Strolling along Shanghai's bustling Nanjing Road, it's hard to find a badly dressed shopper amid the Giorgio Armani boutiques and Salvatore Ferragamo shoe stores, let alone anyone dressed in a Mao suit. And while the leadership still espouses communism as its political driving force, a multinational company ignores China at its own peril as a huge, not yet fully tapped market that offers a seemingly infinite supply of cheap labor. Or can it?
On the subcontinent, meanwhile, India's economy had started taking off at a hitherto unprecedented level as the country opened up its economy to foreign investors in 1990. Since then, there has been a surge not only in India's information-technology sector, but also in other sectors as well.
There are, however, some rumblings that other countries could push out or at least compete fiercely with both China and India for their recent steep climb in the world economy. There is growing concern among some analysts that as businesses seek ever-cheaper laborers, Chinese workers may actually become too expensive.
Likewise, there is wariness amongst some business executives as well as economists that India's call centers which allow U.S. and British companies to provide phone information services to customers at a fraction of the price of employing people back home, may actually not be as cost-effective as once thought.
In the case of China, international businesses ranging from semiconductor manufacturers to plastic toy makers have been flocking to the country since the 1980s when the government began opening up markets to foreign investors, in part to target their products to the 1.3 billion population. Yet the bigger objective has been to lock in laborers who would work longer hours for less pay.
Of course, the search for low-wage workers had been the initial incentive for U.S. manufacturers to relocate to Mexico following the signing of the North Atlantic Free Trade Agreement a decade ago. U.S. companies were eager to take advantage of Mexican factory workers who earn about $$@$!3,300 a year without bonuses and benefits, a fraction of what workers in the United States make. Yet the foreign-owned factories, or maquiladoras, had become victims of their own success, as workers in those manufacturing plants saw their incomes rise 86 percent for an average of $$@$!6,490 per annum over the past five years.
That, in short, has become too costly for many foreign companies, particularly as the average skilled Chinese worker is willing to offer their services for about $$@$!2,000 a year. Reflecting in part the attractiveness of cheap labor, the Chinese Ministry of Foreign Trade and Economic Cooperation reported that foreign direct investment rose 19 percent last year to $$@$!24.6 billion. In fact, China topped the United States as the most attractive destination for foreign direct investment in 2002, according to a private survey of executives at the world's 1,000 biggest companies.
But now, some companies particularly in the textile sector are eyeing Vietnam and the Mekong River region as a cheaper alternative to China, as Vietnamese workers on average are willing to clock in even longer hours for about half the pay of their Chinese counterparts.
Likewise, even though there is some concern that call center operators in India cannot adequately address customer needs, the general trend appears to be that technical support jobs are being lost to Asia too. Granted, computer maker Dell decided in November to stop using Indian operators for customer services and instead relocate those jobs back to the United States, the fact remains that 250,000 U.S. call center jobs have been lost since 2001, according to Technology Marketing Corp.
India too is facing more competition from countries like the Philippines, Malaysia, and even Botswana, who are willing to work for similar wages as their Indian counterparts but can often identify with the customers calling in with their less distinctive accents, according to industry analysts.
Whether China will continue to dominate as the factory nation to the world, or whether Indian phone operators will take on more and more jobs that were previously based in U.S. and British phone centers, one thing is certain. As world markets become more and more accessible, businesses will continue to seek ever-cheaper labor to ensure lower costs. And that means the exodus of manufacturing and lower-skilled white-collar jobs from industrialized countries will only increase. The only question that remains in the years ahead is which countries will be able to offer the cheapest, most reliable labor.
