The American dream, Made in China: China's rise has cost South Carolina jobs but it's also saving consumers money

Kendall Harmon posted this article on his blog, which details the effects of China's rise on South Carolina's economy.

BY TONY BARTELME
The Post and Courier
SHENZHEN, CHINA - Quoizel's light factory is off a six-lane road that's as straight as a steel girder, past giant new buildings clad in bamboo scaffolding. The sky is gray because a smothering blanket of smog blots out the mid-afternoon sun, though the entrance to the factory stands out, with guards in formal military-style uniforms saluting visitors as they pass through an ornate gate.

Tony Wu, manager of the Quoizel factory, introduces himself and says he's from a family of factory owners from Taiwan. He's a confident, tough man in his 40s with strong opinions about the environment ("The government knows about the smog and is doing something about it") and Taiwan's uneasy relationship with the mainland ("They will never fight; we all have yellow skin").

Tony says the factory has about 400 workers and could use more. It's a plain but tidy place with lamp parts stacked in piles. In some rooms, workers wear earplugs or masks as they bend steel and weld pieces together in flashes of sparks. In other rooms, workers move cardboard boxes bearing the company logo and headquarters address, "6 Corporate Parkway, Goose Creek, SC."

As Tony shows off one room after another, he answers questions about wages and working conditions without hesitation; but at one point he turns and asks, "Why go to a factory in China? You have a lot of manufacturing in the United States."

But this factory is part of China's manufacturing boom, which has caused a global wave of change.

In less than 30 years, the Shenzhen region in southern China has become the world's biggest manufacturing center, capturing countless jobs once held by workers in America, Europe, Japan and other countries with more mature economies. New manufacturing centers are going up elsewhere in China, all part of an economic surge that experts say will make China the world's dominant economic power by the middle of this century.

China's rise already triggered one of the greatest migrations in human history, with as many as 300 million people in the country's interior moving to Shenzhen and other industrial centers along the coast. It led to the construction of massive new cities with sparkling skyscraper skylines. It has rearranged the world's economy.

Because of this shift, more than 8,200 people in South Carolina lost jobs making textiles, electronics, chemical solutions and other items between 2000 and 2003, a federal study found. At the same time, China's rise saved people money by lowering or holding down prices on things like televisions and T-shirts.

Gary Hufbauer, a senior fellow at the Institute for International Economics in Washington, calculated that the typical American household saves $500 a year through the steady or decreased prices coming from China.

China's effects on American consumers are "as tangible as the change in one's pocket," Ted Fishman, a former commodities trader, wrote in his recent book, "China Inc."

China's boom hasn't been all bad news for workers in South Carolina. While more than 8,000 lost their jobs a few years ago, Haier, a Chinese appliance manufacturer, said last year it would hire 1,000 people to build refrigerators at a new factory in Camden.

Last year, South Carolina businesses exported a record $870 million in goods to China. Trade with China generates jobs for Charleston's truckers and port workers. In 2006, roughly one of every 10 containers that passed through Charleston's docks came from Hong Kong and China, more than 198,000 in all.

What's happening in China isn't a simple story of one country's gain and another's loss; it's about an unprecedented cultural and economic shift that is remaking the world's economy and environment.

Some South Carolina businesses understood this shift early on and adjusted their lives. Quoizel, pronounced "Kwoy-zell," is a good example. But even those who benefit from China's rise still view what's happening with a mixture of anxiety and awe.

'To get rich is glorious'

Quoizel's factory is one of more than 120,000 factories in Shenzhen, a place that's probably not on the tip of many Americans' tongues, though it may be soon enough.

Thirty years ago, Shenzhen was a mere fishing village of about 75,000 people on the Pearl River Delta, located on the border of bustling Hong Kong. Now, Shenzhen (pronounced "Shen-jen") is home to roughly 12 million people, a higher population than in the city of New York.

Shenzhen was an experiment. In 1978, Deng Xiaoping assumed leadership of a country bursting with more than 1 billion people, 300 million of whom lived in abject poverty. Conditions in rural areas were especially dire; many people lived on less than a dollar a day.

With unusual speed, Deng reversed Mao Zedong's stifling social and economic policies, famously saying: "To get rich is glorious." Deng's government set aside a large area around Shenzhen as a special economic zone. The idea was to take advantage of Hong Kong's freewheeling capitalist know-how, and a steady pace of foreign investors soon marched in.

What happened to Hong Kong during this time is informative. Under British rule, Hong Kong grew into a manufacturing powerhouse and the "Made in Hong Kong" label became a symbol of Asia's economic awakening. But by 1997, when the British handed Hong Kong over to China, 90 percent of Hong Kong's factories had moved to Shenzhen and other parts of Asia. Hong Kong's factory workers survived this shift by becoming accountants, paralegals and brokers - helping businesses in the United States and elsewhere move to mainland China.

Today, Hong Kong remains a thriving skyscraper city, though Shenzhen is building a skyline to match, with towers that would impress even the most snobbish New Yorker.

Shenzhen's tallest building is 10 feet higher than the Empire State Building. The city's downtown streets are filled with buses, BMWs and Buicks - made in China, of course - not the rivers of bicycles so often seen just a few years ago. Shoppers dress in the latest fashions, chattering away on the latest model cell phones, swarming through Shenzhen's malls, which look like American malls, except with more people, more lights, and more music and noise.

Shenzhen's caffeinated brand of capitalism is a powerful draw to young Chinese who dream of better jobs and homes and money to spend at the city's sparkling new stores - the American dream, made in China.

Away from the skyscrapers are the factories. They stretch for miles, but it's difficult to actually see how far because the smog blocks your view. Most of the smog comes from China's many coal-fired power plants, which supply electricity to the factories. Sometimes the air is so thick you can feel it on your skin.

Scientists call it the "Asian Brown Haze" and say this toxic cloud has left one in three Chinese children with dangerously high levels of lead in their blood. The cloud stretches for hundreds of miles and disrupts rainfall patterns throughout the continent. Sometimes it rides jet streams across the Pacific and lands in Seattle or Santa Barbara, another thing made in China.

From Charleston to Dongguan

About an hour from Shenzhen is Dongguan, a city of 6 million or so and another manufacturing and business hot spot.

Quoizel's China headquarters is on a corner of a wide, busy street. Nearby is a sneaker manufacturing research center, a spectacular new museum, a private hospital the size of an airport terminal and a six-story library that's open 24 hours a day. Quoizel's offices are spacious and well-appointed with handsome wooden cubicles enclosing computer work stations with flat screen monitors.

On a recent Saturday morning, fresh from a brutal 15-hour flight, a group of Quoizel executives from Charleston walk into the office, greeting workers with hugs and smiles. "They spoil us," said Tim



Hensch, Quoizel's vice president of operations. "They're very bright and computer literate; they're all learning English."

Ann Zhang is one of 28 office employees. Like most in the office, she lives in a new high-rise apartment building a few miles away that's not too different than what you might see in Fort Lauderdale, Fla., minus the beach. Quoizel pays the rent for most of the workers. Ann liked the apartment so much that she bought one three years ago for about $44,000. Its value has since risen 50 percent, she says.

Jasper Zhao, another employee, says he and his colleagues ride the bus to work and that the company covers his meals. He writes the English installation instructions for the company's lamps. "If you have experience, it's easy to get a job," he said, later adding that someday he'd like to have "a house, a car and two children."

With Hensch this morning is Ira Phillips, the company's chairman of the board. Phillips is a bundle of New York energy, a high school dropout whose business tactics have been studied at Ivy League schools. "We've got a loyal work force here in China and we have a loyal workforce in South Carolina," he said. "We try to have a family culture. And the attitude you see here is the same as you'll see in Charleston. We know their families, we have scholarship programs for their children; we believe in sharing the wealth."

Phillips joined the company in 1964 with a bold pitch to the company's owners: Make him director and he would double their meager $250,000 in sales. He made good on his vow and by 1986 had bought out the entire company. Back then, Quoizel had a cumbersome three building complex in New York. The company decided to consolidate its operations in the South.

Charmed by Charleston and lured by South Carolina's industry tax breaks, Quoizel bought 63 acres in Goose Creek and built a $10 million plant. Quoizel flew its New York workers to Charleston, set them up with real estate agents and pleaded with them to stay, tossing in a free washer and dryer if they did. All told, they moved 125 families and Phillips found himself lauded in "Business Week" for the humane way he relocated his workforce.

At around the same time, the company began to buy more lighting parts in Taiwan, which they imported through the Port of Charleston and assembled in Goose Creek.

That all changed in 1992 when Deng visited the Shenzhen region and urged its leaders to "move more boldly" toward capitalism. With this green light, many Taiwanese manufacturers moved their operations to Shenzhen and other areas of China. Because of Quoizel's existing relationships with these Taiwanese factory owners, the company found it easy to jump to mainland China with them.

By now, Phillips and other Quoizel leaders felt the company's survival was at stake. If they kept their manufacturing plant in the United States, rivals with factories in China would price them out of the market. Not long after their move to Charleston, Quoizel's leaders decided to do most of their manufacturing and assembling in China and use the new factory and warehouse in South Carolina for storage and distribution.

In Goose Creek, they retrained more than half of their workers: An employee who specialized in repairing Tiffany-style lamps became a photographer and a woman who assembled lamps became an accountant. The company's sales grew, and some competitors who failed to move to China folded.

Today, Quoizel has roughly the same number of employees in the United States as it did before it moved its factory overseas. Its revenues have doubled, from about $50 million in the mid-'90s to nearly $100 million today.

Inside the factory

The company's factory in Shenzhen is about an hour from its office in Dongguan. It's a simple plant where workers make many of the parts by hand. The air is stale, but that's mainly because the windows are open for ventilation and that lets in the smog. You don't see children working or piles of trash.

As Tony, the factory manager, walks from room to room, he sounds like an American boss, talking about how the government has new work rules: 8 hours a day, time-and-a-half for overtime and three times pay if it's a holiday.

The workers are housed in apartments next door to the plant. A typical worker makes about $115 a month, though that pay is a little misleading considering a dollar may buy four or five times as much in China than in the U.S. Tony says it's getting more difficult to find workers because so many new factories are opening in China's interior.

"I think the Chinese are good workers," he said, comparing them with some in other parts in the world who he says complain too much and are prone to fits of anger. "Here they work hard, they train easily and they follow instructions." He wonders out loud whether it would be a good career move to work for Home Depot or some other big company. "But they are too cold and serious. They always wear poker faces when you talk to them. And here they talk to people like they are human beings," he said.

Back in South Carolina

Eight thousand miles away in Goose Creek, the company's president, Rick Seidman, tools around the warehouse in a golf cart, pointing machinery out along a wall.

"This was the paint line," he said, referring to equipment that gave lights a finished coating.

Seidman is 40, smart and, with his eager, rapid-fire New York accent, talks like someone competing for a job as Donald Trump's "The Apprentice." He says he's seen factories in China with terrible working conditions, places where he says he would never do business. Others treat their workers well. Sometimes, Seidman brings buyers to Charleston. Other times, he takes them to China and puts them on tour buses to visit the Great Wall and Shanghai.

He travels to China several times a year and each time he goes, it's asthough he's missed 10 minutes of a movie. Five years ago, bicycles were everywhere. On later trips, the bicycles were gone, replaced by scooters. Now, he sees more and more cars. Paved roads have replaced dirt roads and fancy hotels are springing up across the region. The sheer energy in China is both exhilarating and discomforting.

"If we didn't go to China, we would be out of business now," Seidman said, but when he comes back to the United States, "I do have a shallow feeling." He doesn't necessarily fear China's rise; indeed, he's profited from it. Still ...

"What's happening there is something unlike the world has ever seen, and I do wonder about it," he said. "I have two children, and I know that in 20 years China will be the biggest economic power in the world. And I don't know what that means."





THE CHINA EFFECT

Examples are everywhere

Manhole covers
China's demand for metals created a shortage, driving up international prices. One result: Thieves across the world began stealing manhole covers and selling them for scrap.

Construction
Between now and 2015, more than half the world's construction is expected to take place in China.

Smog
In some cities, it's four times worse than air in Los Angeles or New York and so widespread that it's modifying rainfall patterns in Asia and polluting the American West Coast.

Soybeans
China's growing appetite for meat is triggering a boom in demand for cattlefeed, driving up prices for corn and soybeans for American farmers.

Harry Potter
Within two weeks of its release, fake copies of ? Harry Potter and the Half- Blood Prince' flooded China's cities. Officials estimate these and other Chinese knockoffs cost legitimate businesses $50 billion a year.

Stocks
On Feb. 27, Chinese stocks slid 9 percent, causing a global selloff. The next day, the Dow lost 416 points.

Sources: China Inc., The Associated Press, The New York Times-