Conspicuous in Spending but Miser on Workers: Chinese Enterprise Exploits Workers despite Profit Boom

Chinese enterprise Huawei Technology Co. was under fire since the arrest of its CFO Meng Wanzhou by the Canadian government and its lawsuit against the US government over the equipment ban some weeks ago. Meanwhile, the diplomatic crisis due to the arrest of Meng triggered a heated debate on whether Chinese-owned telecommunications companies are cybersecurity risks to the world. In recent years, Chinese-owned technology companies are expanding overseas.  Large-scale mergers, investment and marketing that involved big amount of money have sparked a lot of controversies, as well as issues on labour abuses and exploitations.

 

Huawei’s major rival BBK Electronics is expanding its business abroad as well, especially in the smartphone market in developing regions. Since 2014, BBK Electronics has entered the international smartphone market under the brand name VIVO. It has set up businesses in Southeast Asia and South Asia and opened factories in India and Indonesia within a few years. It is now ranked among the top in the local smartphone markets of both countries. Until Q3 2018, VIVO has already captured a market share of 10% and become the third largest smartphone brand in India.

The mushrooming of Chinese smartphone brands in developing regions is not only the result of cheap price, but also the expensive and aggressive marketing strategies that they adopt. These help the brands to build their fame in a very short time. For instance, when VIVO entered the Indian market, it sponsored a lot of popular sport events to promote their products.  The company even paid a high price to become the title sponsor of the Indian Premier Cricket League (IPL). As a result, the sales of VIVO smartphones boomed during the IPL 10 in 2017. To cater the rapid growing needs, the VIVO factory in Greater Noida hired a lot of contract workers, dispatched workers and apprentices[1].  However, the sales dropped significantly in May 2017, when the cricket season was over. The factory then downsized its workforce to cut cost. Within two-months, the factory sacked over 1,000 contract workers[2].

On 25 July, the layoff of workers from an assembly line with immediate effect was the last straw and led to a protest by 400 workers. Armed police were called to the scene by the factory management. They dispersed the protesting workers and arrested six of them. Later, VIVO factory management together with the representatives from the Chinese Embassy in India met with the local police and requested the protection to Chinese-owned businesses and Chinese citizens who worked there. The Indian Police guaranteed to offer the requested support and asked the Chinese delegation details of the Chinese-owned businesses in the region to ensure quick response to be made in the future. The Police even asked the Chinese companies to give prior notice of their layoff plan, so that they could make better preparation when needed. They also agree to stationed more police officers near the factories to prevent similar incidents happen again[3].

In fact, VIVO won the title rights of the IPL from 2018 to 2020 one month before the strike. This costs the company an astronomical price of US$340 million approximately[4].  The smartphone sales was benefited by the sponsorship and hiked up by 78% in 2018. VIVO therefore spent US$500 million to expand its production in India and promised to provide 5,000 jobs. Ironically, VIVO spent nearly US$900 million in just two-year’s time in marketing and business development while dismissing its workers casually when sales dropped. VIVO is not the only example of this. Hipad Technology, another Chinese company who produces mobile phones for OPPO and Xiaomi, laid off its Indian workers at the end of last year due to a seasonal adjustment. The incident also brought another wave of strike[5].

 

The above examples tell the tale that when Chinese enterprises go global, they seldom establish a long term plan on staffing and production.  Instead, their business model relies on the employment of contract workers, dispatched workers, and apprentices to escape their responsibilities as employer and sacked contract workers casually during low season. This seasonal hiring and layoff practice neglects the job security, career development and experience accumulation of workers. This “workers are disposable” management attitude is contradicting to the generous and conspicuous image of the Chinese brands.  And we believe that this contradiction of being conspicuous and miser at the same time would definitely cause the anger of workers worldwide towards Chinese enterprises.

 


[1] Condemn Exploitation And Harassment Of Workers At Vivo India Pvt. Ltd, https://countercurrents.org/2017/08/11/condemn-exploitation-and-harassme...

[2] Sacked employees ransack Vivo factory in Greater Noida, https://www.hindustantimes.com/noida/sacked-employees-ransack-vivo-facto...

[3] Vivo factory violence: Embassy seeks protection for Chinese businesses, people, https://www.hindustantimes.com/noida/vivo-factory-violence-embassy-seeks...

[4] Vivo retains IPL title rights till 2022 after massive bid, http://www.espncricinfo.com/story/_/id/19748603/vivo-retains-ipl-title-r...

[5] Workers Go on Rampage at Phone-Making Unit After Being 'Sacked Without Notice', https://thewire.in/labour/workers-go-on-rampage-at-phone-making-unit-aft...