Thursday, August 24, 2006

The rural migrants know better than us

In response to oiwan's letter, I would like to make some remarks on the situation of Chinese rural migrant workers. The China government recently collaborated with international NGO, including ILO, to produce a TV drama series about the success story of rural migrant labor in Sichuan province. During my field study of the Chinese rural migrants, I met a lot of small business owners. Many see it as the only way out of the difficult situations as a cheap labor in the "World Factory". I haven't watched that TV drama series but I doubt if it is necessary for the government and NGOs to encourage the migrants to run small business.

In China, most rural migrant workers start their own business in the retailing market. I guess this is the case in most developing countries. It is much easier for a worker to open a grocery than a factory. And the retailing market in China is highly competitive but "unorganized". It means low-profit and the economic scale of most operators is small. It requires small amount of initial fund and low skill for people to start up small business. The large-scale chain shops are not able to monopolize most of the market. I think of an interesting example.

Recently GOME, the biggest home electronic appliances retailer in China, has acquired its rival China Paradise, the third largest one. But after this deal, GOME only gets 10% market share. That is why GOME's stock price dropped quite a lot. To many people's surprise, China Paradise recently announced that its annual profit rate is as low as 0.2% of the total revenue.

I don't have more statistics about China's retailing market at hand. But I have read something interesting about India. Her economic growth rate is so high that many people are expecting a bright future of India's economy, particularly her retailing sector. India's individual consumption accounts for 64% of GNP, much higher than that of China (42%). Yet few people notice that the retailing market is also highly decentralized in India. There are more than 15 million retailing units, among which only 4% are shops bigger than 500 square feet. Most of them are small shops. In the United States, there are only 0.9 million retailing units, mostly owned by big corporations such as Walmart.

Desipte the influential corporate agenda of neoliberalism promoted by WTO and many developed countries, many parts of people's economy, particularly in the developing countries, are still characterized by a large number of small operators and their lively markets. The highly competitive market is both good and bad for Chinese rural migrants. It is not that difficult for them to wave farewell to their identity of "Dagong" (worker) and expect upward mobility in the future. Some of them make money. That is one of the reasons for the weak class solidarity among rural migrant workers. Furthermore, the profit rate is so low for small business that many shopowners could hardly survive.

Even though you buy the idea of ILO that small business is a good way for the poor people in the developing countries and job creation, your first priority should not be to encourage them to run small business. I also doubt if training could really help. They might know about it better than us. Instead, the government should try to identify and solve the key problems the small shopowners come across. For example, the big companies keep making use of their money and their connections to governments to get rid of the small operators and change the market structure.

That is what happened and is happening in Hong Kong. Now there is less and less room for small business to survive. People should be worried about the implications of the corporate moves for the retailing market, such as the acquisiton of China Paradise by GOME. As far as I know, many global retailing companies, such as ESPRIT and GIORDANO, are about to expand their outlets in India.

In other words, the future is not a dream but it is not so bright.

Photo: Wuerzi

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