they had to work so hard when my crew did not? I told him that I promised my crew if they worked hard for 8 hours and finished the work they would not need to work overtime. As a result of my insistence that my crew not work overtime my crew is being removed from my control and put under a person that will demand the overtime, and I will be looking for other work next month.

In this case, and in many others, the overtime is not a matter of performance or expense but a matter of doing it the company way and keeping up the Chinese labor culture of long overtime hours for low pay. When I was told my crew was inefficient I showed the factory owner the reports for my production and asked for the reports on their crew's production. I've never received those reports. But my 8-hour crew is going to be put under new management next year for 'efficiency reasons.'

The Chinese are becoming much more wary about trying to cheat American businesses. The recent scandals will compel the Chinese to do better, but not for the right reasons. They don't get the moral, ethical reasons for doing the right thing, or they will pretend not to understand them. They do understand that faulty products are bad for business; product quality is not positively enforced but negatively enforced. Shabby practices won't be reformed or stopped because the buying public in America or Canada may be hurt, they'll be stopped because shabby practices cost Chinese business people lots of money when scandals occur. It's not a matter of doing a good job or having pride in the product or pride in the company producing the product. The primary consideration is making money. There's very little consideration for the environment, the quality of the product or the human beings making the product. It is, however, starting to dawn on the Chinese that it is better to have satisfied repeat customers than it is to try cheat a customer and lose that customer forever and then have to go out and find a new customer to replace the one you cheated.

Scandals are obviously bad for business. Also, if goods are rejected, especially huge amounts of goods, it can break a company financially or cost the company a substantial portion of their share of the profits. Typically, though, long-term considerations are set aside for short term gains. Quality defects are hidden, and if someone in the company, a manager or a worker, says something to the customer about the defect the tipster is usually fired or moved to a position where they do not have contact with the customer. The manufacturer doesn't want to lose a customer, but often the Chinese boss or middleman thinks it is more important to put the problem off than to deal with it when it arises. They just hope the buyer won't notice, or by the time that he does notice the problem will have dissipated. Unfortunately, problems tend to intensify.

China is an environmental disaster. I recently visited a factory that has been dumping trash in the creek behind the production area for a long time. I told them that if they wanted to do business with me, or have me bring customers there, the area would have to be cleaned up and the practice stopped. It totally confuses them that someone would be concerned about what the plant was doing to the land and water.

Blatant violations are being curtailed so improvement is being made. The most visible violations usually involve direct health hazards such as having workers paint all day without adequate ventilation or protective masks. Or not keeping aisles open so workers can get out quickly in an emergency, or safety markings on the floor and other safety precautions — things that are easy to visually verify are the ones being dealt with.

As I said, the company I have seen make effective field efforts is Walmart, who I tend to dislike because of their marketing strategy and purchasing methods. But Walmart is better than most of the big boxes from what I have personally seen, so I have to give them that. Walmart has canceled orders rather than 'close one eye' to violations. But their inspectors are notorious for taking bribes in our area.

Some of the big box companies make efforts to choose a factory that is more in compliance than a factory that is not, if all other things are equal. I am sure other box stores are making efforts that I have not seen, and most now do demand annual compliance inspections, and those inspections are helping bring reform. However, what I have seen is Chinese compliance inspectors working with the factories to pass inspections but not solve the problems. It is not uncommon for two sets of time clocks to be kept and for safety equipment to be non-operational, like a fire alarm on the wall that isn't hooked up to anything. Everyone wants a cheaper product so it is still acceptable to 'close one eye.' And the inspectors see it as an opportunity to make a bit of side money.

China is going after some of the worst offenders, some of the big boys, and they don't let the little guys get too far out of line. There seems to be progress but bribes are still very much a part of any business. Yes, the bribes are prevalent but not as prevalent as they used to be. It is accepted that these practices will happen but efforts are made to keep it more or less under control and not be so flagrant about them. Most of the foreigners who have worked in China for a long period of time say that there has been a lot of improvement."

A Canadian working in Fujian Province testified in December of 2006:

"From August 2001 to February 2005, I worked for XXX Company, which is a major supplier for several major chainstores in Canada. Due to the sensitivity of this content I am not willing at the current time to reveal the name of the company I worked for. However, I am willing to testify under oath of the way in which the company I worked for operated in order to get approval for the factory so that we could ship to The Home Depot (Canada) and comply to be a supplier of their direct import program.

On December 22 and 23 of 2004 the factory we were working with was audited for a shipment that was going to Home Depot. The factory audit showed one major non-conformity and five minor non-conformities in purchasing, incoming goods, calibration of tools, management and training. Just enough for an average rating which constituted as a pass grade. There was no mention of the work hours and massive overtime, which were way beyond the legal allowable limit. We work seven days a week for a minimum of 12 hours per day.

The factory was listed as working one shift per day, two days off per week and a max of three hours of overtime per week which was completely false. In order to pass inspection, false work records for all the employees were made for the year prior to the date of inspection. It is good to include this but volatile. The very company that is paid to make sure human rights are protected takes money to allow the factory to violate them. The Intertek inspector instructed us on how to change the records in order to pass. The inspector demanded a fee to teach us how to do this. Employees are randomly selected by the inspector for interview but all employees are told beforehand how to answer the questions and if selected to be interviewed they are later paid a bonus.

Another major violation was the fire safety equipment. In order to pass, the factory had to have certain safety equipment in place which included fire safety stations. A station was installed at required locations but there is no water main to the factory from the city water main that can supply water to the hose station. It was a completely useless system installed only to pass inspection and provided absolutely no value for the safety of the employees. The factory works daily with some very flammable items such as solvents and paints, a major component of our production."

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