Where consumerism is king

Home of outsourcing - Clifford Coonanin Shenzhen, southern China

Driving through the industrial sprawl surrounding the boomtown of Shenzhen, China's wealthiest city, it's difficult to imagine anything being made anywhere else.

One of the shining stars in the world's most powerful industrial region, the Pearl River Delta, Shenzhen has a population of 15 million people by some estimations, and 13 million of these are migrant workers, many of them working in the thousands of foreign companies in the area. All the more incredible when you consider this was a city of 30,000 back in 1980.

Most outsourcing in China is done by Hong Kong and Taiwanese companies, but the number of foreign companies is not small - foreign investors, including Irish companies, have put €50 billion into this area in recent years and are outsourcing huge quantities of production to here and to surrounding areas such as Dongguan.

Lunchtime in one of the industrial areas of Shenzhen looks like a picture of the early years of the Industrial Revolution in the north of England in the 18th century, except the temperature is higher and the streams of thousands of workers thronging the thoroughfares are a decidedly cheerful bunch - the prospect of eating is always guaranteed to raise spirits in China. Most of the workers hail from the poorer provinces of Jiangxi, Hubei or Sichuan and they chat in a variety of dialects as they walk through the streets.

China is not out to compete with countries like Ireland on education and typically these are unskilled workers, with the minimum educational requirements if that. Where China wins out is in the simple fact that wages are low and labour is plentiful.

Salaries for a factory worker here average between 800 yuan (€75) and 1,200 yuan (€113) a month, once you factor in huge quantities of overtime and the fact that most people don't take days off.

"I work 10 hours a day, six days a week, sometimes seven days a week, in a garment factory," said one 23-year-old woman from Sichuan province, who says that by putting in the overtime, she earns a salary of close to 2,000 yuan (€188) a month. She is rushing to lunch in one of the enormous canteens set up to feed the workers. One Taiwanese company Foxconn, which makes motherboards for nearly all the mobile phone handset manufacturers in the world, has a quarter of a million workers around here and famously slaughters 6,000 pigs a day to feed its workers in the staff canteen.

Another two young printing factory workers pass by, pleased by the smart yellow uniforms they get from their joint-venture-owned employers.

"I work 12 hours every day, five days a week usually. I like the job, I'm pretty happy," says one of the women, who even peppers her answer with English words - a rarity in China. People have no time, or don't want, to give their names.

Most of the workers passing by are female, turning on its head the usual statistics about China's gender breakdown - 60 per cent of migrant workers are female. No one is worried at the prospect of their jobs going to other cities or countries - it seems inconceivable to them that a neighbouring country like Cambodia or Vietnam, India or some African countries could overtake China's position as a source for cheap labour.

There are 200 million migrants working in cities across China. However, the country is getting pricey. It is no longer the super-cheap venue for outsourcing production that it used to be, particularly in the established production areas around Shenzhen, where a labour shortage is emerging.

While it seems almost laughable that the world's most populous country, with a population of 1.3 billion, should have a shortage of workers, the labour ministry confirms that factories in the Pearl River Delta and the eastern Yangtze River Delta are short of millions of workers.

"The labour shortage is getting worse and getting more serious. In the past two years I've visited many factories in Guangdong and in the inland areas, all with shortage. Family planning and economic growth means we cannot provide enough labour because the scale of production down here is very, very big," said Liu Kaiming, executive director of the Institute of Contemporary Observation, a non-government organisation focused on migrant workers in Shenzhen.

But despite the labour shortage, companies are still slow to outsource to other countries. Not just yet anyway. Much is made of how garment factories are moving to Vietnam and Cambodia, but Liu says the vast majority are still in China.

"In one town in China, Jianying, there are over 1,000 companies operating in the textile and garment industry - the biggest factory has 5,000 workers. China is like three Cambodias rolled into one in just one town in terms of scale," he said.

While China remains an attractive venue for outsourcing, it is becoming more expensive. And also, firms are realising that association with a sweatshop tag can be a marketing nightmare. Shares in Apple were devastated by reports that one of its suppliers - a company associated with Foxconn - in southern China were underpaying their employees.

Sweatshops, including those using child labour still exist in southern China, although they are moving further inland to escape the attentions of increasingly vigilant state agencies.

Trade unions are banned in China and organising strikes can lead to imprisonment. But there have been individual incidents of industrial disputes at factories where workers call for more money or better conditions.

The internet means Chinese workers know more than ever before about wages, conditions and benefits and foreign firms are focusing more on corporate social responsibility (CSR) and monitoring after a number of high-profile public relations disasters. The recent experience of Mattel highlighted the risks inherent in outsourcing production without adequate monitoring.

The biggest toy company in the world was forced to recall 18 million made-in-China toys because of potentially dangerous magnets, just two weeks after it recalled 1.5 million toys over fears about lead paint, Although Mattel later said the problems largely were its own fault and had nothing to do with the plants making the toys, it did show just how exposed a foreign producer can be when making things in China - where 80 per cent of the world's toys are made with most of them come from Shenzhen and surroundings.

And it's not just toys - half of all finished industrial goods in the world come out of China and the country has been reeling from the impact of scandals involving tainted pet food, toothpaste, tyres, medicine and fish.

But despite rising costs and a growing number of scandals about quality control, it still makes economic sense for most companies to produce here. Shenzhen won't stop booming for some time yet.