The Default Line: THE INSIDE STORY OF PEOPLE, BANKS AND ENTIRE NATIONS ON THE EDGE (16 page)

Deng Zhi’s life is typical of the 262 million migrant workers who cross the length and breadth of China to work seventy-two-hour weeks, for £100 a month. Together, they form the biggest human migration on the planet, a monumental demographic shift of a quarter of a billion people in search of work, every year, 166 million moving thousands of miles to different provinces. They are the invisible labour force whose efforts have underpinned rising living standards in the West, and the rising influence of China around the globe.

You can trace the roots of this extraordinary phenomenon back to the beginning of this century, when the Great Migration was sparked by the loosening of restrictions on rural migration. The numbers of migrant workers had been static at 60–70 million during the 1990s. But in the first decade of the twenty-first century their number trebled to a size bigger than the workforce of the USA or the European Union. Soon Chinese migrant workers alone will exceed the combined workforce of the USA and Eurozone.

After Chinese New Year, the nation’s rural transport hubs swarm with migrant workers returning to the cities. On a packed bus from Zhugao sits Zhang Youwen, who also works in Dong Guan, in a rubber factory. His wife Li Chun Rong has just lost her job in a shoe factory. ‘We make money for our two children and our parents,’ Li Chun says. ‘We need to save for our own old age too. We don’t dare to spend money. We have to send our children to school and take care of our parents. Everything costs money.’

That is the double whammy of the Chinese system: enough communism for there to be no pensions, no life insurance, no health insurance, for most workers; and enough capitalism for there to be no unemployment insurance and no welfare state. Between the rock of undeveloped financial services and the hard place of a limited welfare state, Chinese migrant workers are motivated to serve the factory owners.

At the roundabouts that separate the rows of factories in Dong Guan, dozens of migrant workers gather in the New Year chill. With one hand they drag a wheelie suitcase, packed with their belongings. In the other, they hold their
hukou
card, a precious piece of ID to be shown to their prospective employers as they make the rounds of keyboard factory, shoe factory and toy factory, asking for work. In 2006, Communist Party officials from Jintang County in Sichuan set up an office to persuade the factory-owners of Dong Guan to take on their youth. Banners outside some factories invite wandering migrant workers to apply for jobs at under £150 a month, and sometimes specify 18–35- year-old females, who are less trouble.

The
hukou
system is crucial. All workers need this purple, passport-style document (formally known as the ‘Household Register’), which is issued at birth by the Ministry of Public Security. The system severely curtails rural workers, or
nongmin
, from access to basic facilities in the city: no housing, no pensions, little health coverage and no educational rights. The children of rural
hukou
-holders are not even allowed to take national college entrance exams in the cities where their parents toil. Instead, they are forced to travel hundreds, even thousands, of kilometres to their rural homes if they want to continue their education after the age of sixteen.

For its critics, the
hukou
system acts as a kind of apartheid that allows discrimination against and abuse of a large chunk of China’s population. This is effectively a form of twenty-first century serfdom, for the benefit of factory owners, the Chinese government, and consumers in the West. But its supporters say China needs
hukou
as a tool to control its massive internal flows of human migration. They point out that China’s major cities do not have the mass homelessness and sprawling slums found, for example, in India.

There may not be mass homelessness or sprawling slums in China’s industrial cities, but for China’s migrant workers the outlook is far from rosy. When I visited China in 2009, at the height of the global financial crisis, in the fraught months following the collapse of world trade, the reverberations were visible in the streets of Dong Guan.

I spoke to a young woman sitting outside a factory waiting to hear about her job application. ‘I first looked in Shenzhen,’ she tells me. ‘It’s difficult to find work now. It used to be easy to go and work in a factory. Not the same now. We’re still waiting to hear from the factory. If we can’t find work here, we’ll go look in Guangzhou. We won’t go home.’ An older woman tells me: ‘I worked here for three days. They don’t want me. I’ll go look at the factory down the road. I won’t go home. My cousin works in the factory over there. I’ll go work there too.’ A security guard describes scenes worthy of Dickens at his bleakest: ‘Every day, there are workers coming and going from this factory. They hire workers for about a week. If they don’t work hard enough, they let them go.’

At a job agency in Dong Guan, desperate migrant workers such as Yi Bin, also from Sichuan, look forlornly for employment. He used to work in factories making toys and electronics, but has had nothing for two weeks. ‘I have no social security,’ he tells me. ‘Some factories provide a little security but not enough. If I don’t work, I have no income. I’ve been spending my savings in the last two weeks. We have lands at home [back in Sichuan]. We don’t go hungry. It’s just that we have no money to spend.’ Yi Bin is fairly philosophical about his circumstances. Again, though, he is working almost entirely to send £1,000 back per year for his children’s school and his parent’s pension. ‘I made about 1,500 RMB [renminbi] a month last year. Before that, when the economy was good, we could make over 2,000 RMB a month. Last year, many factories laid off workers and offered lower wages. We expect even lower wages this year. It’s normal. The prices are not lower though. It’s a bit of pressure on us,’ he says. At this point the boss of the job agency turns up. He looks down at Yi Bin and two of his friends, barking questions about their experience and what wage they would be willing to work for.

Here, in nominally Communist China, this is what an extreme free-market labour force looks like. There are very few social protections, and workers are hired and fired at will. Wages are entirely dictated by supply and demand for workers, and for the products they produce. Europe and North America did not just outsource production, they also outsourced the sharpest edges of the free market. It can be no mystery that workers save as much as they can.

Despite the cut-throat nature of the labour market, people keep flooding from the fields to the factories. As Yi Bin told me, ‘It’s impossible for me to go home to farm. I haven’t farmed for years. It’s better to learn a skill and work in the cities. Farming makes no money at all. If we stay on the farm, the whole family would work all our lives just to have enough grain to feed ourselves.’

The appropriate response from us in the West to all the rural Chinese workers who have flocked to the cities should be first and foremost ‘Thank You’ – although with some caveats. This enormous and industrious workforce underpinned the growth in living standards during the Great Boom in the West. But this ready supply of workers also created a new type of demand.

In 2000, China was the seventh-largest goods exporter in the world, with a modest share of under 4 per cent of the total. It quickly reached the number one spot. China’s annual growth rate, already at 8 per cent, went stratospheric, peaking at 14 per cent at the height of the world boom.

Container ships are the juggernauts of global trade. In the five years after China joined the WTO in 2001, the number of containers on ships coming in and out of China doubled from 40 million to over 80 million. By 2011, a decade after China joined the WTO, the number of containers going in and out of China had more than trebled to 129 million. Around half of the containers going into China were empty, whereas nearly all those leaving China were full of exports. Already by 2003 the traders of ship capacity noticed that there was no capacity left.

There were simply not enough ships. And the ships that existed were not big enough. The biggest container ships on the planet at the time of China’s WTO accession belonged to the Sovereign class, which each held the equivalent of 8,000 containers. In November 2006, when the 400-metre
Emma Maersk
visited Felixstowe harbour it was laden with 12,500 containers, all of them filled with Christmas gifts made in China. By this point, shipbuilders had given up bothering to ensure that ships could fit through the Panama Canal. All that mattered was the Suez Canal and the vital Asia–Europe shipping route. By 2013, ‘Triple-E’ class vessels were carrying the equivalent of over 18,000 containers from China to northern Europe.

Not only was there not enough capacity to carry China’s exports, there was not enough capacity to make the ships that might in the future carry China’s exports. China itself went from building 100 vessels in 2001 to more than 1,000 in 2010, as global banks piled in to fund existing dockyards. China briefly overtook South Korea as the world’s number one shipbuilder. Speculation ran amok, and there emerged an insane bubble in the price of any greenfield land close to a navigable river that might at some point in the future be used to build ships to carry goods. Prices were being quoted not only for cargo ships that did not exist, but also for the non-existent dockyards that were supposed to build them.

But it is not all smoke and mirrors. In modern mega-ports such as Shanghai, China has given concrete expression to the reality of its export drive – as I found when I drove along Expressway S2. Leaving the neon-lit skyscrapers, the magnetically levitating train and the bright lights of the Shanghai Bund behind me, I followed the six-lane expressway as it snaked 30 kilometres out into the depths of Hangzhou Bay. On a map, it looks like a ridiculous mistake, a bridge to nowhere. But the Donghai Bridge, the world’s longest at sea when it was opened in 2005, is an umbilical cord for Chinese intercontinental trade. The great fear for ordinary Chinese truckers is breaking down along the sea bridge. The only licensed tow truck has been known to charge thousands of yuan for a rescue.

The bridge connects Shanghai to China’s newest gateway, itself a remarkable symbol of China’s economic transformation. In 2000 there was almost nothing here. Yangshan comprised three rocky barren islands, where the only economic activity was fishing. By 2005 the gaps between the islands had been filled in and turned into a giant artificial landmass, hosting one of the world’s biggest container ports, reclaimed from the East China Sea. The Yangshan Deep Water Port had to be so far out to sea because Shanghai’s river port is shallow and surrounded by mud flats, whereas the biggest modern cargo ships need water at least 15 metres deep. After just half a decade of operation Yangshan now handles more containers than Shanghai’s river port did, yet that port has also continued to grow. A terminal for receiving liquefied gas has also been constructed at Yangshan.

Port authorities are reclaiming more land from the deep ocean, helping Yangshan grow exponentially and the Shanghai ports overtake both Hong Kong and Singapore as the world’s largest container port. The ambition does not end there. As part of the central government’s twelfth five-year plan a new city is to be built on the land side of the bridge, with metro connections, a power station, and an entirely new financial centre for global shipping. Yangshan is just one example of China’s investment in freight infrastructure. There has also been a massive expansion of China’s highway network, which increased from 4,700 km in 1997 to 25,100 km in 2002 and to 96,000 km in 2012.

In addition to a state-of-the-art freight infrastructure, China also needs materials such as metals, minerals and fossil fuels to support its manufacturing boom. One key material is steel, essential to China’s burgeoning automotive and electrical-appliance industries. In 2005 China became, for the first time, a net exporter of steel, and has since become the world’s largest exporter. Through the 1990s, China’s production of steel had hovered at around 100 million tonnes per year. After WTO membership, it exploded to around 500 million tonnes by 2008. By 2012 it had topped 700 million tonnes. China now accounts for 50 per cent of world production. It now produces more steel on its own than the rest of the globe managed together, just ten years ago. The same goes for ceramic tiles, and plenty of other ingredients of industry.

The cost of shipping dry raw materials, such as iron ore and coal, quadrupled in the two years following China’s WTO membership, fell back a little, and then quadrupled again before the peak of the boom.

The Great Migration of rural workers combined with the Great Mobilisation of logistics and infrastructure – these have been the two core Chinese contributors to the mega-boom in the developed world, which has seen the cost of consumer goods tumble. Since 2000, these epic transitions in China’s economy have transmitted cheap prices out from mainland China, along the length of the Donghai Bridge, through ports such as Yangshan into the world’s container ships and so into the shops, living rooms and ultimately the wallets of the Western world. In electronics, clothing, toys and furniture, China has become the dominant source of supply, forcing down export prices all around the world. Economists noticed a ‘once-for-all’ shock in global prices following China’s WTO entry.

China’s clothing exports doubled between 2000 and 2005, and its share of the value of global trade went from one-fifth to one-third. After 2005, production quotas in the textile industry were also lifted, leading to an even bigger production shift to China. In 2000, the Dominican Republic and the Central American Free Trade Area were the biggest exporters to the USA, accounting for 14 per cent of US imports, as compared to China’s 13.3 per cent. By 2009, China’s clothing exports to the USA had destroyed all-comers, trebling to just under two-fifths of US imports.

What did this massive transition look like on the ground back in China? About four hours’ drive around Hangzhou Bay from the Donghai Bridge is Shengzhou, known as ‘Tie City’. If you wear a tie, it was probably made here. Two in five of all the ties made in the world come from this town: 350 million fat ties, skinny ties, silk ties, even washable ties. While schools in the USA bulk-order their ties from websites for less than a dollar each, workers in Shengzhou are paid much less than a dollar for an hour of work.