Wal-Mart's China operation a study in contrasts
Workers at many of the factories that supply goods to the stores can't afford to shop there
Vanessa Hua, Chronicle Staff Writer
Wednesday, December 29, 2004
Dongguan, China -- Inside this toy factory in southern China, childhood memories are born. Cuddly bears, soft pastel bibs, blankets are midwifed by migrant workers who see their own babies but once a year.
Row upon row of workers at Germton Enterprises in this huge new industrial area of China make thousands of such products. Most are bound for Wal-Mart and other retailers around the globe that rely on this cheap labor.
Just a few miles away, middle-class shoppers cruise Dongguan's brightly lit, well-stocked Wal-Mart. Here they find American products like Pantene shampoo, Johnson's baby milk-bath and Disney infant clothes. Yet here, too, shoppers pick up medicinal deer antler, live turtles and Greatwall Cabernet Sauvignon.
The Wal-Mart illustrates China's paradox: The global chain stocks its shelves with goods churned out by Chinese manufacturers like Germton, yet few of its factory workers can afford to shop there. In the past two decades, the standard of living in China has risen dramatically after the government began economic reform. But progress has been uneven, divided along geographic and social lines.
Dongguan, two hours north of Hong Kong in the Pearl River Delta of Guangdong province, is thick with thousands of factories that line the roads. Dongguan, with a population of 7 million, has more than 14,000 companies backed by foreign investment and 8,000 domestic enterprises. For 2002, total exports from the area reached $23.7 billion.
In two decades, the farming area has been transformed into factories, gated housing developments, golf courses and upscale shopping malls.
In 1989, Andy Hung, Germton's general manager, and a business partner set up the Dongguan factory at a cost of $2 million.
Germton, whose name in Chinese means fertilized land, makes goods sold at Wal-Mart and Kmart, churning out toys for companies such as Mattel, Play- skool, Fisher Price, the Learning Curve, Baby Einstein and Tiny Love. Today, Hung's factory has about 4,000 employees who work six days a week -- 3,500 factory workers and 500 management and administrative staff. The factory workers earn about $120 per month, while managers and others earn $300 to $2, 000 per month. The average monthly wage for factory workers in the coastal province is about $100, economists say.
This year, Germton is expected to reach $30 million in sales, with about $8 million to the United States.
Germton opened its first U.S. sales office in 1995 in South San Francisco. By having offices here, the company can keep track of trends and maintain better relations with its buyers, Hung said.
Hung picked the Bay Area because a cousin he grew up with immigrated here and could help him set up the office. A framed oil painting of the Marin redwoods, purchased at Fisherman's Wharf, hangs in his office in Hong Kong.
United Commercial Bank in San Francisco opened a line of credit for Germton, a key to the company's expansion.
Germton's factories, dormitories, medical clinic, library, ping-pong tables, traditional shrine, and English and management training classes are all behind a gate. Across the street are vegetable fields ringed by more factories.
Inside the factory, workers labored over sleeping mats, stuffed animals, tiny colorful socks, blankets covered in leaping sheep -- the most intimate items of childhood.
A man stuffed fluff into a deflated brown bear. A chain of Tiggers sprang from another sewing machine. Another man stamped yellow buttons onto bibs trimmed in red. A line of masked workers silk-screened layer upon layer of color, until the image emerged -- Winnie the Pooh, lying on his belly, shaded by a circus tent.
Worker Yang Chui-Ping, 37, earns between $84 and $96 per month sewing stuffed animals. She sends about $604 home each year to support her two teenage daughters and husband, who runs a men's clothing store in Sichuan province, about 40 hours away by train.
Yang has heard of Wal-Mart, but said she has never has been there. But she's proud that many products sold worldwide are made in her homeland.
"China is developing and become more and more powerful," she said in Mandarin over lunch in the company's cafeteria.
Her family has a television, and her husband even has a cell phone. Someday, maybe in the next three to four years, Yang said, she can return to open a shop with her husband. She is saving to buy a beautiful house, she added, to replace the concrete one where the family now lives.
In 2003, Wal-Mart purchased $15 billion worth of Chinese goods made by factory workers like Yang. The retailer accounted for about 10 percent of China's exports to the United States. Within the next five years, Wal-Mart expects to buy $25 billion to $30 billion worth of products from China.
With China's entry into the World Trade Organization, foreign investment is expected to flow into less-developed areas of China as companies seek new areas to build factories. Some worry that the new development will drive down wages in factory centers such as Dongguan.
At the same time, low-cost agricultural imports such as soybeans from the United States are likely to cut into peasant income, creating more pressure for farmers to seek employment in the cities. Their migration will expand the labor pool and could cause wages to decline, labor advocates say.
China's middle class traces its roots to the mid-'70s, when economic reforms began. In the countryside, new policies dissolved communes and increased the price of agricultural products, narrowing the gap between urban and rural residents. Urban reforms included closing many state-owned enterprises, along with reducing job security, medical care and pensions. But at the same time, both state and foreign investment has enriched cities.
Urban professionals are prospering in real estate, communications, engineering, advertising and other emerging fields, with opportunities for good pay and quick promotions.
"They have a chance to expand their life," said Xiaobo Hu, a research fellow at Stanford University's Hoover Institution.
On a rainy Saturday afternoon in Wal-Mart, Niu Zhi-Yuan, 28, shopped for children's socks. The prices and quality are good, the accountant said through a translator. The service is also better than at other retailers.
"More smiles," she said.
She and her husband, a finance manager, moved from Jiangxi province about seven years ago, because Dongguan had more opportunities and higher wages.
Niu shops at Wal-Mart once a week. Her son and his grandmother go to Wal- Mart every day to walk around because there are no playgrounds nearby and she thinks the store is a safe, familiar place.
In the grocery section, Zhao Ying, 31, fished for live prawns with his 4- year-old son, Do Do.
Behind him, a butcher hacked away at a pig hanging on a meat hook while buyers called out their orders.
Wal-Mart is not the cheapest option, Zhao said, but he likes the convenience and the parking. His son also likes the toy factory on the top floor of the mall, Zhao said.
Wal-Mart is betting on this growing class of shoppers. The retailer now has 43 stores in 20 cities in China, with 21,000 employees. It plans to open an additional 10 to 12 stores in 2005.
In 1996, Wal-Mart opened its first store in China, in Shenzhen. Although the stores feature the familiar red uniforms and smiley-face logo, the quintessential American retailer is also learning to do as the Chinese do.
In the United States, Wal-Mart's signature greeters are often senior citizens. But in China, where there is great respect for the elderly, the greeters are much younger. In southern China, customers like to eat turtle soup during the winter, so there are big bubbling tanks of it in the stores, just like the markets in San Francisco's Chinatown.
About 95 percent of Wal-Mart's products in its China stores are locally made.
"We have a small number of stores compared with the customer base. We see huge growth potential," said James Lee, vice president of corporate affairs in China, citing the country's population of 1.3 billion. "We're excited."
Much of that growth is likely to come from the emerging middle class, like the staff and management at the Germton factory.
After a six-day work week, three women employees feasted on huo guo, or hot pot, dipping mushrooms, slices of beef, chicken, rice noodles, fish balls and green vegetables into the boiling spicy broth.
After dinner, they headed to a club where they clinked bottles of San Miguel beer.
These young women in their 20s can have meat whenever they want. It's a contrast to their childhoods, when they ate meat only once a year, at Chinese Lunar New Year. Angel Fu, 25, moved to Dongguan after graduating from college because she heard the city had jobs. The daughter of factory workers, she rode 44 hours by train, in a seat instead of a sleeper to save money. She is an executive who oversees workers and training. She summed up China's economic gains in her lifetime:
"Yi qian, wo men chi bao. Xian zi wo men chi hao," she said.
"In the past we ate our fill. Now we eat well."
E-mail Vanessa Hua at vahua@sfchronicle.com.
sfgate.com |
