The changing tide of good fortune
Words | Boyd Farrow The tide is turning as more and more Chinese and other Asian manufacturing companies see the benefits of setting up business in Europe, with many workers from these parts in hot pursuit of jobs ON A STATE visit to China late last year, Bulgaria’s Prime Minister Sergey Stanishev was delighted when his hosts unveiled a [...]
Words | Boyd Farrow
The tide is turning as more and more Chinese and other Asian manufacturing companies see the benefits of setting up
business in Europe, with many workers from these parts in hot pursuit of jobs
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ON A STATE visit to China late last year, Bulgaria’s
Prime Minister Sergey Stanishev was delighted
when his hosts unveiled a monument to his
famous countryman, the 19th-century poet
Hristo Botev. Whether Beijing’s civil servants are genuine
fans of Botev is debatable, but there is certainly reason for
the Chinese to show appreciation of the new EU member
– Shanghai electronics giant SVA Group has just opened
a TV set factory in northern Bulgaria.
Almost 200 million Chinese people are learning English
as Western business processes flood Asia, but the trend is
going the other way, too, and a growing number of Chinese
and Taiwanese companies have begun producing goods
in Europe. Last December, another TV set manufacturer,
Changhong Electric, opened a €90m plant in the Czech
Republic, to produce a million plasma TVs and LCD screens
a year. Another Chinese company, Hisense Co., opened a TV
plant last year in Hungary, to add to the one it has in France.
Furthermore, earlier in the year, it had opened a research and
development centre in the Netherlands. And, Taiwanese rival
Tatung Co’s factory, also in the Czech Republic, is cranking
out 50,000 flat-screen sets each month and, not far away,
compatriot Foxconn Technology Co., which makes computer
equipment for Cisco Systems, Hewlett-Packard and Apple,
has a €75m plant employing 5,000 people.
There are several reasons for all this activity. On the official
Chinese news agency website, Changhong’s international
development chief, Luo Guangqiang, acknowledges that a
plant in the Czech Republic will help the company to vault
over trade barriers and position its merchandise for lucrative
markets in Europe, the Middle East and the US. Europe is
one of the largest markets for flat-screen TVs, yet Chinese
manufacturers have been hit by quotas and restrictions
regarding prices and specifications. Producing inside the
EU lets Chinese companies avoid a 14% import tariff.
But new EU member states are even more welcoming, with
governments offering incentives to attract investment and
create jobs. In the Czech Republic, for example, companies
setting up plants and creating jobs have been granted tax
exemptions for 10 years. Romania has scrapped income tax
for IT programmers and the Netherlands has a wedding cake
of tiered tax breaks for foreign staff and corporations.
There are other benefits, too, points out Stephen Bullas,
whose company eCODE assesses outsourcing locations.
Operating in Central Europe, he points out, enables Asian
companies to react quickly to demand. “They can churn
out hundreds of thousands of TVs and computers in China
but it will take a month to ship them to Western Europe,”
he says. This benefit helps offset the wage cost – salaries
in the Czech Republic are roughly €350 a month – four to
five times the Chinese equivalent.
Another benefit of getting a foot inside the EU is that
Chinese companies can claim that their presence is proof
that they comply with EU governance.
There is a twist though, as some Chinese companies
have imported some questionable practices to Europe.
When Italian textile workers were angered at losing jobs
to the benefit of Far East factories, it coincided with more
than 2,000 Chinese entrepreneurs and 30,000 low-wage
workers decamping into Prato, Italy’s textile-making capital.
Some Central and Eastern European countries are also
facing the prospect of growing Chinese immigration, due
to a shortage of skilled labour.
One of Poland’s largest companies J.W. Construction
already employs 200 workers from central Asian countries
Uzbekistan and Tajikistan and is now considering importing
Chinese workers. Swiss textile maker Wear, meanwhile,
employs nearly 1,000 Chinese workers in Romania.
It’s a trend that’s not without its critics, unsurprisingly.
In Russia, where many Chinese workers drift across the
border, President Putin, for one, has expressed concern
about millions more arriving in rural areas.
