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A number of Chinese businesses are setting up 100%-Chinese factory compounds overseas. These compounds are located in a foreign country, but they are fully fina

A number of Chinese businesses are setting up 100%-Chinese factory compounds overseas. These compounds are located in a foreign country, but they are fully financed by Chinese, built by Chinese, employ only Chinese, have accommodation for the Chinese employees, have a completely sustaining internal economy where employees can buy food and entertainment and send mail, posts, banking, remittance, insurance, through Chinese companies etc. so that the Chinese never leave the compound and no-one else ever enters. The reason for these factory-compounds is because China has challenging export quotas to places like the US and EU. But concentration of manufacturing know-how remains in China. The only way for these businesses to keep selling to high-value markets is to move manufacturing to another country where there is available quota. Although the goods are 100% made by Chinese, they are 0% made in China. The Chinese government encourages business in this area because it is good employment for the Chinese. In turn, these businesses need better infrastructure in the countries they operate in. The infrastructural investment in these other countries is a wonderful side-effect that the government is happily playing up as part of its diplomatic strategy. When the textiles and the shoes and the fabrication factories are no longer making money, hopefully the ports, the trains, the roads, the power grid will continue generating interest income for the Chinese banks. And the recipient countries of these gifts, as it were, may extract benefit from this arrangement, eventually.

hyperdunc 9y ago
China does a similar thing with agriculture. Huge plots of land in Australia and New Zealand are controlled by Chinese farming companies and staffed by Chinese. All the food they produce goes back to China.
- robbiep 9y ago
  It is not true that they mainly (or even significantly) employ chinese on Australian Farms - these farms are generally managed by the previous owners or managers and staffed by Australians, with australian Agronomists. In actual fact, very little changes on a day to day basis, except there is more funds available for infrastructure and capital goods purchase (and property values are driven up). Which, when you think about it, makes the best managerial sense - What the hell is a chinese person going to do coming to australia and farming - they don't know the conditions, they don't know the land - that's a quick way to destroy all the value they hope to create. Local know-how is essential in agriculture. + they wouldn't be able to get enough on 457's to come in and run it even if they wanted to import all their workers. Source: Australian, from a farm, neighbouring farms have been purchased by chinese buyers
  - icantdrive55 9y ago
    Unless the farm buyer is a citizen of Australia, doesn't it bother the average citizen that foreigners can buy businesses, and property? Plus--doesn't Australia worry about nutrient depletion of their farm lands for food sent overseas? Once those nutrients are gone; they are stuck with buying nutrients/fertilizer forever. Plus--it's an island, with I imagine limited farming land?) Yes, in the USA we let anyone basically buy our land too. Want a house--just pick up the tele. I don't feel it's right. I'll probally get hammered for this post, but I just don't get it. Plus--we can't own squat in most of these emerging countries.
  - robbiep 9y ago
    to the dead post: Australia has always relied on capital inflows for infrastructure and capital improvement. in the 30s-50s it was from the UK, the 60s and 70s from the US (especially with the growth and introduction of Cotton in Australia), the 80-90s from Japan, and now China. All those waves of investment have come with fears of 'takeovers' and all of them have passed. maybe the current one will go for longer, who knows. Fear of foreign ownership are a little overhyped; they can't take the land with them and they must be good stewards of it in order to earn good returns. And they must employ locals in order to do that too - which has brought revitalisation to some regional areas that have gone through downturns.
  - iamshs 9y ago
    Well Shepparton and Mooroopna has quite a substantial number if Chinese farm workers. In Safeway, nearly whole Saturday is busy with Chinese farm workers shopping. I haven't really enquired on which specific farm they work, because they generally shun interaction and also due to language barrier. Also, Shepparton has a substantial Punjabi farming population and I can tell you from experience that the farmers do take inputs from Tatura Agricultural institute but the management to production to packing is all Punjabis. Your comment is significantly false information. Shepparton is filled with people who don't have local know-how, but have developed it.
    - pm90 9y ago
      Punjabis are from India and Pakistan, not from China, if that wasn't clear to you. They have a reputation as good workers in agri businesses. See this article about how they invigorated Italy's cheese business: http://www.nytimes.com/2011/09/08/world/europe/08iht-italy08.html?mcubz=0 http://www.nytimes.com/2011/09/08/world/europe/08iht-italy08... (The article references most workers as being Sikhs. Sikhs are adherents of the religion of Sikhism, but I believe nearly all of them are ethnically Punjabis)
- toomanybeersies 9y ago
  You want to cite a source on that? Somewhere between 5-10% of NZ farmland and forestry is owned by foreign interests. That's not just China, but all other countries, of which Australia is a large investor in NZ. A large amount of this land is owned by super funds. Fonterra has an 84% market share in the dairy sector, Fonterra is a collective, owned by the individual farms. Now, the Chinese are building milk powder factories exclusively for export to China, and owned by Chinese companies. But they are employing local people, and constructed by locals, they aren't staffed by Chinese, because the hassle of trying to get a factory worth of workers immigrating to New Zealand isn't worth it, when you could just as easily pay locals. At the end of the day, you can't pay Chinese workers less, because there is a minimum wage. The suppliers to these factories are independent dairy farmers, there's little vertical integration here. In the end, these plants grow the economy and create jobs. Sure, in an ideal world, it would all be NZ owned, but nobody wants to cough up the cash here to build more plants. New Zealand is a small country, it has always relied heavily on foreign investment and ownership, and always will. The population and economy is too small to do it any other way, NZ has to turn to globalism in order to have a healthy, functioning economy.
  - syphon7 9y ago
    Well you could just pay them illegally under the table. I'm ignorant about NZs economy, and you have good points/questions but I felt that it needed to be said. In the US we have huge migrant groups that are responsible for a large amount of the harvesting in this country, and most are paid well under minimum wage. Not saying it's right... just how it is.
    - jpatokal 9y ago
      Illegal migrants are easy to pay under minimum wage, because they're under the radar. However, illegal immigration to NZ is (comparatively) minuscule and you don't really hear about payments under the table, except in small businesses like restaurants, massage etc.
    - roel_v 9y ago
      How would you get sizeable groups of illegal farm helps into NZ? How would they live/send money back home/travel back home etc? NZ is a remote island, this is not a Mexico/Arizona situation. NZ native farmers are very in control of their farms and NZ's agriculture industry in general.
- kiproping 9y ago
  This happens in Africa, not Australia.
- chiefalchemist 9y ago
  Link? Please?
fludlight 9y ago
This strategy is just as transparent as it sounds. Eventually US/EU regulators will find out and shut it down. A similar thing recently played out when a Chinese company owned by the son of a major Chinese aluminum smelting magnate tried to cross ship about a ridiculous quantity of aluminum through Mexico. In this case, certain rules may need to be amended, but that is not outside the realm of possibility. > But concentration of manufacturing know-how remains in China. The US and EU had a monopoly on manufacturing know how for all sort of things until some executives voluntarily transferred that to the (then) third world in order to maximize short term profits. Their successors have spent the last decade shifting semiconductor production from China to lower cost countries like Vietnam, Malaysia, and Thailand.
- erikb 9y ago
  You assume that the US and EU politicians aren't actually fine with it.
  - varjag 9y ago
    If they were fine with it, there wouldn't have been quotas for China in the first place.
    - sfifs 9y ago
      Remember that the prime objective of a politician is to retain power. These quotas are responses to demands from electorate to do something to win their votes... not necessarily because they want or don't want them. In fact it's probably in their best interests to play it both ways as what the GP comment implies.
- factsaresacred 9y ago
  > executives voluntarily transferred that to the (then) third world in order to maximize short term profits They gave China their secret sauce (well, actually, China demanded it as a prerequisite) in return for access to one billion new customers. China then cloned the tech and under-priced the foreign competition. See: High-speed rail, wind-turbines etc. Can't say if it was the 'right' thing to do for Western companies. But it was brilliant for China, who are now, in turn, buying up Western manufacturing companies.
monpetitjules 9y ago
Here in the Malaysian part of Borneo there are a lot of Chinese tourists. Most of the time they travel with Chinese Travel Tour Agencies, they go to restaurants owned and staffed by Chinese people, the same about souvenirs shops. All the money stays in the same hands. It's very clever from Chinese business (wo)men but local business owners are quite pissed off.
SCdF 9y ago
Do you have an example of one of these compounds? An article about them?
- mastazi 9y ago
  I have one about Italy http://www.nytimes.com/2010/09/13/world/europe/13prato.html http://www.nytimes.com/2010/09/13/world/europe/13prato.html
  - jaclaz 9y ago
    >I have one about Italy Prato is a case on its own, there is no "large company" or "compound". The Chinese have come on an individual basis, after the first few came (which dates much before, in the 80's) they brought families, friends, etc., and replaced - little by little - the native artisans (largely in the textile sector). But even before they arrived, Prato's economy was different from any other Italian textile district, there have been traditionaly very few large factories (there were some, but not like - say -northern Italy), besides the workers in the factories everyone worked in small laboratories or at home, often involving all the family members in the production. (and it was not at all uncommon that factory workers had anyway a couple looms at home that they worked on the evenings or night, while their wives operated them during the day, while doing the normal household chores). The Chinese simply replaced the natives, adopting the exact same "individual" approach.
happosai 9y ago
I think this is an urban legend, or at least a major hyperbole. The Chinese businesses (at least the ones I know in Kenya) all employ lots of locals. What is Chinese is management and most of the highly skilled workers. It's more about keeping the value-add than creating jobs for Chinese. We can argue that it's bad for locals, but unlike western colonialism, this happens under the rules the local governments have set them self. As the article points out - this might change if the Chinese government feels it needs to protect it's interests abroad - which could happen if a populist anti-chinese movement appears.
- pm90 9y ago
  Western colonialism happened pretty much among the same lines. Start as law-abiding traders, get pissed off by some local lord, build a fort, train a local army. Local army is better supplied and trained than local lords army, so now you engage in military games (either protection or outright conquest). Certainly I don't see this happening in any of the African countries. What China can do is what most Western countries do today to get debtor countries in line: refuse access to credit, or increase the interest rates on future loans. I'm interested to see if China plays regime-changing games that the US and (then) Soviet Union did when its interests were under threat. So far, it doesn't seem to be employing that strategy, but I wonder if they will...
mastazi 9y ago
This is not a recent phenomenon. The Italian city of Prato has had that type of businesses for at least 20 years now, this is common knowledge in Italy (I grew up there) and I could also find a NYT article about it: http://www.nytimes.com/2010/09/13/world/europe/13prato.html http://www.nytimes.com/2010/09/13/world/europe/13prato.html
NicoJuicy 9y ago
This is discrimination and wouldn't be possible in the EU
grecy 9y ago
I have seen more of these than I can count in West Africa, and I am told the same is true in the East (I am going there next). The scale of construction here is staggering - I wrote a little about it [1]. It is not only roads - it's dams, deep water ports, high-rise buildings, etc. Basically anything that requires a high degree of competency in engineering. Western governments are now held to account when they make deals with African countries - the country must have fair votes, human rights, free speech etc. As you might guess, many African countries are not so hot on this. China? They couldn't care less, and have no such requirements, so African governments are much happier to deal with them. [1] http://theroadchoseme.com/chinese-road-construction http://theroadchoseme.com/chinese-road-construction
- whazor 9y ago
  Maybe this is better as well, once citizens have more welfare they have more power to acquire human rights.
  - grecy 9y ago
    Who said anything about citizens getting more welfare? China is stripping these countries bare, and the money goes straight into the pockets of the corrupt ruling class. It is staggering to see the countries with the multi-hundreds-of-billions in resources have the poorest citizens.
    - pm90 9y ago
      I think a distinction must be made between a completely extractive economy and one that is based on manufacturing. So if its simply raw materials being mined and shipped abroad, then yes I agree with the stripping the countries part. If they are actually manufacturing stuff.... Oh actually, if they're employing only Chinese citizens for manufacturing, then I agree with your assessment.
      - grecy 9y ago
        One of the major "problems" with African economies is they manufacture essentially nothing, and everything they export is completely unprocessed raw materials.
tzumby 9y ago
Am I the only one thinking of the Snow Crash novel when reading this ?
reaperducer 9y ago
I know there are at least two in Italy, and they're coming to the United States. One is under construction in the desert just north of Las Vegas. (Apex area, IIRC - near the now abandoned Faraday Future Chinese electric car factory. The groundbreaking was on local TV news.) This gives companies ability to get the coveted "Made in USA" label on their products, but they're built by Chinese nationals in a Chinese-owned factory in a Chinese-only compound to Chinese quality standards.

hyperdunc 9y ago

China does a similar thing with agriculture. Huge plots of land in Australia and New Zealand are controlled by Chinese farming companies and staffed by Chinese. All the food they produce goes back to China.

robbiep 9y ago
It is not true that they mainly (or even significantly) employ chinese on Australian Farms - these farms are generally managed by the previous owners or managers and staffed by Australians, with australian Agronomists. In actual fact, very little changes on a day to day basis, except there is more funds available for infrastructure and capital goods purchase (and property values are driven up). Which, when you think about it, makes the best managerial sense - What the hell is a chinese person going to do coming to australia and farming - they don't know the conditions, they don't know the land - that's a quick way to destroy all the value they hope to create. Local know-how is essential in agriculture. + they wouldn't be able to get enough on 457's to come in and run it even if they wanted to import all their workers. Source: Australian, from a farm, neighbouring farms have been purchased by chinese buyers
- icantdrive55 9y ago
  Unless the farm buyer is a citizen of Australia, doesn't it bother the average citizen that foreigners can buy businesses, and property? Plus--doesn't Australia worry about nutrient depletion of their farm lands for food sent overseas? Once those nutrients are gone; they are stuck with buying nutrients/fertilizer forever. Plus--it's an island, with I imagine limited farming land?) Yes, in the USA we let anyone basically buy our land too. Want a house--just pick up the tele. I don't feel it's right. I'll probally get hammered for this post, but I just don't get it. Plus--we can't own squat in most of these emerging countries.
- robbiep 9y ago
  to the dead post: Australia has always relied on capital inflows for infrastructure and capital improvement. in the 30s-50s it was from the UK, the 60s and 70s from the US (especially with the growth and introduction of Cotton in Australia), the 80-90s from Japan, and now China. All those waves of investment have come with fears of 'takeovers' and all of them have passed. maybe the current one will go for longer, who knows. Fear of foreign ownership are a little overhyped; they can't take the land with them and they must be good stewards of it in order to earn good returns. And they must employ locals in order to do that too - which has brought revitalisation to some regional areas that have gone through downturns.
- iamshs 9y ago
  Well Shepparton and Mooroopna has quite a substantial number if Chinese farm workers. In Safeway, nearly whole Saturday is busy with Chinese farm workers shopping. I haven't really enquired on which specific farm they work, because they generally shun interaction and also due to language barrier. Also, Shepparton has a substantial Punjabi farming population and I can tell you from experience that the farmers do take inputs from Tatura Agricultural institute but the management to production to packing is all Punjabis. Your comment is significantly false information. Shepparton is filled with people who don't have local know-how, but have developed it.
  - pm90 9y ago
    Punjabis are from India and Pakistan, not from China, if that wasn't clear to you. They have a reputation as good workers in agri businesses. See this article about how they invigorated Italy's cheese business: http://www.nytimes.com/2011/09/08/world/europe/08iht-italy08.html?mcubz=0 http://www.nytimes.com/2011/09/08/world/europe/08iht-italy08... (The article references most workers as being Sikhs. Sikhs are adherents of the religion of Sikhism, but I believe nearly all of them are ethnically Punjabis)
toomanybeersies 9y ago
You want to cite a source on that? Somewhere between 5-10% of NZ farmland and forestry is owned by foreign interests. That's not just China, but all other countries, of which Australia is a large investor in NZ. A large amount of this land is owned by super funds. Fonterra has an 84% market share in the dairy sector, Fonterra is a collective, owned by the individual farms. Now, the Chinese are building milk powder factories exclusively for export to China, and owned by Chinese companies. But they are employing local people, and constructed by locals, they aren't staffed by Chinese, because the hassle of trying to get a factory worth of workers immigrating to New Zealand isn't worth it, when you could just as easily pay locals. At the end of the day, you can't pay Chinese workers less, because there is a minimum wage. The suppliers to these factories are independent dairy farmers, there's little vertical integration here. In the end, these plants grow the economy and create jobs. Sure, in an ideal world, it would all be NZ owned, but nobody wants to cough up the cash here to build more plants. New Zealand is a small country, it has always relied heavily on foreign investment and ownership, and always will. The population and economy is too small to do it any other way, NZ has to turn to globalism in order to have a healthy, functioning economy.
- syphon7 9y ago
  Well you could just pay them illegally under the table. I'm ignorant about NZs economy, and you have good points/questions but I felt that it needed to be said. In the US we have huge migrant groups that are responsible for a large amount of the harvesting in this country, and most are paid well under minimum wage. Not saying it's right... just how it is.
  - jpatokal 9y ago
    Illegal migrants are easy to pay under minimum wage, because they're under the radar. However, illegal immigration to NZ is (comparatively) minuscule and you don't really hear about payments under the table, except in small businesses like restaurants, massage etc.
  - roel_v 9y ago
    How would you get sizeable groups of illegal farm helps into NZ? How would they live/send money back home/travel back home etc? NZ is a remote island, this is not a Mexico/Arizona situation. NZ native farmers are very in control of their farms and NZ's agriculture industry in general.
kiproping 9y ago
This happens in Africa, not Australia.
chiefalchemist 9y ago
Link? Please?

fludlight 9y ago

This strategy is just as transparent as it sounds. Eventually US/EU regulators will find out and shut it down. A similar thing recently played out when a Chinese company owned by the son of a major Chinese aluminum smelting magnate tried to cross ship about a ridiculous quantity of aluminum through Mexico. In this case, certain rules may need to be amended, but that is not outside the realm of possibility. > But concentration of manufacturing know-how remains in China. The US and EU had a monopoly on manufacturing know how for all sort of things until some executives voluntarily transferred that to the (then) third world in order to maximize short term profits. Their successors have spent the last decade shifting semiconductor production from China to lower cost countries like Vietnam, Malaysia, and Thailand.

erikb 9y ago
You assume that the US and EU politicians aren't actually fine with it.
- varjag 9y ago
  If they were fine with it, there wouldn't have been quotas for China in the first place.
  - sfifs 9y ago
    Remember that the prime objective of a politician is to retain power. These quotas are responses to demands from electorate to do something to win their votes... not necessarily because they want or don't want them. In fact it's probably in their best interests to play it both ways as what the GP comment implies.
factsaresacred 9y ago
> executives voluntarily transferred that to the (then) third world in order to maximize short term profits They gave China their secret sauce (well, actually, China demanded it as a prerequisite) in return for access to one billion new customers. China then cloned the tech and under-priced the foreign competition. See: High-speed rail, wind-turbines etc. Can't say if it was the 'right' thing to do for Western companies. But it was brilliant for China, who are now, in turn, buying up Western manufacturing companies.

monpetitjules 9y ago

Here in the Malaysian part of Borneo there are a lot of Chinese tourists. Most of the time they travel with Chinese Travel Tour Agencies, they go to restaurants owned and staffed by Chinese people, the same about souvenirs shops. All the money stays in the same hands. It's very clever from Chinese business (wo)men but local business owners are quite pissed off.

SCdF 9y ago

Do you have an example of one of these compounds? An article about them?

mastazi 9y ago
I have one about Italy http://www.nytimes.com/2010/09/13/world/europe/13prato.html http://www.nytimes.com/2010/09/13/world/europe/13prato.html
- jaclaz 9y ago
  >I have one about Italy Prato is a case on its own, there is no "large company" or "compound". The Chinese have come on an individual basis, after the first few came (which dates much before, in the 80's) they brought families, friends, etc., and replaced - little by little - the native artisans (largely in the textile sector). But even before they arrived, Prato's economy was different from any other Italian textile district, there have been traditionaly very few large factories (there were some, but not like - say -northern Italy), besides the workers in the factories everyone worked in small laboratories or at home, often involving all the family members in the production. (and it was not at all uncommon that factory workers had anyway a couple looms at home that they worked on the evenings or night, while their wives operated them during the day, while doing the normal household chores). The Chinese simply replaced the natives, adopting the exact same "individual" approach.

happosai 9y ago

I think this is an urban legend, or at least a major hyperbole. The Chinese businesses (at least the ones I know in Kenya) all employ lots of locals. What is Chinese is management and most of the highly skilled workers. It's more about keeping the value-add than creating jobs for Chinese. We can argue that it's bad for locals, but unlike western colonialism, this happens under the rules the local governments have set them self. As the article points out - this might change if the Chinese government feels it needs to protect it's interests abroad - which could happen if a populist anti-chinese movement appears.

pm90 9y ago
Western colonialism happened pretty much among the same lines. Start as law-abiding traders, get pissed off by some local lord, build a fort, train a local army. Local army is better supplied and trained than local lords army, so now you engage in military games (either protection or outright conquest). Certainly I don't see this happening in any of the African countries. What China can do is what most Western countries do today to get debtor countries in line: refuse access to credit, or increase the interest rates on future loans. I'm interested to see if China plays regime-changing games that the US and (then) Soviet Union did when its interests were under threat. So far, it doesn't seem to be employing that strategy, but I wonder if they will...

mastazi 9y ago

This is not a recent phenomenon. The Italian city of Prato has had that type of businesses for at least 20 years now, this is common knowledge in Italy (I grew up there) and I could also find a NYT article about it: http://www.nytimes.com/2010/09/13/world/europe/13prato.html http://www.nytimes.com/2010/09/13/world/europe/13prato.html

NicoJuicy 9y ago

This is discrimination and wouldn't be possible in the EU

grecy 9y ago

I have seen more of these than I can count in West Africa, and I am told the same is true in the East (I am going there next). The scale of construction here is staggering - I wrote a little about it [1]. It is not only roads - it's dams, deep water ports, high-rise buildings, etc. Basically anything that requires a high degree of competency in engineering. Western governments are now held to account when they make deals with African countries - the country must have fair votes, human rights, free speech etc. As you might guess, many African countries are not so hot on this. China? They couldn't care less, and have no such requirements, so African governments are much happier to deal with them. [1] http://theroadchoseme.com/chinese-road-construction http://theroadchoseme.com/chinese-road-construction

whazor 9y ago
Maybe this is better as well, once citizens have more welfare they have more power to acquire human rights.
- grecy 9y ago
  Who said anything about citizens getting more welfare? China is stripping these countries bare, and the money goes straight into the pockets of the corrupt ruling class. It is staggering to see the countries with the multi-hundreds-of-billions in resources have the poorest citizens.
  - pm90 9y ago
    I think a distinction must be made between a completely extractive economy and one that is based on manufacturing. So if its simply raw materials being mined and shipped abroad, then yes I agree with the stripping the countries part. If they are actually manufacturing stuff.... Oh actually, if they're employing only Chinese citizens for manufacturing, then I agree with your assessment.
    - grecy 9y ago
      One of the major "problems" with African economies is they manufacture essentially nothing, and everything they export is completely unprocessed raw materials.

tzumby 9y ago

Am I the only one thinking of the Snow Crash novel when reading this ?

reaperducer 9y ago

I know there are at least two in Italy, and they're coming to the United States. One is under construction in the desert just north of Las Vegas. (Apex area, IIRC - near the now abandoned Faraday Future Chinese electric car factory. The groundbreaking was on local TV news.) This gives companies ability to get the coveted "Made in USA" label on their products, but they're built by Chinese nationals in a Chinese-owned factory in a Chinese-only compound to Chinese quality standards.