Future Investment Opportunity In China and current Labour Condition



Today china is one of the biggest economies in the world; the success story of today china starts from last 30 years, this success is fuelled by the low-cost labour, which influenced the foreign companies to come into china and keeping there cost low for ultimate user.

But in recent years china is facing problem in their labour market as the labour is start getting frustrating over the working condition provided by the local and MNC'S in china, specially if we look in recent months the GUANGDONG favourite city for investors, there are about 37 strikes came out between 25th may to 12th July.(economist ,2010)

As there is also need to improve the condition of workplace and more effort required to improve the condition of workplace and more training will be required.

China knows the strength of their economy that is their export, but its export is directly related to its cheap labour.

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Because of this strength china become the 2nd biggest economy with GDP $1.33tn with 10.1% growth per year, but many international companies who started their business some decades ago facing a problem with their labour, so more strikes being done by the labour, as a result the cost of the product is getting higher, as well as companies are realising that the labour force is getting older now.

The potential companies who are willing to invest in china still looking the situation and analysing the situation closely,

Background of study:

Economy of China is booming from last many decades, and report of many financial institutes declaring it a hot spot for the investment, in 2006 the FOREIGN DIRECT INVESTMENT is $ 78.095 billion which raise up to $ 147.791 in 2008 (world bank , world bank development indicator)

Chinese economy is growing with averaged of 9% from last 2 decades, this has increased due to the entry in WTO from china so the direct investment get increased but, this is not only because of the these steps taken by the Chinese government but the revolutionary steps like, welcoming attitude, the cheap labour (which is the biggest advantage of china) and the biggest population in the world, it mean for MNCs that a new consumers for their product and new worker who are cheap as well.

Such milestone been achieved by china, because of the cheap labour, low product cost, and consistency in the policy for the investors.

It is very important to analyze that if in future any situation arisen like the new labour condition like the strikes and wages and benefit get increase mean the costly labour, other some other company who are competing with china, as another hot spot for the MNCs, so how china will keep its edge over other and make it paradise for the MNCs.

Chinese Industry Back ground

In today economic environment, when every country is connected with other country directly or indirectly, it is not possible that if one country get affected from the problem in their economic the other won't, specially a country like china that have billion of import and export with other country.

Top countries exporting list from china:

United state = $ 162.9(+30%)

Hong Kong =$ 124.5(+23%)

Japan = $ 84 (+14%)

South Korea =$ 35.1(+26%)

Germany = $ 32.5(+37%)

Top countries importing list from china:

Japan = $100.5(+9%)

South Korea = $ 76.8(+23%)

Taiwan = $ 74.7 (+15%)

United States = $ 48.7 (+9%)

Germany = $ 30.7 (+1%)

(Source: us census bureau foreign trade statistics)

As statics shown that china have a great Import and export link with leading economic countries, who have definitely link with other countries so in case when china is facing a problem in its labour market where number of strikes being carried out by employees because of the different reason, then it is obvious that the related countries will get effected as well.

Specially in today scenario when the countries are trying to coming out of the recession it is very important the key countries must perform their economic activities smoothly, if this problem get bigger then it will be great disappointment for the MNCs and well as the Chinese Economy as well, and over all it will create imbalance to other countries exports and imports, so the companies need to look into their policy and procedures from time to time so as the government.

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If such problem will prevail more into the Chinese economy then in such case china will loose its important edge over its competitors that is cheap labour and ultimately the cost of the product will get increase, expensive product will make the export low and the profit for the MNCs will go down as well, in a result companies will try to locate them self in other countries where they can produce product having maximum profit.

So it is important that MNCs and the government official address the root causes of the problem and come into the reasonable solution, either long term or short term but futuristic approach should be adopted.

So the Question to be asked is that:

1- 1st thing we need to get answer's regarding the Investments like: Is china is still worth to make investment. (So we have to see what current ratio of investment is, we need to find that and factors influencing) If china is not that attractive, what are the reasons behind it? (Like said in introduction MNCs came into china because of cheap labour, one of main factor to influence investment)

Send question which are more related with the MNCS like: Cheap labour factor for the MNCs,(Is cheap labour is still cheap) New strength of china market for MNCs (Because of big achievement in past Chinese have more buying power now) Labour laws practise by MNCs and rights given to Chinese labour.(With the time, what companies have done to improve life o labour in Organization and out side?)


The aim for doing this research is to find the solutions of the problem as mentioned in question, to find answer is not only the aim, but to know why these issue came, what could be the alternate, how china can provide strength to keep edge on its competitors countries, like India and other countries in BRIC, how china could be different and still attractive for MNCs, the Main focus will be on the labour issues face by china as this is one of the main strength to keep china favourite for the investors.

If this edge will be gone what could be the consequences for Chinese economy, how the labour condition become better.

So we will try get into the causes and remedies for the problem.


1- This is a big challenge for the china to make his man-power not only the technically skilled for making them more valuable for the companies but these efforts will improve the relation between MNCs and Chinese Government and the peoples of china. So need to find the ways to improve the labour conditions

2- If such effort like improving working conditions for the labour and make them more efficient for the MNCs reviewing the labour laws and safety procedures, these efforts will make china labour multi skilled, this mean adding the value in your products, so what ways should be adopted to train and make them more valuable for the MNCs.

3-The investors like to get a labour who is more efficient and skilled, and specially when it come with no coat or less cost, its very important to keep the edge so the efforts made by government will make good impact on MNCs, government policies should be reviewed by the time.

4-So we gone see how the labour could be nourishes from layman to technical skilled and put more value by making it more valuable for the company and overall making the Chinese market more knowledgeable and getting edge to their competitors.


This is very important for me to look deeply into the Chinese economy, so the countries that are competing with china with different strength not be accessed in this project, similarly the other factors which influencing the Chinese economy the factor which are external will not be discussed with the great thought also not all the factor of Chinese economy will be scrutinised but the labour factor will be the main focus and policies and procedure.

I also gone look into how some MNCs are operating in china and what labour conditions they are facing and if any success they have got to solve the problem, and what type of solutions they have produced for the problems with labour conditions they have faced.

Outline design of the research:

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Literature review


Empirical data


Conclusion and implication

As shown in the picture how this step by step will be taken into the conclusion, as the introduction will provide the information what this research is all about, reason and purpose to do this research, while the literature review will provide the detail on the issues and related theories and their concept, this will be followed by the methodology where we gone a look into the approaches, data collection, process for data collection and analysing that data in the next stage we look into the empirical data it mean the example of such MNCs who had faced such related problem and what solution they come up with, causes of the problems and analyse them and try to compare them .

Analysis will be carried out by using the example and by better under standing of the problem and analysed them, as with the related theories and examples.

And finally conclude with the recommendation for every situation and alternative for the MNCs and long term and short term solutions.

Literature review and Citation:

China is a big country with the biggest population in the world, and achieving its goal comfortably from last decades, but now is the time when china need more divorce manpower as this is main edge in Chinese arsenal if they really want to compete in this BRIC environment.

GUANZI (c.645BC) said:

When planning for the a year, plant rice

When planning for decade, plant trees

When planning for life, train and educate peoples

(Source: Erasmus University Master Thesis)

So if a country with such a big foreign reserve about $2,648,300 Millions (source:http://www.forexhedgingstrategy.net)

It is important then to invest into the people's life and try to make a better working environment, but unfortunately it is not happening at the moment and as the companies are also facing a labour who is getting more aged now as three decades ago china have announced the one child policy and today it is not looking to suit the requirement, as recently china have announced that china 1 child policy will be continue fro next 20 year and then might be considered to lift it up.

As a communist country, the government have more responsibility to look after their peoples but by with drawing the policy mean more kids in the society and more pressure on the government to spend that what Chinese government is not ready up to now. Very recently china have announced the HENAN province have achieved the land mark of 100m of population, this population size is as similar to the Philippines, and government report said if there was no such policy to follow then the population of HENEN could be 33m more.

As the projected population for the china in future 1.39bn by 2015 (source: www.guardian.co.uk)

Another major problem which is faced by MNCs in today's china is the regular strikes from the labour, this is increasing the cost of and untimed deliveries to the second party, as the working conditions are not being up-graded by the MNCs, as the policy followed by the companies now being reviewed, the wages as compare to profits are not that good, on the other hand the fringe benefits are not being that attractive.

In recent month there are 37 strikes being carried out from 25th may to 12th July in GUANGDONG.

(Source: peoples daily)

Series of strikes being faced by some of the known MNCs like the HONDA, TOYOTA and FOXCONN.

Many source are warning Chinese government that it now time for china to move into another era, as the manufacturing model faced a turning point, it is because of the changes coming into the society demographically and social changes slowed the influx of low-cost labour.

So it looks a perfect time to shift from manufacturing sector to the service sector and create such opportunities and also to look to improve the quality in product and crating the value products.

The conditions for work should be getting improved, recently because of recent strikes in some major MNCs, some others companies are thing to improve their conditions and so the government is also looking into this things, and they have introduced the COMPULSARY EXERCISE for the labour by broadcasting the music from the radio, the timing are from 10am to 3pm and workers need to do just 8 min exercise in this time.

(Source: http://english.peopledaily.com.cn)

China migrant worker not demanding much but want a better environment to work in and reasonable wages as the, these migrant worker not only providing the cheap labour to MNCs but contributing highly in china economy, but the policy like hukou as this system is demotivating the labour, as this being introduced in 1958 to separate the rural-to-urban migration, this system not allow them to educate their children in the city as according to their system they have to send their children in the place they are registered, but how long they have to wait for this policy to change and end it.

(Source: http://english.peopledaily.com.cn)

Migrant workers are facing a great difficulty to work in these environments, but some companies who have changed their tactics and improved the working conditions and so as the wages, so the migrant worker sees to work in such organization; if not very soon but not very late I can hear a call for the change.

We will look into depth the theories, model and concept which are more relevant in such environment:

Like to analyse the inv investment is worth in such condition we can look into the

Top down investment theory

Bottom up theory

Diversification theory

Efficient market theory

Life cycle investment theory

Selling theory

But to look into the labour factor I will go to see, how the people's management and performance can be linked;

How we can motivate so look into the motivation theories (like Maslow, porter and Lawler), how the skill could be increased make them more valuable so we gone look into the theories like; Kolb's learning cycle, Senge's five learning discipline,

The rewarding system intrinsic and extrinsic,

These theories will make to setup such criteria which could be helpful the organization and to create better environment and Chinese government can pursue on that as well so to make their people life better.

Research methodology:

This is very important in any research to see facts and analyse them, the result should be not bias and working on the solution by keeping in view the good solution will be accepted not any one which close to your heart,

The out come will be accessed through some procedure and method, these methods make the picture clearer for the decision maker to understand the situation better; in this type of research there are two methods I will go to use as they are more effective in this situation, and there is a reason behind that as well:

First one is the Ethnography; as it involves participation from me physically, to look into peoples life that have served in the china and have a good experience working in china, specially some one having MNCs experience will make the things ideal and some very concrete experience date can be gathered.

By doing ethnography method in practice I will gone approach the documentaries about china and their conditions, while informal and formal conversation with the peoples having experience in china,

This method will help to understand to the behaviour of the employees and what they have understood by the MNCs environment and government policies, Ethnography
 study give a good view about peoples thinking and their cultural system both emic

As it is a very open process and not a rigid investigator but highly flexible and creative process.

As by adopting this process I can get good idea about the following things like:

How is job designed?

What type of risk being seen by employees or MNCs?

Rules and regulation followed by the companies?

Ethics followed by the co-worker or in the society?

How the employees being recruited and rewarded?

What are their views about training and wage criteria?

How companies can tackle with the new situations?

As the organizations have it own culture and society have their own culture then, you have to develop such culture which is more suitable for the organization and best for your employees as well.

This research method will give good understanding about the AIM, OBJECTIVE and the answer about your entire Question which are related with the Labour while to make it clearer I am another method that is surveys:

Surveys: surveys are more focused way of retrieving data but it is normally divided into two Questionnaires and interviews

Questionnaires are generally in the written format and this has been constructed in a way that one question will be related to other and you relate the one question with other but there are many format In question from the multiple choice to the fill in the blanks, choose the right answer, just to tick what is relevant or grading the answers from the given choices.

The most important is that every answer should be relevant to the topic and by the end the conclusion will be clear not disperse so it will make examiner to view a clear picture, more the picture will be clear more the policies made by the organization or suggestion will make work for the problem.

While the interviews are normally need to be more open approach and its not very constructive and in a very formal way you can ask for their contribution and some information which is not relevant can be feed into the details

Interviews also being conducted in group form as well as individual, but it must be assured that the person you are going to interviewed must have something what you are after not totally irrelevant person, like in this project the peoples who will get interviewed should have reasonable experience in china,

Data can also be collected from the surveys companies who already done surveys, regarding these kind of issues, might be it will helpful to you and might be some part of that will be helpful to you rather then whole, there also some articles and book which are written about the Chinese economy may get the answers and some online resources will help to understand the situation.

Another important thing is to convert such data into the numeric format which can be graded by getting the interviews and questionnaires.

When doing a grading of the information it needed to give grading on the basis of the relevance with the information you required.

When concluding it then you have to be understand that be ethical with the peoples you conduct interviews as they are helping you out and they are the source of information for you so have to respect them, they have a privacy about some of things might they share with you, respect is the prime responsibility for you, and most important the result should not be exaggerated and be factual about your finding. These finding will be result orientated and fruitful to build a concrete solution, for the problems.

If interview will be conducted first and then questionnaire will be constructed then it will provide far more constructive detail, about the information which is more related more useful and more result orientated

All the result will be then analysed in the light of theories which we gone use in this dissertation

These mentioned methods will make it easier to analyze the labour condition but to analyze the investment we need to look into:

What is the current policy for the investment especially for the MNCs?

There are some basic factors which influence the MNCs to invest in that country or not; factors like:

Capital availability


Regulatory Environment


Local Market and Business Climate 

Openness to Regional and International Trade

Every factor have its own importance but we will going to look deeply 3 of them the business climate , stability and regulatory environment and will find out what type of changes needed to be required in the different areas how, the recommendations will be done,

We also gone look into the example of TOYOTA, HONDA AND FOXCONN, who have recently got into trouble and look into how they have sorted the situation, or what type of support government can do for MNCs.

We will analysed in the end and conclude all in good format.


Time scale:

Schedule Tasks and details

Literature Search: started to look for topic on 13 July 2010, and after discussion with tutor, decided to start on china future investment opportunities and problem in labour sector, finalised my literature on 27 July 2010












Literature review: after getting finalise the topic just review it and start doing some research on it, how the matter is available is it in my reach to get information , started on 28 July 2010 and then finished it on 3rd August 2010

Data analysis and collection: collected the data in two gape because of other assignment and exams firstly 10 -15 August 2010 and then on 30 August - 20 September 2010, mostly date from library and online, and from different newspapers

Presentation: proposed date is 1st Nov, but requested to do it earlier as my marriage is due, done the slide already, almost covering my all points.

Surveys' and interviews: as coming form home country start doing surveys, as already pick the peoples who have china experience will not take long 1st Dec 2010 to 4th Dec 2010.

Surveys' analysis: as it is well constructed so to gathering it and do a conclusion won't take it long to put in for result, duration will be from 6th Dec to 10 Dec.

Start writing section: as the data I got it already so as the surveys and their analysis so only needed to start writing it down, needed to take days from 10th Dec to 18 Dec 2010.

1st drafting section: from 19 Dec to 22 Dec 2010, I will do 1st drafting and that will be thoroughly so, and thing needed to be amended will be amend, and have a good look to each and every thing.

Final drafting: final drafting wont gone take that long as it being done before thoroughly, so any fine tuning needed to be done will be done at this point and more focus on the presentation so it gone start on 23 Dec to 26 Dec 2010.

Finishing: finishing won't gone take a lot of time it should be done easily and with a good finish, careful about the binding requirements, just allocating 2 days for this from 27 Dec to 28 Dec 2010.

Submission: just have a last look and hoping that every thing will be according to the required standard and do the submission on 30th Dec 2010.