China’s Consumerist Virus

BY BERNADETTE SPOFFORTH

China’s exploitation of consumerism is a virus, but we created it.

I have many experiences of business in China, over 25 years in fact, from dealing with small family factories to multibillion-dollar factories; good ones, who at least attempt to follow ethical working practices, to ones that hide child workers before inspections. They all have one thing in common – a collective aim to do everything they can to grow, survive and produce more of the same. Much like viruses.

Manufacturers, designers, developers and IP owners have all learnt the hard way that China does not create, China copies. Badly at first, as we have seen from the glut of low-quality medical products hitting the market recently. But they practice until acceptable to the buyer and always build to a price. They can make the same looking product for $10, as well as $200 – they build to a budget. And build they have.

From the highest levels of Chinese finance, mostly government funded, to the smallest textile factory, China has copied to our instructions exponentially over the past 20 years – in areas as diverse as pension funds, to an inflatable swimming pool products factory turning over $50 billion per year and supplying every corner of the world. And under the collective noses of Governments worldwide, China has purchased and bartered for large parts of Africa, trading mineral wealth in return for food, education and transport. 

Chinese investments and contracts in sub-Saharan Africa totalled $299 billion from 2005 to 2018, according to the China Investment Global Tracker and in 2018, China said it would invest a further $60 billion into African nations, effectively into industries the West didn’t want to dirty its collective hands with.

This was all done to satisfy consumer need. China simply exploited the developed world’s need for levelling the playing field between rich and poor. No longer do most families in the West struggle to the launderette with a week’s washing, they have their own Chinese-produced UK-badged washing machine for under £200 sat at home.

Making products affordable in the West, although vital for western GDP growth, conflicted with the new found morality; that of closing the gap between the rich and the poor. Whilst all countries need GDP growth in order to pay back increasing debt (some of which is owed to China in the first place) consumerism had to grow apace. Of course consumerism cannot be fulfilled in Western societies – our demands for minimum wage and youth ambition have seen to that.  Western production would put even a simple washing machine out of the reach of many consumers (Logik £189 versus UK brand £400, with components sourced from China). We are even unable to produce mass market products we design, because that mass market will not, or cannot, value that effort.

The economic invasion of Africa by China only happened because of the West’s desire for technology and profit. China simply provided a means to that end, by doing the dirty work for the West. Mining the minerals for batteries and electronics, harvesting the crops for fabrics and exploiting the abundant workforce, because the West were too sanctimonious to admit they were a part of those shoddy and dehumanising industries. China did it. Why? Because we let them.

The EBA (everything but arms) policy put in place to help Africa develop its own export industries played straight into China’s hands. Now factory owners, backed by Chinese government-owned funds, could outsource production to places like Ethiopia, exploiting their seamstress skills and avoiding the on-average 16% duty on textiles coming into the EU from China. Even when the USA increased tariffs on China, it meant little in real terms to most of the textile industry, who simply shipped half-finished goods to have labels stuck on them in Vietnam, saying “Made in Vietnam”. There is no duty between China and Vietnam and there is no duty between Vietnam and the USA. Cheap goods move because consumerism is an unstoppable virus.

Much like a virus, China manufacturing is geared up to copy, copy badly and then refine. Western manufacturers spend considerable time with these manufacturers perfecting finished products from designs created in the West. It’s still more cost effective to do that, than produce from scratch in their own countries.

In return, the Chinese have sent us their children, to be educated at great cost – for them then to return home, having been educated at the best establishments in the world, in order to share their skills back in China. As they import their children as enhanced human capital back home, we have seen replication happen much higher up the food chain. Investment by Chinese banks and funds into British property, businesses and key infrastructure now depends to a large degree on the knowledge gleaned by this well-travelled new generation.

Chinese financial business models of investment offer great wealth, on a matrix not seen from UK investment companies. I have seen more than once investments offered by Chinese companies promising more wealth than an entrepreneur could ever imagine from a UK Private Equity deal. And so they came in their droves to invest in us. Now to the tune of over £267 billion, in brands such as Pizza Express, Weetabix, Barclays and even in our nuclear power stations.

Occasionally, as now, there is unease and consumer consciences are pricked. Stories of Congolese mines owned by the Chinese and mined by children have hit our media, to a flurry of righteous indignation tweeted on iPhones. We still buy the iPhones though, because Apple is a good western company, right?

Whilst our governments continue to determine success as ever-increasing GDP and our trusted brands continue to manufacture in China, often without the consumer realising Chinese depth of spread, this situation cannot change. And it is no longer a cheap versus expensive product split. Most high-end tech product is produced in China, but without doubt the poorest will be hit hardest by any contraction of production from that country.

So while Coronavirus started in China, we are the ones who created the conditions for China’s exploitation of consumerism to spread like a virus across the world. 

Bernie Spofforth is an experienced Managing Director and investor with a background including board and CEO roles, NASDAQ, FMCG, IP, patents, global manufacturing and the Grey market. You can follow her on Twitter here.