The Beijing Development Area: China’s Jobs Magnet by Jamey Essex

At the end of June, while in Beijing for an economic geography conference, I had the opportunity to visit one of the engines of China’s economic growth, the Beijing Economic-Technological Development Area, or BDA for short. This industrial park on the southeastern edge of China’s capital, in the Yizhuang region, operates as a magnet for foreign investment and is a major building block in China’s plans to make globalization work for its development. Although my group didn’t get the factory tour of the BDA’s Nokia plant we had hoped for, I did come away with some basic info on the area, how it works, and how it relates to what’s going on here in Windsor, Southwestern Ontario, and Canada more generally.

Who’s there, and how does it work?
First off, it’s important to know which industries and specific companies are setting up shop in the BDA. Currently, the area centers on four major industries – biotechnology, electronics information technology, facilities and equipment manufacturing, and auto manufacturing. A total of 52 Fortune-500 companies from around the world (and over 1600 enterprises total) are now operating in the BDA, with over US$8 billion invested. In the automotive sector, both GM and Ford have facilities in the area, but the leading auto company is Mercedes Benz-Daimler Chrysler, producing up to 25,000 sedans yearly. Benz-DCX’s Beijing facilities are part of a joint venture with the Beijing Automotive Industry Holding Company, and are described by the BDA as “a flagship” and “strong driving force” in Beijing’s and China’s rapidly growing automotive sector. In the photo BDA provides of the Benz facility in its investment guide, Toyota and Hyundai facilities can be seen in the background, and entering the industrial park from the expressway one of the first plants we encountered was Ford. The BDA provides an example of what geographers call an industrial or regional “agglomeration,” a heavy concentration of facilities, labour, and even management in a single area, with (hopefully) spillover effects in terms of knowledge sharing, reduced trade and transportation costs, and when necessary, political organizing. The Detroit-Windsor region is another example of such an agglomeration, though it’s becoming more defined by its collapse than its successes.

It’s not necessarily correct though, to view the BDA as just another of the “free trade zones” that companies seek and push for throughout the world to lower labour costs and evade taxes. These areas often merely allow tax-free havens for multinationals that exploit local labour with little oversight, and which seek only to export goods back to Western markets. The situation in China is a bit different. China has established 54 national-level economic or technological development areas to attract international investment and help support domestic companies – areas like the BDA promote transfer of knowledge and technology to Chinese companies. As geographer Susan Walcott points out, China views these types of transfers and economic zones as central to its development and modernization, as the country has been torn apart by civil unrest, colonial manipulation and widespread poverty for much of its recent history. Maintaining tight control over investment rules and locations, and encouraging of domestic-foreign partnerships and joint ventures, development areas like the one in Beijing are becoming the motor of the dynamic Chinese economy, and offer safe and predictable sites for large multinationals to invest, as well as access to the booming Chinese domestic market.

But what are some of the specific incentives that multinationals get when they invest in the BDA? Set up in 1992, the BDA is the only such zone in China designated both an economic and a technological development area, giving more companies wider access to Chinese labour and tax breaks. For instance, foreign companies operating in the BDA must pay a 15 percent income tax, but can get tax breaks of up to 100 percent in the first two years and 50 percent in years three through five if they agree to stay in the BDA for more than 10 years. Extensions of these low rates are available for high tech companies and for those that export most of their production. This tax strategy allows Chinese domestic firms to retain some access to local markets. The recent development of a home-grown Chinese auto industry attests to its success.

What’s it like for workers?
This begs the question of why countries like Canada cannot or will not do more to provide incentives to manufacturers that save jobs. But multinationals are crying crocodile tears when they argue they are hamstrung by “globalization” – in fact, they are working to drive this process, and actively seek out the kind of low-tax areas and joint ventures that countries like China offer. But what does this mean for workers, both in a place like Windsor and the BDA?

I cannot discuss with certainty what it’s like to work in the BDA, but average wages and some direct observations give us some impression of Chinese workers’ lives. Within the BDA, the average line workers’ monthly wage was 1254 yuan, or about CAD$187, in 2005-06, though managers make over three times that amount at 4451 yuan (CAD$664). According to a July 2, 2007, article at Forbes.com, the average monthly wage in China in 2006 was US$230, though this figure is for all workers and not just line workers. The article also notes, though, that wages have increased faster than the economy as a whole, and could affect China’s seemingly bottomless well of cheap labour. China’s answer so far has been to allow wages to rise while also opening new development areas outside of the coastal zones where the economy is centered, and loosening restrictions on rural-to-urban migration. This has been fairly easy, as peasants from the countryside, who struggle with crushing poverty and limited infrastructural development, stream – legally and illegally – into China’s cities to find work, straining urban resources but providing Chinese and foreign employers with the cheap labour they seek.

The BDA itself was built on land taken from peasant farmers, and is a major part of Beijing’s ambitious long-term urban restructuring plan. The Chinese government says that the process of development here has been “harmonious,” with 60 percent of displaced peasants finding jobs in the BDA (17000 former peasants work there, out of a total of 93000 employees), and skills training and subsidized housing provided. There was no mention of what the other 40 percent of peasants from the area did when they lost their land, or how they might have been compensated. Without more specific information, it’s impossible to say for sure exactly how “harmonious” all this was or is. Built on what was once prosperous farmland supporting several thousand peasants, the BDA now houses dozens of heavy and high-tech manufacturing facilities, as well as thousands of workers and basic urban amenities.

Indeed, the first image we might have of a place like the BDA would probably include gruesome images stripped from a Dickens novel, full of grinding poverty, ramshackle housing, and the ever-present shadow of the factory smokestack over workers’ lives. While other manufacturing centers in China do in fact look like this, the BDA actually resembles the outskirts of a place like Windsor, where open farmland gives way to suburban tract housing, big box stores, and some industry. Driving around the BDA, I was struck by the familiar suburban landscapes typical of Western cities – broad paved streets, large green parks, access to expressways, schools (though these are all private), and new housing, mostly brick apartment buildings, but even some tract housing.

Can 1254 yuan per month pay for all that? I’m not sure, but increasing wages have meant increasing prices for goods such as food and fuel. The fact that basic social services like schools are privatized in the BDA also does not bode well for workers’ long-term prospects, especially as the Chinese government and the multinationals rationalize production and deskill in response to increasing wages. In the long run, workers in the BDA face wage crunches and production conditions similar to, and probably worse than, those experienced by workers in Windsor. This may even occur in the short run, if the US, among others, gets China to fall in line with standard currency exchange rules, which would lower Chinese workers’ wages by devaluing the yuan. But if wages do continue to rise, or if employers face higher energy bills or transport costs, the strategies they follow will be just like those that are now ravaging Windsor’s economy – demanding lower taxes, or pulling up stakes and heading to where the desperate and impoverished will work for less.

Conclusion
What is the upshot of this for workers and other concerned residents of Windsor? One thing that should be clear is that places like Windsor and the BDA are, in fact, in direct competition with one another, but this competition is a race to the bottom authored and promoted by corporations and their partners in government. While they can attempt to paint it all as the natural progression of markets and globalization, it is in fact a series of economic choices they have made, playing the well-being of one community off others to increase their own profits. The fact that so many companies actively seek to cluster together, to work together, and to lobby together in one place, such as the BDA, should alert workers in China and in Canada, and anywhere else, to the real logic behind the “natural” process of globalization. Only by realizing the interests of workers everywhere depend on calling those in business and government to account for their decisions, will workers be able to reverse job loss and foster true development and democracy.