How Social Changes in China Can Have Big Effects on Your Business

News Flash #1:

The maker of Apple's iPhone, Foxconn, a Taiwanese-owned company with major manufacturing facilities in China, made top headlines in the past few days as riots broke out inside one of its factories in China. It started with a scuffle with the security guards and some young workers. It then boiled over to involve more workers that took violent actions to express their frustration and displeasure at the security guards and eventually took 5000 police officers to quell the riot. The factory was closed temporarily as a result.

News Flash #2:

One of the biggest news that everyone in China was talking about in the last few weeks is the contentious dispute with Japan over a group of uninhabited islands called DiaoYuDao. China, Japan and Taiwan all have claimed it to be theirs, and suddenly the Japanese government purchased the island from its private owner and "nationalized" it. This prompted national outcry in China over Japan's "invasion of Chinese territory". One of the surprising developments of this incident is that the population reacted so strongly that it appeared to have had an effect in pushing the Chinese government to take a firmer stance on the issue. While the dispute is still going on, Japan admits it at least had underestimated the strong response from China.

These events highlight the ever-changing society in China today, not just economically, but also socially. And understanding these social trends is a critical part of doing business with China.

Generational Cultural Difference

Behind the Foxconn incident are the growing generational cultural differences in China today. The younger generation labor force is increasingly emboldened to express their opinions and standing up to injustices. These workers are usually in their early twenties and have grown up in the economic boom time that offered new opportunities as well as new ideas. They are less docile and less willing to accept the rigid and tough working conditions than the older generations. In addition, especially for those who have gained some work experience, the labor shortage in China also allows them more freedom to pursue better opportunities.

Such phenomenon has direct implications for foreign business' supply chains in China. Cost of labor may rise unexpectedly as a result of the factory yielding to pressure from the workers and the public. Productions may be interrupted when incidents happen. And more measures may need to be put in place to retain highly skilled workers. Whether your company is directly dealing with the Chinese suppliers or through an intermediary company, trends like this may have a direct impact on your sourcing cost.

 People Driving Change

While it appears that anyone who challenges China's political systems are facing more harsh punishments these days, there is a more positive development in China that allows common people to drive small social changes.  In China today, the general population has more outlets to voice their opinions about daily life and current events than they've ever had before. Micro blog sites and popular online portals play an instrumental role in driving this change. The government keeps a watchful eye but does not often interfere as long as the topics are not "politically sensitive".

The outcome of incidents like this can be quite unexpected for businesses. The negative sentiment towards Japan has already forced some Japanese companies to close their retail stores and offices in China. Though Japan touches a particularly sensitive nerve with the Chinese as a result of its invasion in China during World War II, other countries are not immune either.   The U.S. and China have always had an often-rocky political relationship depending on which way the wind blows. This can also translate into a hot-and-cold shift in consumer sentiment and loyalty towards U.S. businesses and goods .

Conclusion

There is little argument that China offers one of the most stable and safe investing environments in the world today. At the same time, as the Daoism teaching goes - change is constant and one must follow the "Way". Social changes in China can have big effects on foreign business in China. Keeping in touch with the trends, and putting in place risk management measures can give you just the edge you need to secure your supply chain, local sales and even talents that all foreign businesses sorely need in China.

 

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