Neoliberalism ‘with Chinese Characteristics’

merely needed to import the machinery and the technology and

gain access to markets (with Hong Kong conveniently obliging). It

could use its cheap labour to great competitive advantage. Hourly

wages in textile production in China in the late 1990s stood at 30

cents compared to Mexico’s and South Korea’s $2.75, Hong

Kong’s and Taiwanese levels hovering around $5, and the US’s

cost of more than $10.

33

 Chinese production was, however, largely

subservient in the initial stages to the Taiwanese and Hong Kong

merchants, who commanded the access to global markets, took the

lion’s share of the trading pro

fits, and increasingly achieved back-

ward integration into production by buying out or investing in the

TVEs or SOEs. Production facilities employing as many as 40,000

workers are not uncommon in the Pearl River delta. Furthermore,

low rates of pay make capital-saving innovations possible. Highly

productive US plants use expensive automated systems, but

‘Chinese factories reverse this process by taking capital out of the

production process and reintroducing a greater role for labor’. The

total capital required is typically reduced by one-third. ‘The com-

bination of lower wages and less capital typically raises the return

on capital above the US factory levels.’

34

Incredible wage labour advantages of this sort mean that China

can compete against other low-cost locations such as Mexico,

Indonesia, Vietnam, and Thailand in low-value-added production

sectors (such as textiles). Mexico lost 200,000 jobs in just two years

as China (in spite of NAFTA) overtook it as the major supplier of

the US market in consumer goods. During the 1990s China began

to move up the value-added ladder of production and to compete

with South Korea, Japan, Taiwan, Malaysia, and Singapore in

spheres such as electronics and machine tools. This occurred in

part as corporations in those countries decided to move their pro-

duction o

ffshore to take advantage of the large pool of low-cost and

highly skilled labourers being churned out by the Chinese uni-

versity system. Initially, the biggest in

flow came from Taiwan. As

many as 1 million Taiwanese entrepreneurs and engineers are now

thought to be living and working in China, taking a lot of produc-

tion capacity with them. The in

flow from South Korea has also

been strong (see Figure 4.4). Korean electronics corporations now

have substantial operations in China. In September 2003, for

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