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Chinese Investments Intensify Beijing’s Influence
May 21, 2007

As rumours of a new 250 billion dollar fund to be opened and managed in China circulate, the increasing influence of Chinese investment throughout ASEAN continues to intensify. The physical effects are obvious: the damming of the Mekong and the blasting of rapids on its upper reaches has dramatically affected the flow and value of the river, while the pollution from its enormous industries crosses borders in increasing amounts. The investments in industrial parks in Thailand, Cambodia and outside of the region are precursors to a new wave of Chinese companies opening up to take advantage of the many privileges and inducements offered to them. To what extent will Chinese practices in terms of labour rights and occupational health and safety standards accompany these new ventures? Anyone familiar with China will be aware of the large number of cases of workers being killed or injured at the workplace and the instances of consumer deaths following the marketing of contaminated and falsified goods. Of course, most of these cases are the results of criminal activities but, even so, the official policies of the Chinese government do not inspire much confidence in this matter.
Pressure is also likely to be felt in terms of the training and education of the workers to fill those factories. It can be expected that a number of Chinese will relocate overseas to manage and staff facilities but host governments will, quite reasonably, expect that the investment will provide much needed skilled jobs for their people. However, to fill those jobs, workers will in many cases be required to train to receive specific skills which are likely to tie them to the investment facilities on a long-term basis. Governments will need to consider the extent to which those skills will be transferable to domestic investments or to use them to open new businesses themselves. As neither Cambodia nor Thailand nor most other ASEAN states have integrated and fully-articulated labour market policies, it will be a significant challenge for them to fill this gap.

An additional issue concerns the nature of supply chain management. When Japanese firms invest overseas, it is routinely the case that they will be intending to compete with local and international competitors on the basis of high quality products. Chinese manufacturing does not have the same reputation. Lacking internationally recognised brands, to date, Chinese firms are much more likely to compete in terms of low cost and through replicating design innovations made by other firms. Consequently, the boost to productivity and competitiveness that characteristically accompanies Japanese overseas investment is not likely to accompany its Chinese counterpart. Is it possible that firms in the supply chain in Thailand in particular will be expected to reduce the quality of goods they supply?
In the twenty-first century, it seems almost inconceivable that any government would be able to administer its country on a long-term basis without a pro-business policy. It is not only the zeitgeist of the times, institutional arrangements reinforce the requirements every state must meet. Membership of the WTO, of ASEAN itself and the many multilateral and bilateral agreements that states enter into all bring with them lists of obligations and responsibilities, each of which may be reasonably considered pro-business in intent and effect. Accepting overseas investment has come to be regarded, at least at the state level, as an unalloyed good. At the local level, this is not always apparent as the distortions it causes to local labour markets and supply chains is turbulent and, as capitalism does, creates losers as well as victors. Effective marketing communications would help to reduce the credibility gap that this seems inevitably to cause – but Chinese industry does not have a very good reputation in this respect.

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