Industry in China
From The Economist Mar 13th 2008
Where is everybody?
Manufacturers struggle in southern China's industrial belt
At first, the managers of the factories spread throughout Guangdong province thought the lack of returning workers
after the Chinese New Year break in early February was merely because they had been delayed by the huge blizzard
that disrupted rail and power lines, and left roads impassable. But now that the mess has now been cleaned up, it is clear
that the vast annual migration of around 20m people that has fuelled the manufacturing boom in southern China over
the past two decades is beginning to diminish.
The Guangdong Labour Ministry reckons 11% of the workers did not return after the holiday; other estimates are as
high as 30%. Whatever the precise number, many factories are reeling. Wages were already rising; now they will surely
go up further, adding to surging costs for credit, materials, energy, environmental compliance and health care.
Meanwhile, revenues are falling due to slowing demand from America and a reduction, following pressure from other
countries, in China's complex system of export subsidies.
A survey of conditions in southern China conducted in the aftermath of the Chinese New Year, covering 162
members of the Federation of Hong Kong Industries, produced reams of gloomy figures. Members estimated 10-20% of
the 70,000 factories in Guangdong province had closed in the past year, and expected a similar number to close within
the next two years. Two-thirds of those polled said they were unsure whether to invest more in the region; one-third
planned to cut investment. Only one respondent was optimistic.
To some extent the upheaval in southern China follows a government plan to force dirty, low-paying industries out
of business or into poorer interior regions that have so far missed out on the country's growing industrial wealth. The
hope is that the gaps in Guangdong will be filled by factories producing more sophisticated, high-value products that are
cleaner and less energy-intensive to produce. There are signs that this is indeed happening.
Factories are opening up in China's interior, providing opportunities for those in rural areas to find employment
closer to home, rather than having to leave their families for an entire year. This may explain the reduced flow of
migrant workers. At the same time, discriminating industrial parks are popping up in Guangdong and Suzhou, among
other places, that will only permit factories producing sophisticated electronics and medical equipment. The factories in
deepest trouble are said to be in low-cost, low-skill areas: toys, plastics, shoes, clothing and so on. Many are sweatshops
with poor working conditions.
Firms that provide relatively high wages and good working conditions do not seem to have problems attracting
employees. Nike's sneaker factory in Dongguang, one of the grimier sections of Guangdong, has 27,000 workers,
including 4,500 that have returned over the past year and 40% who have been around for at least three years. The
workers receive 1,400 yuan a month ($200), well above the minimum wage, receive subsidised food and (for the 7,500
living inside the factory) clean dormitories. Nike is not competing for the low end of the market: shoes produced in its
Dongguang factory can cost as much as $185 a pair.
But Nike has been steadily spreading manufacturing from southern China to the rest of the country, and the rest of
South-East Asia. Indeed, the idea of shifting away from China seems to be gaining adherents. A study by Booz Allen
Hamilton, a consultancy, on behalf of the American Chamber of Commerce in Shanghai, says more than half of foreign
firms believe China is losing its edge over other low-cost Asian countries, and 17% intend to relocate.
This shift will be a good thing, as production shifts to Bangladesh, Indonesia, Malaysia and even Africa, spreading
wealth and deepening manufacturing skills. Whereas China was once desperate to grow through exports, it is now
developing its own domestic economy and has other ways to thrive beyond merely producing cheap goods. But these
shifts are at the very least disruptive. Hundreds of thousands, if not millions, of unskilled workers still depend on
southern China's low-cost factories for their livelihoods.
And as the rusted hulks of manufacturing plants throughout the Western world attest, the transition to higher-value
products can be difficult. Clement Chen, the chairman of the Federation of Hong Kong Industries, says the Chinese
government is understandably clamping down on lots of dirty industries—leather tanning, dyeing, finishing,
electroplating, and the like—but that this can disrupt the broader manufacturing supply chain, including industries
China wants to develop. Business environments, like ecosystems, can be fragile—and once lost, competitive advantage
can be hard, if not impossible, to regain.
THIS ARTICLE, ENTITLED “WHERE IS EVERYBODY” IS TAKEN FROM THE ECONOMIST, MARCH 15 TH 2008.
READ IT CAREFULLY AND THEN DO THE EXERCISES. MAKE SURE YOU FOLLOW THE INSTRUCTIONS, AND
THAT YOUR WRITING IS LEGIBLE. DO NOT PRINT. REMEMBER TO PUT ALL YOUR ANSWERS ON THE
SECTION A TASK: To get the general meaning of the passage in spite of the fact that you do not understand all
the words. Extract the necessary information from the text and add ONE appropriate word to finish the
following sentences and make them reflect the same meaning as in the text.
After the Chinese New Year holiday not as XXXXX workers as usual returned to their factories in the
At first the managers thought that this was XXXXX of the blizzard, which had interrupted both road and rail
However, they were not right, because between 11% and 30% of workers are XXXXX not to have returned at
This means that wages are sure to XXXXX, adding to the already soaring costs of credit, materials, energy,
respect of the environment and health care.
5 A further problem is that demand from America has XXXXX, together with exports to other countries.
A recent survey reports that many of the members of the Federation Hong Kong Industries have lost
confidence in XXXXX more in the region.
7 Yet, what is happening to industry in southern China is partly XXXXX to a government plan.
8 Dirty low-paying industries are being XXXXX to close or move to poorer inland areas.
The government wants more sophisticated cleaner, less energy intensive factories turning out high-value
products to XXXXX in the gaps in Guangdong.
The factories opening inland may be one of the reasons XXXXX the migrant workers not returning after the
New Year Holiday.
In new industrial parks in Guangdong, only factories producing sophisticated electronics and medical
equipment are XXXXX.
12 The traditional sweatshops with poor working conditions by now attract XXXXX employees.
XXXXX Nike has no problems, it is already spreading manufacturing from the South of China to the rest of
14 And furthermore many foreign firms are thinking of XXXXX to other low-cost Asian countries.
15 If production shifts to Bangladesh, Indonesia, Malaysia and Africa, wealth will be XXXXX.
16 Such shifts will also XXXXX manufacturing skills.
17 XXXXX that China is developing its own domestic economy, it no longer needs to just produce cheap goods.
Yet the cost of such shifts is high, XXXXX millions of unskilled workers depend on South China’s low-cost
The government is actively discouraging dirty industries, XXXXX can also be disruptive socially and
20 Business environments, in fact, can be as fragile XXXXX ecosystems.
SECTION B TASK: To understand what is implied in the text. Read the text again and then decide if the
statements below correspond to what is being said or implied. Then put TRUE or FALSE in the column
The reduction in the number of migrant workers returning to southern China is the main cause of the
22 What the government aims at is a re-qualification of industry in areas like Guangdong.
23 Dirty industries are being forced by the government to close or relocate to poor areas inland.
24 More than half of foreign firms now in China intend to relocate to other low cost countries in the region.
25 There are both negative and positive aspects in re-qualifying industry.
SECTION C TASK: To find the meaning of unknown or unfamiliar words used in the text. Match the word
taken from the text with the most suitable definition in the opposite column.
26 struggle A covering
27 spread throughout B snow storm
28 break C have difficulties
29 blizzard D fed, supplied the material for
30 mess E respect of regulations about the environment
31 fuelled F in a state of shock
32 reckons G confusion
33 reeling H sharply rising
34 surging I holiday
35 environmental compliance J calculates
36 aftermath A lots
37 reams B degree
38 polled C sudden change
39 extent D appearing
40 upheaval E illegal workshops
41 missed out on F dirtier
42 popping up G constantly
43 sweatshops H period following
44 grimier I not taken part in
45 steadily J questioned
46 shifting A colouring
47 its edge B curing
48 relocate C forbidding
49 thrive D wider, more ample
50 rusted E transfer
51 hulks F covered with rust
52 clamping down G its superiority
53 tanning H moving
54 dyeing I prosper
55 broader J remnants