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Last Updated: Friday, 23 November 2007, 10:55 GMT
On the production line
By Quentin Sommerville
BBC News, Shanghai

Large-scale garment factory
At work in a large clothing factory
Many of the products UK shoppers buy are made in China. How do workers there feel about efforts to curb consumerism - and the market for their goods?

Wang Guohong is busy threading a knitting machine at the Three Gun Underwear factory on the outskirts of Shanghai. The lime green cotton being wound through the needles will eventually become polo shirts.

Just before the shirts leave the factory, a "Made in China" label is sewn inside, and on the front, a small crocodile logo is added. It's a brand familiar the world over, and the shirts will be heading for stores in the UK, France and Russia.

On Huai Hai St in downtown Shanghai, the shirts she is making sell for more than $100. But Wang Guohong would have to work for more than a week to buy one, as she earns just over $8 a day.

"It's a good job," she says. "If I wasn't doing this I'd be working in a bakers in my hometown, but the money there is not so good." She comes from Anhui province, west of Shanghai. It is one of the poorest places in China; far from the riches of the country's financial capital.

Shopping with a psychologist

That Western consumers might stop buying her products is a puzzling thought. "If they did, then we would just make for the domestic market." It is unlikely that the designer shirts she produces would find enough customers in China. The country's middle class is still relatively small, but Wang Guohong has a point.

Elsewhere in the factory, machines are making underwear for the Chinese market, including thermal underwear for the People's Liberation Army.

"The margins are better than with our foreign customers," says one manager.

Cheaper goods

China is in large part responsible for falling prices for everything everything from T-shirts to DVD players in shops around the world. It is roughly 40% cheaper to make goods here. Western companies have moved production here to take advantage of low wages and the plentiful supply of workers.

Assembling toys in a Chinese factory
Putting together toys
But that's not the only reason companies move to China. Bangladesh and Vietnam have lower wages, but they don't have the modern roads, airports and ports that allow China to deliver goods worldwide in the fastest time possible.

And the world, it seems, is reluctant to turn its back on China.

At the Yuan Tai toy factory, in Donguan in southern China, 20-year-old Wu Jinlian is busy painting tiny black eyes small farmyard animals. Over lunch she explains that she comes from Hunan province - the promise of better wages brought her south.

"If I didn't work here, I'd have to work on a farm at home." The wages would be a fraction of what she earns. Here in the factory, her food and board is paid for - much of her monthly wage of about $80 is sent back to support her family.

She is also responsible for checking the quality of the toys. Despite a series of safety scandals involving everything from Chinese-made toys to car tyres, Western consumers have not been discouraged from buying the goods.

But what kind of impact would there be if the West stopped buying so much from China? Would Wang Guohong have to return to Anhui, and Wu Jinlian to Hunan?

Perhaps not, says Shanghai-based economist, Andy Rothman of CLSA markets. While exports make up about a third of China's economy, most are heavily processed goods that are being assembled and snapped together in China.

Spending power

China makes most of the world's laptop computers, but according to Bo Xilai, the country's commerce minister, it only makes about $15 from each $700 computer.

Lingerie models and fashion buyers
Fashion buyers at a lingerie trade fair in Shanghai
Stripping out those imported parts, the net export figure only made up 7% of the value of China's economy last year.

"Exports are important, but not nearly as important to China's growth as domestic demand and domestic investment," he says.

And China's domestic demand still has a long way to go. An estimated 400 million people have been lifted out of poverty by 20 years of economic growth, according to the World Bank. As they get richer, Chinese people have more money to spend on consumer goods.

Some 15 years ago there were barely a million cars in all of China. Now everyone wants one, and there are 33 million on the road. In 15 years time, China is expected to overtake the United States with 140 million cars tearing across its ever expanding highway network.

For now, Western consumers are important to China, but that will not always be the case. And while Westerners may eventually be convinced to slow their spending, China and its 1.3 billion customers have only just got started.


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