Chinese Workers Pay for Wal-Mart's Low Prices

By Peter S. Goodman and Philip P. Pan, Washington Post, Sunday 8 February 2004; Page A01

SHENZHEN, China—Inside the factory, amid clattering machinery and clouds of sawdust, men without earplugs or protective goggles feed wood into screaming electric saws, making cabinets for stereo speakers. Women hunch over worktables, many hands bandaged and few covered by gloves, pressing transistors into circuit boards.

Most of the 2,100 workers here are poor migrants from the countryside who have come to this industrial hub in southern China for jobs that pay about $120 a month. A sign on the wall reminds them of their expendability in a nation with hundreds of millions of surplus workers: If you don't work hard today, tomorrow you'll have to try hard to look for a job.

The calculations driving production here at Shenzhen Baoan Fenda Industrial Co. are no different from those governing global capitalism in general—make more for less—but it is applied with particular vigor on this shop floor. Sixty percent of the stereos coming off the line are for one customer: Wal-Mart Stores Inc., whose mastery at squeezing savings from its supply chain made it the world's largest company.

The profit is really small, said Surely Huang, a factory engineer, speaking of the 350,000 stereos that Fenda agreed in March to supply to the retailer for $30 to $40 each. Huang said they sell for $50 in the United States. We have to constantly cut costs to satisfy Wal-Mart.

Yet this factory and thousands of others along China's east coast have decided, with China's leaders, that the deal is worth the price. Wal-Mart provides access to vastly more store shelves than they could ever reach by themselves, a way to build a brand from Fort Worth to Frankfurt. Meeting Wal-Mart's strict requirements could improve the factory's efficiency and make it easier to land contracts from other major retailers.

As capital scours the globe for cheaper and more malleable workers, and as poor countries seek multinational companies to provide jobs, lift production and open export markets, Wal-Mart and China have forged themselves into the ultimate joint venture, their symbiosis influencing the terms of labor and consumption the world over.

With sales of more than $245 billion a year, Wal-Mart is the largest retailer in the United States, still the ultimate consumer market. China is the most populous country, with 1.3 billion people, most still poor enough to willingly move hundreds of miles from home for jobs that would be shunned by anyone with better prospects. The Communist Party government has become perhaps the world's greatest facilitator of capitalist production, beckoning multinational giants with tax-free zones and harsh punishment for anyone with designs on organizing a labor movement.

More than 80 percent of the 6,000 factories in Wal-Mart's worldwide database of suppliers are in China. Wal-Mart estimates it spent $15 billion on Chinese-made products last year, accounting for nearly one-eighth of all Chinese exports to the United States. If the company that Sam Walton built with his Made in America ad campaign were itself a separate nation, it would rank as China's fifth-largest export market, ahead of Germany and Britain.

Back in its home market, Wal-Mart's vast appetite for Chinese imports has placed it at the center of a sharp debate over whether the influx of low-cost products from China is good for Americans.

Domestic manufacturers, labor groups and some politicians point to China's record trade surplus with the United States, estimated to have totaled $120 billion last year, and accuse Beijing of manipulating its currency, condoning the exploitation of its workers and competing unfairly, resulting in the loss of U.S. manufacturing jobs.