Why is Everything Made in China?

In this episode, we explore the history of industrialization in China and ask why are so many electronics assembled there. 

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Episode Transcript

Speaker 1 (00:04):
Welcome to Tech Stuff, a production of I Heart Radios
How Stuff Works. Hey there, and welcome to tech Stuff.
I'm your host, Jonathan Strickland. I'm an executive producer with
How Stuff Works in My Heart Radio and I love
all things tech. Kind of, it seems like I have
to put a lot of qualifiers and when I give

(00:25):
that introduction these days, and the reason I say kind
of for this one is that I'm going to be
tackling a pretty thorny subject. So in the United States,
there's been a lot of talk about the trade war
between the US and China, as both countries are slapping
tariffs on goods and the whole world is watching an
anticipation of a potential global recession. Now, this trade war

(00:49):
has the potential to affect lots of stuff, obviously, including
a lot of electronics. Now, chances are the price of
your next computer, smartphone, tablet, or you know whatever other
electronic device is going to be a little more expensive
than earlier models because companies are going to pass on
the cost of these higher tariffs to customers. Now, this

(01:12):
leads up to a question, why are so many devices
manufactured or assembled in China? How did we get to
that point, and to understand that, we need to understand
the history of industrialization in China. So this episode is
really going to be all about China's journey to becoming
an industrialized country, which honestly didn't happen that long ago,

(01:37):
and how it then became the go to place to
have electronics assembled before moving on to stores around the world.
So this is a pretty complicated topic. It involves trade, politics,
and economics, and they all have a lot of variables.
So this is not as straightforward as technology tends to be.

(02:00):
Because with tech, typically something either works as the designer
had intended it to work, or it doesn't work. And
if it doesn't work, with diligence, skill, and maybe a
little luck, you can trace the reason that the tech
isn't working, and you can figure out the cause of that,
you can address it. But economics and politics, those are

(02:24):
a lot more squishy than tech, and addressing one thing
could throw something else out of whack. So I'm gonna
do my best to kind of give an overview of
where we got or how we got to where we are.
So to understand the story, we really have to look
at China's history over the last couple of centuries. And

(02:44):
I know that seems like it's overkill, but I think
it's really important to kind of understand the historic cultural
influences of China and how that has shaped the modern
day China. And I'm gonna warn you there really aren't
a whole lot of good guys in the story. I'm

(03:05):
gonna tell I'm sad to say so. The United Kingdom
kind of entered into the Industrial Revolution really in the
midst mid eighteenth century, so the mid seventeen hundreds, but
it really got going in earnest in the nineteenth century
or the eighteen hundreds, but China would lag far behind.

(03:25):
At that time, the China government was an imperialist government.
It was led by the the the Qing dynasty, which
had been in control of China since the mid sixteen hundreds.
Now by the eighteen hundreds, this dynasty was starting to
deal with a progressively more unstable China. A large part

(03:48):
of that came from foreign interference, and a ton of
that had to do with British merchants who were smuggling
opium into China. This is one of those terrible parts
of the story. We've get into a whole part of
why China is the way it is largely because of
illegal drugs coming into the country. So the British merchants

(04:12):
what they were doing was they were buying up opium
in India. They would then travel to China and they
would sell it for a large profit. Meanwhile, the Chinese
we're dealing with a very real opium crisis. Addiction rates
were on the rise. It was causing a lot of
social and economic unrest. So the dynasty moved to address

(04:32):
the social and economic issues that were growing as a
result of this illegal trade, and the Chinese government uncovered
and destroyed more than a thousand tons of opium the
British merchants had hidden in warehouses in Canton, China. Canton,
by the way, was the one place that China was

(04:52):
allowing to be open to trade from UH with foreign
parties like like the British. Other cities were off limits.
China had very strict trade restrictions and was pretty insular.
It wasn't very much welcoming the outside world to come
into it quite as much. UH. Even though China has

(05:13):
a very long long history with international trade, with stuff
like the Silk Road, tensions between Chinese officials and British
sailors grew over time, and then a couple of drunken
British sailors killed a Chinese villager, and the Chinese government
understandably wanted to apprehend the sailors and try them for

(05:33):
this crime. The British government, however, was not keen on
its citizens being subjected to the authority of another government,
and so they refused to hand over the sailors, so
tensions would continue to increase. The Chinese government then created
a blockade around Hong Kong to prevent British tradeships from

(05:55):
passing it. The British government didn't like that either, so
they commanded British warships to break up the blockade, and
this was the beginning of the First Opium War. The
British forces were outnumbered, but they had superior weaponry and equipment,
and so ultimately they won out over the Chinese forces.
Britain was able to occupy the Chinese city of what

(06:17):
is now Nanjing in August of eighteen forty two, and
the Chinese government was forced to negotiate with Britain. As
part of those negotiations, China signed on to some trade
agreements that were incredibly favorable to foreign merchants, specifically British sailors,
and put China at a disadvantage. It did, however, have

(06:37):
the effect of turning several of China's coastal cities into
centers of trade and opening those up two British traders,
so it was no longer just Canton. And this is
also where Britain would gain control of Hong Kong, which
they would then hold onto until nineteen seven, when they
were relinquished the territory and China regained sovereignty over it.

(06:59):
But that's a story for a different podcast. That's one
that's still having some repercussions today. Now, if that were
all that this dynasty had to contend with, maybe it
would have remained in power in China. But the nineteenth
century also saw a period of natural disasters, had stuff
like droughts and floods. I mean, keep in mind, China

(07:20):
is an enormous country. You can have droughts in one
part and floods in another part. They can happen. At
the same time. The government also was raising taxes on
people who really couldn't afford to pay them. Uh, and
it created an environment in which people were unhappy with
how things were, and so they decided to rebel, and
that's why we got the Taiping Rebellion. Now that story

(07:43):
gets super complicated, but the quick summary of the Taiping
Rebellion is that it was the bloodiest civil war ever
anywhere in all of history. The dynasty was ultimately victorious.
They were able to stop the rebellion, but millions of
people died in the process, and the government was in

(08:04):
a weekend position afterward. Complicating matters further is that while
this civil war was happening, the Chinese government would also
have to deal with a second opium war, this time
against not just Britain but also France. The war started
after Britain sought to expand its trading rights in China
and essentially used an event in which Chinese officials boarded

(08:28):
a British ship and arrested several sailors as an excuse
to use a warship to bombard Canton. The French joined in,
and then hostilities increased until the British were able to
occupy the city of Tianjin. The Chinese government again was
forced to capitulate to disadvantageous trade deals with the West,

(08:51):
including a law that now made it legal to import
opium into Shanghai. Now, the Chinese government recognized that one
of the reasons that the British and French were so
successful in the Opium Wars was due to China's lack
of industrialization. Around eighteen sixty, the dynasty the government began
massive programs in an effort to industrialize China, but for

(09:14):
many reasons, those efforts failed, and getting into all those
reasons would take a podcast of its own, but a
lot of it had to do with very different economic
and political structures in China compared to those in the UK,
which had of course already industrialized. The failures put the
government deep in debt and people were suffering. The dynasty

(09:37):
would hold on to power until around nineteen eleven nineteen twelve,
but these events that happened in the mid eighteen hundreds
effectively sewed the seeds for the dynasty's demise. So it
was pretty much doomed based upon this, this group of
things that all happened around the same time, with the

(09:58):
various natural disasters, the rebellions, and the opium Wars. So
the reason I'm spending so much time on this is
to give you guys an understanding of where China was
as a country. It had lagged far behind the United Kingdom,
which had become industrialized nearly a century before the Opium
Wars had started. And in place of this dynasty was

(10:18):
a new government system called the Republic of China, which
was modeled after Western governments, particularly the United States. In fact,
the Constitution of the Republic of China called for a
separation of government powers into different branches in a very
similar way to the United States, with executive, judiciary, and
legislative branches. Now that's not to say this transition went smoothly.

(10:42):
Various regions in China fell under the rule of regional
war lords. They asserted their own control of their particular territories,
and they essentially ignored the Republic. Also, not long after
the founding of the Republic, there was another big shift
in politics. So over in Russia just next door, Vladimir

(11:05):
Lenin lad the October Revolution and established communism as the
system of government for Russia. Now, the ideal of communism
is that all class distinctions within a population are stripped away.
You no longer have upper, middle, and lower classes. None
of that exists anymore. There's no such thing as private property,

(11:25):
and the government is there to ensure that every person
works and is paid according to their abilities and their needs.
So if you're able to work, you work, and then
you are paid according to how much you need in
order to survive. Ideally, everyone in such a society would
receive the support needed to in turn be a productive

(11:47):
member of that society. Concepts like profit are meaningless in
that idealization. But that's not really how communist governments have
tended to shake out. Rather, a lot of those government
has ended up being authoritarian structures that used government owned
assets to maintain power over the general population. So while

(12:09):
it was based on ideals of everyone is equal, it
turns into the animal farm example of some people are
more equal than others. The idea of such a system
in which people of a country are the ultimate owners
and the means of production was a very powerful one, though,
which explains why so many people signed on to that idea,

(12:31):
even though it turned out in practice it never really
manifested that way. Now, the Communist Party established a presence
in China in nineteen twenty one, which was just four
years after the October Revolution in Russia. While all this
turmoil was going on. China failed to kick off an
era of industrialization and fell further behind. Joseph Stalin, who

(12:53):
took over Russia upon Lennon's death in nineteen four would essentially,
through force of will, lead Russia through a process of industrialization.
But this process had tremendous costs and precipitated a terrible
famine in Russia. And you would think that that would
serve as an example for China. But we'll get to

(13:17):
why that wasn't anyway. Starting in nineteen thirty one, Japanese
forces began to invade and occupy parts of China, and
a guy named maud Ze dong Uh climbed the ranks
of the Communist Party in the nineteen thirties. Eventually he
would become the chairman of the party. Now, after World
War Two and after two decades of what was essentially

(13:41):
civil war, Mao established the People's Republic of China in
nineteen forty nine with the Communists in control of the country,
and so they essentially erased the Republic of China, and
now you had the People's Republic of China. It was
not really a republic. The communist government was more authoritarian

(14:02):
than that, uh and Maw as chairman of the party,
was effectively the new head of state for China. The
United States, already wary of communism and in the early
stages of the Cold War, cut off trade and a
lot of diplomatic ties with China entirely. At that point.
Now we're gonna skip ahead to nine, Mao decides to

(14:24):
follow Stalin's lead and through sheer control, try to force
China through industrialization. He comes up with a five year plan.
He calls it the Great Leap Forward. Now, Mao wanted
to overtake the United Kingdom in industries like iron and steel.
But they call his particular strategy a mistake is to

(14:46):
drastically understate the results and the Great Leap Forward. Communities
in China were upended to meet Mao's vision, and they
were villages and towns were transformed into calm UNEs. Many
tasks were collectivized, stuff like childcare. They would all be
put into a centralized system and a few people would

(15:09):
be charged to handle looking after whatever those centralized tasks were.
Some people would be dedicated to farming, but a lot
of people would be sent to work in small manufacturing facilities.
Now also encouraged Chinese citizens to build backyard steel furnaces
and smelters in an effort to produce more steel within

(15:31):
China and thus reduced the country's need to depend upon
foreign sources of steel like the UK. So citizens were
actually expected to meet quotas of steel production, and in
an effort to actually meet these these government mandated quotas,
a lot of people were melting down useful stuff because
they didn't have any access to anything like or where

(15:55):
they could make steel by you know, smelting or so.
Instead they were melting down like pots, pans, tools, stuff
that they actually really needed so that they could try
and meet these quotas. The problem was that the steel
that they were producing was pretty much useless. So not
only were they getting rid of things that they really needed,
they were producing steel that couldn't really be used for anything. Now,

(16:16):
on top of that, the farming practices that Mao insisted
upon adopting would end up causing enormous environmental harm and
ended up dropping crop yields over the next couple of years.
So what followed was, just like in Russia, a terrible
famine within two years. The Great Leap Forward was largely abandoned.

(16:39):
Certainly was abandoned before the five years were up. Historians
estimate that somewhere between twenty million to as many as
forty five million or more people died as a result
of this initiative. The attempt to produce steel had terrible consequences.
People were deforesting large sections of China in an effort

(16:59):
to fuel the smelters they were using. This in turn
led to erosion and flooding and other problems. And the
farming practices, as I said, they hurt the productivity of
the soil. Even early on when there was a bumper
crop of of food. In that first year, they actually
produced more food than they had anticipated. A lot of

(17:21):
that food ended up going to waste because there weren't
enough farmers to harvest it, all so rotted in the fields.
Mao's brute force approach to industrialization had failed and resulted
in the deaths of millions of people, and China was
lagging even further behind. Mal was not yet finished with
his efforts. I'll explain what I mean by that more

(17:42):
in just a moment, but first let's take a quick break.
In the wake of Mao's failure with the Great leap forward.
The Chairman of the Communist Party faced a lot of
criticism and opposition within the party, and that's pretty understandable.

(18:04):
His efforts had plunged China into a crisis of monumental magnitude,
with millions dying. Mostly those were people from rural cities
and the interior of China, because officials were shipping a
lot of the food that was being produced at the
farms in those areas off to the coastal cities. So
the urban centers were getting more food than the rural

(18:25):
centers where the food was actually being grown, and so
the people who were growing the food were ironically starving
to death. Other members of the Communist Party worked to
kind of sideline now. In fact, there was a plan
for mal to retain the title of Chairman of the
Communist Party, but for it to be mostly a ceremonial

(18:45):
title with no real power attached to it. Now obviously
did not care for that one bit. Meanwhile, over in
the Soviet Union, while the greatly forward was kind of progressing,
there was a huge ship in politics. The Communist Party
was still in power in the Soviet Union, but they

(19:06):
had just renounced Stalin, who had died a few years earlier,
and so this was a move for Russia the distance
itself from the politics of Joseph Stalin, who was truly
a terrible dictator. Mal was worried that this indicated a
shift in the Communist Party in general that would ultimately

(19:26):
have him removed from power, and there was a distinct
philosophical disagreement on the nature of communism between the Soviet
Union and China, and then the Soviet Union would cut
ties to China. In the process of this, they were
called some of their technical experts who were working in
China who were trying to usher along this industrialization which

(19:47):
had not yet really succeeded. And in nineteen sixty six,
Mao calls for what he called a cultural Revolution, with
the stated goal being to sort of squelch the revolutionary
forces that Mao said were attempting to overthrow the Communist
Party and deny China It's place among the world's superpowers.
Mal would end up inspiring a lot of young people

(20:09):
to to carry out this vision, and they formed groups
called the Red Guard, and they would act out against
perceived enemies of Mao and his vision for China. Sometimes
that would actually include fighting with other Red Guard groups,
so you would have two different Red Guard groups throwing
down with like heavy weapons. Within a year, the various

(20:29):
Red Guard groups had captured and assaulted many leaders in
various regions of China, and China's official armed forces would
also engage in combat with the Red Guard groups, so
this became a multifaceted kind of internal struggle. Hundreds of
thousands of people died in this and the country teetered
toward anarchy while mal was trying to reassert control. Regional

(20:53):
authorities would start to collect young people, specifically students in
urban centers, and then ship them off to work in
hard labor in the countryside in an effort to kind
of squelch this intellectualism that they viewed as a dangerous
um pursuit, something that would lead to unrest. Some leaders

(21:13):
of the Communist Party were tortured and killed by members
of the Red Guard. The revolution continued for a decade
as Mao did his best to maintain his position as
the leader of China, and in nineteen seventy six he
died at age eighty two after a series of heart attacks,
and that's when the Cultural Revolution really ended. It ended

(21:33):
with Mao's death and also the arrest of several other
high ranking members who were helping Mao. So after Mao's death,
a veteran of the People's Liberation Army or p l A,
that's the official armed forces of China ended up assuming
control of the country starting in nineteen seventy eight. That
person was Deng Xiaopeng. Now Dean would dramatically transformed China's

(21:59):
economic The country would reverse its policy of discouraging foreign investment,
though I should mention that Mao had really started down
that pathway. Now had actually met in secret with Henry
Kissinger in the early nineteen seventies and later much more
publicly with Richard Nixon. But beginning in earnest in nineteen
seventy nine, China began to initiate drastic economic reform measures.

(22:23):
Rather than take a centralized, state run approach to the market,
the government began to allow some free market activity and
began to delegate much of the authority to provincial and
local governments, thus decentralizing the whole process. Around nineteen eighty six,
China established its open door policy. The country welcomed foreign

(22:43):
investment and the creation of a private sector within China
that would be guided by market forces, not by a
centralized authority. By the early nineteen nineties, China would become
the third largest economy in the world. The United States
and Japan were in positions one too. China offered up
tax incentives to encourage foreign investment and began to import

(23:06):
foreign technology to augment the country's manufacturing capabilities, and started
building out factories in its various regions, largely along the
coastal regions. Deng would simultaneously re established the Communist Party's
hold on the government, quelling all opposition, as would be
particularly evident during the Tianamen Square event in nineteen eighty nine,

(23:28):
and the party would maintain control even as the Soviet
Union dissolved and Russian President Boris Yeltson banned the Communist
Party from operating in Russia. Now, this uneasy balance between
a free market approach to the economy and the more
authoritarian approach to government led China into unprecedented growth. According

(23:50):
to a June twenty, two thousand nineteen report from the
Congressional Research Service, China's economy has effectively doubled in size
every eight years because the private enterprises have to respond
to market forces. They must adapt to remain competitive. Previously,
state owned enterprises really just had to meet state mandated quotas.

(24:14):
There was no competitive reason for you to try and
do better. You weren't. You weren't rewarded for making more
than your quota. You weren't even rewarded for making better
quality stuff. So the free market definitely had a big
influence in this. China's technological sophistication has depended heavily upon

(24:34):
the adoption of foreign technology rather than relying on a
domestic source of innovation, and that has been a really
huge issue, particularly recently in China. The country built a
lot of factories, and they were specializing in everything from
textiles to plastic. Manufacturing factories abounded in industrial centers in China,

(24:57):
again mostly near those coastline cities, and the country began
to build out factories that could build all sorts of
other stuff, not to mention facilities where workers could assemble
finished projects like smartphones. In fact, that's one of the
things China is mostly known for, is not making stuff,
but for assembling, for putting it all together. Many of
the chips and other elements in the smartphones would actually

(25:19):
come from other places like Europe or the US or Japan,
but the assembly would happen in China. This leads up
to why so many electronic devices are put together in China,
and there are a few really big reasons, so I'm
going to try and touch on all of them. One
reason probably the one that is cited the most frequently,

(25:42):
although it's not necessarily the most important reason is the
cost of labor in China is much lower than in
many other parts of the world, like way way lower.
So an entry level manual job at fox Con, which
is the company responsible for an enormous percentage of the
electronics being assembled in China, including pretty much all of

(26:06):
Apple's electronics, the starting salary at one of fox cons
factories is four thousand, two hundred dollars a year. That's
three fifty dollars a month, or about eleven dollars and
fifty cents per day. So that's one way you can
save a ton of money if you're an electronics company,

(26:27):
is by offshoring all this work to a country where
the wage is incredibly low. But there are a couple
of other elements that are at least as important, if
not more so, because there are other places in the
world that actually pay workers even less than what you
would find in China. One of the reasons that is

(26:49):
just as important is that that low cost and labor
is that there's no shortage of people seeking jobs in China.
There is an enormous under employed workforce in China, and
because it's under employed and they are eager to work,
it is very easy for a factory to scale up
production in response to a demand from a company like Apple. So,

(27:13):
for example, every year, Apple holds its big event in
September where it announces the latest in usually it's it's
phone line, and then it follows that up by releasing
the new phone. Well. Obviously those phones have to be
well through the manufacturing process by the time Apple gets
around to announcing it in September, and there need to

(27:35):
be enough to meet the initial demand. So production for
that super secret phone begins much earlier, and typically you
see companies like fox Con ramp up in June because
that's when they start putting together these phones that have
to be ready by September. So in those cases, fox

(27:57):
Con needs to scale up. They don't want to have
full capacity all year round. There's no need for it,
but when the demand calls for it, they can scale
up and hire a bunch of people, and they will
hire thousands upon thousands of contract workers who will have
a limited contract to work there for a certain number
of months, and those folks can join onto the company

(28:20):
essentially overnight to meet the demand and scale up production.
That's just not possible in places like the United States,
so China's workforce can meet quick turnaround deadlines. On top
of that, in China, it's not unusual for people to
live extremely close to the factories. In fact, a lot
of these factories, Fox Con in particular, have dorms set

(28:42):
up where people can live in the dorms for a
fairly low cost and work right next door to where
they're living, or kind of next door to where they're living.
And that makes a huge difference too, because it means
that if the company gets a call in the mill
of the night in China that a change needs to

(29:03):
happen in the design of a product, they can make
that change, call in the workforce, get them out of bed,
get them over onto the assembly line, and start churning
out phones with this new, updated change and not have
any problems in the supply chain. And speaking of supply chain,
if you've listened to some of the recent episodes of

(29:24):
tech Stuff, you've heard me talk about supply chains a lot.
The supply chain is incredibly important for any business. Making
a supply chain efficient and dependable is critical. And because
there are so many facilities in China that can manufacture
components from screws or maybe they cut pains of glass
to make displays, it makes logistical sense to locate much

(29:48):
of the manufacturing process in China. The more you can
concentrate the production of these various components within a region,
the more efficient you can make the whole supply chain,
and the faster you can react to market demand. That
also translates to big savings for the part of whatever
company is ultimately marketing this product. Big savings means that

(30:09):
then if you're this company, you can mark up the
price to a hefty amount and sell it to the
final customer for a nice profit. You keep more that
filthy lucre yourself, so while you're saving money on the
production costs of the electronics, you're making tons because the
final price tag. And Apple is particularly good at this,
with really high profit margins for many of its products. Now,

(30:33):
the flip side of all of this is that the
people enjoying the electronics, people like me, are doing so
at a really tremendous human cost, and it's a human
cost most of us can't see, and I would argue
it's one that a lot of us can't even really imagine,
in large part because of the truly massive scale of

(30:54):
manufacturing in China. So let me paint you a picture here.
Fox Con, the company I mentioned earlier, has tons of factories,
but one of the ones that gets a lot of
attention in particular is located in Shenzhen and is called
fox Con City. At least that's the nickname for it.

(31:15):
That gives you an indication of how big this manufacturing
facility is. It really is like a city. Now. The
official name for this site is the long Wa Science
and Technology Park. The number of people working there is astounding,
and there's a pretty wide range of estimations about the
total number of employees working at that particular site, because again,

(31:38):
the demand could call for a larger number of people
at one time of year and a smaller number for
a different time of year. But the range tends to
be between two hundred thirty thousand on the low side,
up to near half a million people on the upper side. Now,
I don't know what the average number of employees are

(31:58):
if you were to take the full year to consideration,
but I think we could probably summarize it as a
whole bunch of people. I mean, two thirty thousand alone,
that's a that's a lot of people. The park has
more than a dozen factories inside of it, and from
what I understand, it would take you more than an
hour to walk all the way across it. There are

(32:21):
also lots of other facilities within this park. They're including
a hospital, movie theater, restaurants, a bank. Uh, there's a
television network located there. There's also those dormitories there, which
is where about twenty five percent of the employees of
the park live. Uh. Those employees are frequently working twelve
hour shifts six days a week to get one day off.

(32:43):
That's it. Another fox Con city is in xeng Ju,
which is in the Hanan province. Now, according to Business Insider,
this facility can produce as many as a half million
iPhones in a single day. The same article that gave
me that information are a pretty disturbing bit of data. Now.
According to the article, which in case you want to

(33:05):
look it up, is called Inside iPhone City, the massive
Chinese factory town where half of the world's iPhones are produced.
The cities around Shinshu are given quotas for the number
of workers each place should provide the factory. So, in
other words, let's say that you're you've got a village

(33:25):
that's close to Xingshu, you might have a specific quota
saying you have to send twenty people to serve as
employees of this factory. Now this sounds terrifying to me,
but I should add that the city is in one
of the poorer provinces of China, and there's actually not
a shortage of people who want to earn a living
by working in fox Con. There are a lot of

(33:46):
people who are clambering to get a job there because
jobs in China are scarce, at least jobs that pay
anything close to the wages that fox Con does. Because
even though those wages I cited earlier very low, it's
still high compared to other jobs in China. The Business
Insiders story also states that some of the schools around

(34:09):
this particular fox Con factory requires students to work at
the factory as part of their credits towards graduation. Now,
the work tends to be limited to a specific task
if you're on the production line, so the production line
employees have to repeat the same task hundreds of times
per day, and assembling a device like a smartphone could

(34:31):
require several hundred steps, So employees are arranged through the
production line to do one of those steps over and
over and over again before it then gets handed off
to the next employee to do the next step. And
that step could be a something like soldering an element
on a circuit board, or it could be polishing a screen,

(34:53):
or it could be just you know, inserting a screw
and tightening it. It could be anything like that. It
could be really tiny, and then you just keep doing
that all day long. When overtime is available, a lot
of people jump at the chance to work overtime. They
might work a twelve or fourteen hours shift before heading

(35:13):
back to the dorms. Rent and the dorms tends to
be around twenty five dollars a month, and sometimes you
don't think of it as rent. Sometimes that's more like
you're paying for electricity. But whatever it is, it ends
up being taken out of out of people's paychecks kind
of reminds me of the company store days, as is

(35:34):
made immortal in the song sixteen Tons. Then when nightfalls,
the night shift comes in, and the night shift does
the same thing that the day shift does, only of
course they do it overnight. And according to that same
Business Insider article, the overtime pay can boost the monthly
salary up to seven five dollars a month. That translates

(35:54):
to an annual salary of nine thousand, four hundred twenty dollars.
Now that is assuming, of course that you were able
to get steady year round work at overtime, but you can't,
Like I said it, the demand for work changes throughout
the year, so you wouldn't necessarily be able to have

(36:15):
that level of salary all year round. And a lot
of the reports say that most people end up working
at the factory for about a year before they search
for work somewhere else. That turnover is incredibly high, but
again because there's such a huge population of underemployed people,
that's not that hasn't really been a big concern with

(36:37):
the part of factories. They can very quickly replace people
when we come back. I'll talk a little bit more
about where China is today and what all the tariffs
and stuff mean in the short term. But first let's
take another quick break. Okay, So China factories are assembling

(37:03):
most of the world's electronics. From the perspective of a
company designing electronics, marketing the things, you know, a company
like Apple or Samsung or Amazon, you can understand why
they're doing this. I mean, it's cheap, it's scalable to
your needs, the supply chain logistics workout. It also hinges
on the economic realities of living in China. That's a

(37:24):
little harder to get your mind wrapped around. And in
the last segment, I described the conditions around assembling Apple products.
But please note that is just an example. It's a
very high profile example because it's been the news several
times since. But I am not trying to single out
Apple here and say that company in particular has been
guilty of this. Pretty Much every major electronics company is

(37:48):
dependent upon Chinese factories at some point in their production process,
a lot of them in that assembly part. And there
are a lot of reports that suggest fox Con is
actually one of the better companies operating in China in
this regard. This is particularly difficult to understand when the
reports came out in two about Fox KHN employees committing suicide.

(38:11):
The economic realities for China are such that jobs at
places like fox Khn actually represent a more lucrative way
to earn money than a lot of alternatives that are
available to your average Chinese citizen, particularly those Chinese citizens
who live in those interior cities far from the coastal cities.
China has a very long way to go before conditions

(38:33):
improved to a point where most of us would feel
comfortable learning about how our gadgets were being assembled. This
is a process that took decades and more than a
little violence. In other parts of the world. The history
of industrialization is a history that's also filled with unions, demonstrations, riots,
and more so for China, we have to remember it's

(38:55):
very early days now. Going back to the story about
the suicides, the reports were shocking to Western audiences. Fox
kN after all, was pretty much working as the manufacturing
and assembly arm of Apple's products, and Apple's image was
a company that made aesthetically pleasing technology for a customer
base that frequently thought of itself as enlightened, maybe even

(39:19):
a little bit elitist, and this contrasted in very ugly
ways to the reports of how things were at the
fox Con facilities. So in two there were eighteen reported
suicide attempts at the shen Jin fox Con facility, almost
all of which involved people climbing to the top of
a dorm building and jumping off of it. Of those,

(39:39):
fourteen people were confirmed dead. The reports were shocking around
the world, and the world turned its focus to fox Con,
which attempted to address the issue in various ways, including,
and I am not making this up, they installed nets
around the base of the buildings to catch people if
they should throw themselves off the roof rooftops, which is

(40:00):
pretty terrifying now. According to fox Con employees and former
fox Con employees, the culture at fox Con was largely
responsible for the suicides and attempted suicides. A lot of
people said the work was really boring and repetitive, and
the hours were really long, but that wasn't as big
a factor as the tendency for management to publicly humiliate

(40:22):
workers who made mistakes. The allegation was that fox Con
managers would use shame and humiliation to cower employees, and that,
combined with the high stress and monotony of the work,
is what led to a lot of people breaking down.
Companies like Apple have put pressure on factories in China
to improve conditions, though the extent to which that's been done,

(40:46):
or even the extent to how hard these foreign companies
like Apple have actually pushed the Chinese factories is still
a matter of some contentions. Some people say not enough
has been done in either case, but it is true
that companies like Amazon, Apple, and Samsung and more could
use leverage to force improvements in Chinese worker conditions. China

(41:08):
is also in the middle of a shift in its
economic model. So up to fairly recent times, the earlier
model really stressed rapid economic growth at any cost. The
thought was China has to catch up to the rest
of the world. However, when you say any cost and

(41:29):
you take it to heart, then you end up racking
up a lot of actual costs in the process. In
this case, we're talking about pretty severe ones, stuff like
environmental damage, pollution, over capacity for production. You know, China
built too many facilities in some cases, so there was
you know, the supply was exceeding demand and that's not

(41:52):
good for the long run either. There is also a
lot of issues with corporate debt, as China was creating
these various loan structure ars out of its state run
banking system. So China is now shifting to a less
aggressive economic model, something that's supposed to be more sustainable.
It's trying to invest also in innovation instead of relying

(42:12):
so much on foreign companies and foreign technology to come
to China and then for China to just act as
like the final assembling station for all these other companies.
China announced a vision of this future in which the
country would be innovating and designing products, not just assembling them.
And they announced this back in It's the initiatives called

(42:34):
the Made in China twenty twenty five, and there's an
overarching goal of turning China into quote a world manufacturing
power end quote by twenty nine. Now, recently there's been
a lot of reporting about companies moving manufacturing out of
China entirely or at least in large part, and part

(42:57):
of this has to do with wage is in China
slowly improving. So here's the sad thing about capitalism, right,
is that as conditions are improving for people in one country,
companies start to look to move manufacturing out of that
country because the improving conditions equate to rising costs. Rising

(43:20):
costs equate to lower profits. Lower profits equate two, I
don't want to be here anymore ya capitalism. So it's
cheaper to make some stuff in other Asian countries like Vietnam.
And in fact, some people refer to this as factory Asia,
and that the companies that are making these products or

(43:42):
designing the products are kind of juggling which country should
do the manufacturing and assembly. Now, on top of this
rising wage issue that companies aren't necessarily crazy about, there's
the tariff situation, and the tariffs put these expensive, uh

(44:03):
well expensive tariffs on all these different products coming in
and out of China, and that as a result means
that companies have to figure out how to deal with
that added cost of production, and most companies are going
to pass that on to the customer because otherwise you're
talking about eating into profits. One work around around this,

(44:24):
which I know is a bit repetitive, but it's really sneaky,
at least in my opinion. The workaround is to move
the final assembly of a product to a different country
like Vietnam, but still depending upon Chinese facilities to supply
various components for this finished product. But because the actual
product would be assembled somewhere other than China, the company

(44:46):
responsible for that product could say that the product was
made in or assembled in Vietnam as opposed to China,
and by pushing the final production step out of China,
a company could avoid having to pay some of those
pesky arra. Meanwhile, there are other issues that China is
having to face in this same time. One of those

(45:07):
is that you know, they had that enormous population of
underemployed working age employees, people who are the appropriate age
to work in factories, and I say appropriate age. There's
also been a lot of allegations of child labor issues
in China, which I didn't really go into, but there's
a lot of accusations that that sort of stuff happens

(45:29):
throughout China as well. But that number is actually going down,
the number of underemployed people in China who are able
and willing to work, and that's largely because China has
had a lower fertility rate for several years. China institute
a one child policy, which then meant that families were

(45:50):
having fewer children, and it means that the population itself
was starting to shrink, and so as a result of that,
you have fewer people of the correct age to go
to work to fill up all those positions. This is
not necessarily always a bad thing, but because China's previous

(46:11):
economic model depended upon having a very readily available workforce
and under employed workforce that you could tap into when
you needed it in order to spur rapid economic growth,
that was the real issue. Now that China is trying
to shift away from that model, it might be able
to better serve the citizens who need work and to

(46:36):
provide them better wages, but that is an issue that
China is facing right now, is this reduction in that
enormous labor force. On top of that, the other things
that are kind of on the horizon that China is
a bit worried about are things like automation. Automation would
be beneficial on the bottom line for a company's spreadsheets,

(47:00):
but it's not great for you know, your your population
that is largely dependent upon repetitive, mundane work. I mean,
that's that's the sort of work that is ideal in
order to automate. Right, If you can put automated systems
in there, they could take over a job that would

(47:20):
normally be done by, you know, hundreds of employees. You
can save a lot on costs in the long run.
And because China has worked so hard for so long too,
almost criminalized intellectualism. There were there were long periods where
the school systems in China were effectively shut down as

(47:43):
all these different periods of strife were going on. It
puts China at a slight disadvantable more than a slight disadvantage,
at a disadvantage when it comes to pursuing innovation. The
country is trying to do a lot to counteract that today. Now,
as I said at the beginning of this episode, this
is a very complicated type of of topic. Uh, there

(48:06):
are a lot of things I haven't really gone into
a huge amount of detail on. I've taken a very
high level for a lot of this, but I wanted
to kind of explain what was going on, why so
many things are being made in China. You hear the excuse, Oh,
it's just cheaper, but why is it cheaper there? You
have to ask that question too, And again, some of
it is about the wages. Some of it's about supply chain,

(48:28):
some of it's about the readiness of a huge workforce
that can scale up a process very rapidly and thus
cut down on any delay times between changes in production.
All of these are factors that are important for things
to be made in China, but it's also the sort
of stuff that's happening in other areas, particularly in Asia,

(48:49):
and it's why a lot of the companies that had
been relying on China have already started moving out even
before the tariff situation became a thing. There are companies
we're looking to move out of China and stop depending
so heavily upon China itself, largely because again, those wages
were starting to go up and that was beginning to
impact the bottom line. Fun times, this is the sort

(49:11):
of stuff I don't like to think about when I
sit there and look at a cool new device or
gadget that I really want to get my hands on,
because as I started to think about what actually goes
into making it, I start to feel perhaps my desire
to own that piece of technology isn't important enough to
justify all the stuff that happened On the flip side.

(49:32):
If it didn't happen there. If if the jobs had
not existed in China, there'd be people who arguably be
even worse off than they are already because they wouldn't
have had a job in the first place to earn
that money. So it's very difficult to get my mind
around it and to accept how ethical or unethical the

(49:54):
whole thing is. It's a very very complicated problem. And
this is what happens when you get into a world
where you have a global economy with this capability of
manufacturing and having your manufacturing processes all around the world. Uh.
I'm very curious what you guys think about this, and
also if you have any suggestions for future episodes, you

(50:17):
can reach out to me. The The address for our
humble little podcast is tech stuff at how stuff works
dot com, or you can pop on over to our
website that's tech stuff podcast dot com. That's where you're
gonna find an archive of all of our past episodes.
You'll also find links to where we are on social media.

(50:38):
You can reach out there if you prefer on Twitter
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We greatly appreciate it, and I will talk to you
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(51:00):
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