China Labour Bulletin appears in the following article. Copyright remains with the original publisher.
Sunday 24 May 2009
By: Claire Harvey
On a trip to China, Claire Harvey saw first-hand why it's so hard for Aussie clothing manufacturers to compete with cheap Chinese labour.
It is lunchtime at the Wen Ling garment factory and the clatter of sewing-machines gives way to laughing chatter, as young Chinese workers jostle and flirt their way to the tea-room.
Mostly aged in their twenties and early thirties, they've moved from rural China here to Wuxi, a gritty, grimy city about 130km inland from Shanghai, to make enough money to get started in life.
They work six-day weeks, sleeping in a grey dormitory building across the road. Meals are provided; usually rice, soup, meat and vegetables.
They earn, at most, $A12.50 per day.
As Australia debates the ethics, risks and benefits of Chinese manufacturing, The Sunday Telegraph went inside two Chinese factories to see what conditions were really like.
We didn't find any dark sweatshops, with children chained to work-tables. There were no rats scurrying among the T-shirts. These are the sorts of factories that already make most of Australia's clothes, and from next year will make all clothing under iconic labels like Bonds and Holeproof.
Labour-rights organisations warn these clean, tidy factories are not the full picture -- that many Chinese workers endure exploitative, insanitary conditions. Although China is working hard to clean up its act, there are still widespread concerns about transparency, fairness and safety.
Whatever the truth, there is one simple figure at the basis of this debate: $1. That is what it costs a Chinese factory to sew a garment like Bonds underpants or AussieBum pyjama pants. In Australia, the figure would be three times as high.
That's the allure of China. But it may not be the total price.
This is not the Chinese Government's public-relations spin. I did not travel to China as a journalist; instead, I was invited to accompany an Australian company, AussieBum.
AussieBum's founders, Guyon Holland and Sean Ashby, are committed to manufacturing their quirky underwear in Australia -- but they are frequently wooed by Chinese manufacturers and agents, who are scouting for business.
Ashby and Holland vow they'll never give up on Australian manufacturing, but they're also curious about what the competition is doing.
Like most of us, they've heard the oft-repeated line that Australia simply can't afford to compete with developing nations like China and Fiji in garment-manufacturing.
Ashby in particular was incensed earlier this year when one of AussieBum's competitors, Pacific Brands, announced it had no choice but to take all its manufacturing offshore, including the iconic Bonds brand.
So how cheap is China? How are the workers treated? What is the quality like? Holland flew over to check out some factories for himself and bought me a ticket to come along.
We visited two factories on the outskirts of Wuxi, in eastern Jiangsu province, and took some samples of AussieBum and Bonds garments, to ask how much it would cost to have them made in China.
Factory owner Bao Zheng is being very careful about what he says, closely examining the Bonds and AussieBum garments we've asked him to quote on. He weighs each to work out how much the fabric would cost, then pauses to ponder, sipping tea, taking the odd phone call on his gold Nokia, leaning back in his chair.
With a local factory agent translating, Bao talks details: to make a pair of basic men's underpants, he'd need a minimum order of 3000 units and a lead-time of 45 days, including 15 days to make samples and send them to Australia for approval.
And the price? $A1.80.
It's a startling figure: it includes fabric, trim, sewing, packing, quality control, transport to the port at Shanghai and all handling fees. By contrast, it costs AussieBum $5.20 to make the same garment in Australia.
The labour cost alone in Australia would be $3.20 for the underpants, and up to $6.55 for more complex garments. In Wuxi, it's a maximum of $1 for everything -- including AussieBum pyjama pants or swimming trunks, and a Bonds black raglan-cut T-shirt or women's briefs.
In China, labour is the cheapest component of a garment. Indeed, only a tiny fraction of these $1 ``make-prices'' actually go to workers -- the rest also includes all administrative costs, and the inevitable bribes and wheel-greasing of Chinese business.
Mr Bao's factory makes about four million garments per year, using imported equipment and employing 300 staff, full- and part-time. Mostly ``migrant'' workers from China's vast rural inland, they work as hard as possible for about five years, then move home.
That's why it makes sense for them to work so hard. This is not a lifestyle, it's a few years hard graft before life really begins. Garment-factory workers around Wuxi earn an average of 15-20,000 yuan ($A2850-3800) each year, according to the factory agent.
That works out to between $9.50 and $12.60 per day, or as little as $1.20 per hour.
It is significantly more than Wuxi's official minimum wage of 10,200 yuan per annum ($A1940). Mr Bao says his staff work eight-hour days, six days a week, and Chinese labour laws say he can only ask them to work a maximum of four hours of overtime per shift, and must pay at least double-time.
In Australia, the minimum wage is $543 per week ($14.31 per hour) -- but that does not mean all Australian-made garments are ethically produced.
Many clothes with a ``made in Australia'' tag are actually sewn by ``outworkers'' in private homes or sweatshops in suburban Sydney or Melbourne, earning as little as $3 per hour, according to the activist group FairWear, which wants all Australian manufacturers and retailers to sign a ``no sweatshop'' code of practice guaranteeing fair wages and benefits for outworkers.
So what's the problem with Chinese manufacturing? A lack of transparency, say labour-rights activists -- and it is very difficult to establish the truth about Chinese work-conditions because the media and non-government organisations have very limited freedoms in China, and the only trade unions are government agencies.
``Of course the factories look good on the surface. Factory owners are not going to show you their sweatshops -- but they exist,'' says Geoffrey Crothall of the human rights group China Labour Bulletin. ``There is a well-established system of five-star factories and shadow factories.
``The five-star ones, like the ones you went to, have shiny interiors and the workers only work statutory hours. Then there are the shadow factories down the road, or on the other side of town, where workers have to work excessively long hours, in sometimes very dangerous conditions, to make up for the shortfall that the five-star factory produces.
China has recently introduced reforms, including government inspections of factories and an arbitration system to resolve workers' complaints about wages and conditions.
Last year alone, the arbitration committees accepted 693,000 cases involving 1.2 million workers making claims against their employers -- double the rate in 2007, according to the Chinese human resources ministry.
Lawyers engaged by the China Labour Bulletin last year took 430 labour-rights cases to the Chinese courts, and in 95 per cent of cases the workers were successful in winning compensation, reinstatement or unpaid wages.
However, official corruption means many cases are not adequately prosecuted and some inspectors turn a blind eye to abuses, say both NGOs and local Chinese speaking on condition of anonymity.
Average wages are growing rapidly, but often failing to keep pace with China's huge inflation -- and the economic downturn in the US and Europe means many Chinese factories are now sacking staff, further reducing workers' ability to negotiate for better conditions.
Accurate unemployment figures are impossible to obtain. Beijing issues an ``official'' unemployment rate of 4.3 per cent, but this does not include rural, migrant or many young workers -- the bulk of garment industry staff.
The real figure is more like 10 per cent, Crothall says.
By the middle of next year, all standard clothes made by one of Australia's biggest manufacturers, Pacific Brands, will be made offshore. Pacific Brands has been manufacturing offshore for 50 years and uses approximately 100 foreign factories, including many in China's Guangdong region, says spokesman Matthew Horan.
Over the next year it will shed 1850 jobs by closing seven Australian factories, keeping only one plant in Footscray for defence and emergency services uniforms.
Pacific is still negotiating with existing and new Chinese factories to produce the few lines presently made in Australia, including items like the classic Bonds singlets and babywear.
Horan says Pacific Brands is vigilant about labour rights, and makes every factory sign a guarantee of ``living wages'', freedom of association, the right to collective bargaining and safe, hygienic conditions.
He says Pacific Brands' own auditors inspect Chinese factories at the beginning of each contract and at two-yearly intervals, and is prepared to get tough: last year, its Sheridan brand sacked three supplying factories for breaching labour conditions.
That is not enough, says CLB's Geoffrey Crothall.
``You can never be absolutely sure that the factory you're auditing is the one you should be auditing -- and to be honest, having an audit once every two years is not really going to help a lot,'' he said. ``You need day-to-day monitoring of the labour situation so, if Pacific Brands really wants to ensure labour standards are maintained, they should encourage the formation of a representative trade union within each factory, to represent workers' interests.''
Guyon Holland says he's seen ``absolutely nothing'' that would entice him to shift manufacturing to China. ``I don't think these factories showed us the true picture. You really don't know whether they would farm out the work to other factories, and what conditions people are really working under,'' he said.
In Sydney, AussieBum uses three factories in the inner-west and is in ``constant contact'' with suppliers. That means short lead times of between 48 hours and 20 days to fill orders, and the flexibility to make small runs of particular products.
The cost might be half, but Holland says China presents a mass of quality-control problems.
``The Chinese production lead times would be anywhere from three to five times longer than our current ones, and that puts a lot of pressure onto quality management, forecasting, stock-holding -- and then you've got to manage the fluctuating exchange rate and language difficulties,'' he said.
Flexibility is also the reason another Australian label, Supre, has decided to bring 60 per cent of its manufacturing back to Australia.
``It means we have much greater speed with our `fast fashion' lines,'' says Supre spokeswoman Cathy van der Meulen. That means cutting off deals with Chinese suppliers and opening new contracts with Sydney factories -- a move Supre says will create 500 new jobs in Sydney.
So why did AussieBum go to China at all? Holland says he and Ashby ``didn't want to be naive. We went there to see what it was all about. Because now, when we stand up and say, `We will not do this', we know what we're talking about.'
``We don't believe manufacturing in China is a good commercial decision, or a good ethical decision.''
There is nothing glamorous about Wuxi. A city of 4.4 million in south-east China, it is a sprawl of tall apartment blocks and big, flat industrial sites: rubber plants, weaving mills, machinery factories. ``Stickness Tape'' says one gilded factory sign.
The garment factories are on the edges of town. In one workroom, thousands of purple velour tracksuit-pants are taking shape. One day soon, that purple velour will be hugging the contours of Russian or Japanese bottoms.
The second factory we visit, Sheng Long, caters for mainly European and east-Asian labels. Most of the brands aren't famous: Romy Rhino, Gloria Jeans (there's one for the patent attorneys). This factory's best-known label is British underwear line Wolsey, and workers pack the Y-fronts into boxes labelled: ``By appointment to Her Majesty The Queen.''
The Wolsey boxes don't have a Made in China label, although there's one red-hot clue to their origin: the retail price for a five-pack of white cotton briefs is 12 British pounds. That's a Made in China price.
Sheng Long's owner, Mr Cao, is intrigued by the fabric in a Bonds black raglan-cut T shirt that we ask him to price. The labour cost is $1, but Cao thinks the fabric price would be high, perhaps another $A2.50, with a 1500-piece minimum.
For red AussieBum men's briefs, Mr Cao quotes $2.40 per item, with a minimum order of between 2000 and 3000 per colour, and a 60-day lead time.
For red Bonds women's underpants, Mr Cao quotes $2.60: the waistband alone would constitute $1 of that cost, if he can get it at all.
For western labels, one of the biggest dangers is counterfeit; a huge and growing Chinese industry.
It has been repeatedly detailed - including by US journalist Dana Thomas in her book Deluxe - that luxury western labels have a massive problem with the staff in their Chinese factories using exactly the same patterns, materials and techniques to make extra batches for the black market.
At the Sheng Long factory, one of the labels hanging at the back of the room is YSL Homme. The label looks reasonably authentic, and the garment is well-sewn and sturdy: but is it real? And how much did it really cost?
THE REAL COST
* We asked two Chinese factories to quote the cost of making five items from AussieBum and Bonds, including all labour, materials and transport from Wuxi to Shanghai port.
* In China, fabric and trims are the greatest cost. Labour costs were no more than $1 for each garment. If imported into Australia, each garment would then attract a 17 per cent duty (which will fall to 10 per cent from July 1, 2010).
* For AussieBum's garments, the Australianmade cost is between $5 and $13 per garment, including up to $6.55 for labour.
* The Chinese factories required large minimum orders . up to 3000 units of each garment . and 45-day lead times, compared with Australian factories that offer smaller minimum orders and shorter lead times.
AussieBum briefs
Made in Australia $5.20
Est. Chinese cost $1.80
AussieBum trunks
Made in Australia $11.90
Est. Chinese cost $4
AussieBum pants
Made in Australia $12.90
Est. Chinese cost $ 4.50
Bonds women's briefs
Made in China
Est. Chinese cost $ 2.60
Bonds T-shirt
Now made in Australia
Est. Chinese cost $3.50
Sunday 24 May 2009
By: Claire Harvey
On a trip to China, Claire Harvey saw first-hand why it's so hard for Aussie clothing manufacturers to compete with cheap Chinese labour.
It is lunchtime at the Wen Ling garment factory and the clatter of sewing-machines gives way to laughing chatter, as young Chinese workers jostle and flirt their way to the tea-room.
Mostly aged in their twenties and early thirties, they've moved from rural China here to Wuxi, a gritty, grimy city about 130km inland from Shanghai, to make enough money to get started in life.
They work six-day weeks, sleeping in a grey dormitory building across the road. Meals are provided; usually rice, soup, meat and vegetables.
They earn, at most, $A12.50 per day.
As Australia debates the ethics, risks and benefits of Chinese manufacturing, The Sunday Telegraph went inside two Chinese factories to see what conditions were really like.
We didn't find any dark sweatshops, with children chained to work-tables. There were no rats scurrying among the T-shirts. These are the sorts of factories that already make most of Australia's clothes, and from next year will make all clothing under iconic labels like Bonds and Holeproof.
Labour-rights organisations warn these clean, tidy factories are not the full picture -- that many Chinese workers endure exploitative, insanitary conditions. Although China is working hard to clean up its act, there are still widespread concerns about transparency, fairness and safety.
Whatever the truth, there is one simple figure at the basis of this debate: $1. That is what it costs a Chinese factory to sew a garment like Bonds underpants or AussieBum pyjama pants. In Australia, the figure would be three times as high.
That's the allure of China. But it may not be the total price.
This is not the Chinese Government's public-relations spin. I did not travel to China as a journalist; instead, I was invited to accompany an Australian company, AussieBum.
AussieBum's founders, Guyon Holland and Sean Ashby, are committed to manufacturing their quirky underwear in Australia -- but they are frequently wooed by Chinese manufacturers and agents, who are scouting for business.
Ashby and Holland vow they'll never give up on Australian manufacturing, but they're also curious about what the competition is doing.
Like most of us, they've heard the oft-repeated line that Australia simply can't afford to compete with developing nations like China and Fiji in garment-manufacturing.
Ashby in particular was incensed earlier this year when one of AussieBum's competitors, Pacific Brands, announced it had no choice but to take all its manufacturing offshore, including the iconic Bonds brand.
So how cheap is China? How are the workers treated? What is the quality like? Holland flew over to check out some factories for himself and bought me a ticket to come along.
We visited two factories on the outskirts of Wuxi, in eastern Jiangsu province, and took some samples of AussieBum and Bonds garments, to ask how much it would cost to have them made in China.
Factory owner Bao Zheng is being very careful about what he says, closely examining the Bonds and AussieBum garments we've asked him to quote on. He weighs each to work out how much the fabric would cost, then pauses to ponder, sipping tea, taking the odd phone call on his gold Nokia, leaning back in his chair.
With a local factory agent translating, Bao talks details: to make a pair of basic men's underpants, he'd need a minimum order of 3000 units and a lead-time of 45 days, including 15 days to make samples and send them to Australia for approval.
And the price? $A1.80.
It's a startling figure: it includes fabric, trim, sewing, packing, quality control, transport to the port at Shanghai and all handling fees. By contrast, it costs AussieBum $5.20 to make the same garment in Australia.
The labour cost alone in Australia would be $3.20 for the underpants, and up to $6.55 for more complex garments. In Wuxi, it's a maximum of $1 for everything -- including AussieBum pyjama pants or swimming trunks, and a Bonds black raglan-cut T-shirt or women's briefs.
In China, labour is the cheapest component of a garment. Indeed, only a tiny fraction of these $1 ``make-prices'' actually go to workers -- the rest also includes all administrative costs, and the inevitable bribes and wheel-greasing of Chinese business.
Mr Bao's factory makes about four million garments per year, using imported equipment and employing 300 staff, full- and part-time. Mostly ``migrant'' workers from China's vast rural inland, they work as hard as possible for about five years, then move home.
That's why it makes sense for them to work so hard. This is not a lifestyle, it's a few years hard graft before life really begins. Garment-factory workers around Wuxi earn an average of 15-20,000 yuan ($A2850-3800) each year, according to the factory agent.
That works out to between $9.50 and $12.60 per day, or as little as $1.20 per hour.
It is significantly more than Wuxi's official minimum wage of 10,200 yuan per annum ($A1940). Mr Bao says his staff work eight-hour days, six days a week, and Chinese labour laws say he can only ask them to work a maximum of four hours of overtime per shift, and must pay at least double-time.
In Australia, the minimum wage is $543 per week ($14.31 per hour) -- but that does not mean all Australian-made garments are ethically produced.
Many clothes with a ``made in Australia'' tag are actually sewn by ``outworkers'' in private homes or sweatshops in suburban Sydney or Melbourne, earning as little as $3 per hour, according to the activist group FairWear, which wants all Australian manufacturers and retailers to sign a ``no sweatshop'' code of practice guaranteeing fair wages and benefits for outworkers.
So what's the problem with Chinese manufacturing? A lack of transparency, say labour-rights activists -- and it is very difficult to establish the truth about Chinese work-conditions because the media and non-government organisations have very limited freedoms in China, and the only trade unions are government agencies.
``Of course the factories look good on the surface. Factory owners are not going to show you their sweatshops -- but they exist,'' says Geoffrey Crothall of the human rights group China Labour Bulletin. ``There is a well-established system of five-star factories and shadow factories.
``The five-star ones, like the ones you went to, have shiny interiors and the workers only work statutory hours. Then there are the shadow factories down the road, or on the other side of town, where workers have to work excessively long hours, in sometimes very dangerous conditions, to make up for the shortfall that the five-star factory produces.
China has recently introduced reforms, including government inspections of factories and an arbitration system to resolve workers' complaints about wages and conditions.
Last year alone, the arbitration committees accepted 693,000 cases involving 1.2 million workers making claims against their employers -- double the rate in 2007, according to the Chinese human resources ministry.
Lawyers engaged by the China Labour Bulletin last year took 430 labour-rights cases to the Chinese courts, and in 95 per cent of cases the workers were successful in winning compensation, reinstatement or unpaid wages.
However, official corruption means many cases are not adequately prosecuted and some inspectors turn a blind eye to abuses, say both NGOs and local Chinese speaking on condition of anonymity.
Average wages are growing rapidly, but often failing to keep pace with China's huge inflation -- and the economic downturn in the US and Europe means many Chinese factories are now sacking staff, further reducing workers' ability to negotiate for better conditions.
Accurate unemployment figures are impossible to obtain. Beijing issues an ``official'' unemployment rate of 4.3 per cent, but this does not include rural, migrant or many young workers -- the bulk of garment industry staff.
The real figure is more like 10 per cent, Crothall says.
By the middle of next year, all standard clothes made by one of Australia's biggest manufacturers, Pacific Brands, will be made offshore. Pacific Brands has been manufacturing offshore for 50 years and uses approximately 100 foreign factories, including many in China's Guangdong region, says spokesman Matthew Horan.
Over the next year it will shed 1850 jobs by closing seven Australian factories, keeping only one plant in Footscray for defence and emergency services uniforms.
Pacific is still negotiating with existing and new Chinese factories to produce the few lines presently made in Australia, including items like the classic Bonds singlets and babywear.
Horan says Pacific Brands is vigilant about labour rights, and makes every factory sign a guarantee of ``living wages'', freedom of association, the right to collective bargaining and safe, hygienic conditions.
He says Pacific Brands' own auditors inspect Chinese factories at the beginning of each contract and at two-yearly intervals, and is prepared to get tough: last year, its Sheridan brand sacked three supplying factories for breaching labour conditions.
That is not enough, says CLB's Geoffrey Crothall.
``You can never be absolutely sure that the factory you're auditing is the one you should be auditing -- and to be honest, having an audit once every two years is not really going to help a lot,'' he said. ``You need day-to-day monitoring of the labour situation so, if Pacific Brands really wants to ensure labour standards are maintained, they should encourage the formation of a representative trade union within each factory, to represent workers' interests.''
Guyon Holland says he's seen ``absolutely nothing'' that would entice him to shift manufacturing to China. ``I don't think these factories showed us the true picture. You really don't know whether they would farm out the work to other factories, and what conditions people are really working under,'' he said.
In Sydney, AussieBum uses three factories in the inner-west and is in ``constant contact'' with suppliers. That means short lead times of between 48 hours and 20 days to fill orders, and the flexibility to make small runs of particular products.
The cost might be half, but Holland says China presents a mass of quality-control problems.
``The Chinese production lead times would be anywhere from three to five times longer than our current ones, and that puts a lot of pressure onto quality management, forecasting, stock-holding -- and then you've got to manage the fluctuating exchange rate and language difficulties,'' he said.
Flexibility is also the reason another Australian label, Supre, has decided to bring 60 per cent of its manufacturing back to Australia.
``It means we have much greater speed with our `fast fashion' lines,'' says Supre spokeswoman Cathy van der Meulen. That means cutting off deals with Chinese suppliers and opening new contracts with Sydney factories -- a move Supre says will create 500 new jobs in Sydney.
So why did AussieBum go to China at all? Holland says he and Ashby ``didn't want to be naive. We went there to see what it was all about. Because now, when we stand up and say, `We will not do this', we know what we're talking about.'
``We don't believe manufacturing in China is a good commercial decision, or a good ethical decision.''
There is nothing glamorous about Wuxi. A city of 4.4 million in south-east China, it is a sprawl of tall apartment blocks and big, flat industrial sites: rubber plants, weaving mills, machinery factories. ``Stickness Tape'' says one gilded factory sign.
The garment factories are on the edges of town. In one workroom, thousands of purple velour tracksuit-pants are taking shape. One day soon, that purple velour will be hugging the contours of Russian or Japanese bottoms.
The second factory we visit, Sheng Long, caters for mainly European and east-Asian labels. Most of the brands aren't famous: Romy Rhino, Gloria Jeans (there's one for the patent attorneys). This factory's best-known label is British underwear line Wolsey, and workers pack the Y-fronts into boxes labelled: ``By appointment to Her Majesty The Queen.''
The Wolsey boxes don't have a Made in China label, although there's one red-hot clue to their origin: the retail price for a five-pack of white cotton briefs is 12 British pounds. That's a Made in China price.
Sheng Long's owner, Mr Cao, is intrigued by the fabric in a Bonds black raglan-cut T shirt that we ask him to price. The labour cost is $1, but Cao thinks the fabric price would be high, perhaps another $A2.50, with a 1500-piece minimum.
For red AussieBum men's briefs, Mr Cao quotes $2.40 per item, with a minimum order of between 2000 and 3000 per colour, and a 60-day lead time.
For red Bonds women's underpants, Mr Cao quotes $2.60: the waistband alone would constitute $1 of that cost, if he can get it at all.
For western labels, one of the biggest dangers is counterfeit; a huge and growing Chinese industry.
It has been repeatedly detailed - including by US journalist Dana Thomas in her book Deluxe - that luxury western labels have a massive problem with the staff in their Chinese factories using exactly the same patterns, materials and techniques to make extra batches for the black market.
At the Sheng Long factory, one of the labels hanging at the back of the room is YSL Homme. The label looks reasonably authentic, and the garment is well-sewn and sturdy: but is it real? And how much did it really cost?
THE REAL COST
* We asked two Chinese factories to quote the cost of making five items from AussieBum and Bonds, including all labour, materials and transport from Wuxi to Shanghai port.
* In China, fabric and trims are the greatest cost. Labour costs were no more than $1 for each garment. If imported into Australia, each garment would then attract a 17 per cent duty (which will fall to 10 per cent from July 1, 2010).
* For AussieBum's garments, the Australianmade cost is between $5 and $13 per garment, including up to $6.55 for labour.
* The Chinese factories required large minimum orders . up to 3000 units of each garment . and 45-day lead times, compared with Australian factories that offer smaller minimum orders and shorter lead times.
AussieBum briefs
Made in Australia $5.20
Est. Chinese cost $1.80
AussieBum trunks
Made in Australia $11.90
Est. Chinese cost $4
AussieBum pants
Made in Australia $12.90
Est. Chinese cost $ 4.50
Bonds women's briefs
Made in China
Est. Chinese cost $ 2.60
Bonds T-shirt
Now made in Australia
Est. Chinese cost $3.50