May 27,2010

Another Foxconn Suicide: Presaging the end of China's Growth Model?

By CSC staff, Shanghai

Around 11:20, Wednesday night, May 26, yet another fatal incident took place at the Foxconn factory in South China's mega-bustling Shenzhen. A

male employee living in a factory dormitory ended his life by jumping from a building. In the past year, Foxxconn has been the scene of nine successful suicides and two other attempts. Four of the deaths came in the last month. That same day, Foxconn Chairman Terry Gou had only just arrived in Shenzhen from Taiwan to apologize for the deaths, while the Shenzhen municipal government declared it would take measures to prevent such incidents.

 

It must be said that up until now Gou and his management have never given any sign that they are in any way responsible for the carnage. They are kings of the world's largest OEM factory, and Foxconn must survive in the narrow profit space clients give. Facing increasing competition and a downturn in the electronics industry, Foxconn has still achieved stunning success, playing efficiency in electronics manufacturing to the extreme. Last year, Hon Hai Precision Industry, the flagship subsidiary of Foxconn Technology Group, reaped US$2.4 billion in net profit, up 37%, year on year, with the net margin reaching 3.8%. At the top of his field, Gou has also amassed legendary wealth-his personal fortune increased by 79% last year, reaching 5.9 billion dollars, making him Taiwan's richest man. He employs 900,000 people (70,000 on the mainland) around the world, and has trained tens of thousands of skilled workers. In addition, he never skimps on charity.

 

He seems senseless, however, to the desperate deaths of employees. Like many of China's most successful entrepreneurs, Gou leads a simple life and is very hard-working. He is strict in rewards and punishments, generous to excellent staff, giving hundreds of millions to reward prominent persons, but comparatively cold to his front-line people, most of whom were born after the 1980s, from which group come the suicides.

 

This is not the story of Terry Gou only. There has always existed in Chinese culture an acceptance of cruelty. It manifests itself differently at different times, in ways such as treating the winner as king, judging people based on their success, big is beautiful. Gou's idol is the ruthless Mongol conqueror Genghis Khan (he is known in Taiwan as the modern "Genghis Khan"), in whose eyes, the world was driven by knife and blood, to whom other people were merely a means of realizing his ambition. With this simple and cruel belief, he became the leader of perhaps the largest empire the world has ever seen.

 

Genghis Khan and his descendants were fabulous fighters and looters but perhaps not so good at maintaining their hard-won spoils. China's Yuan Dynasty, established by GK's descendants, lasted less than a century did not build much of lasting value.

 

The GK culture holds with many of the most successful Shenzhen entrepreneurs such as Huawei founder Ren Zhengfei, whose factory is only steps away from Foxconn. He would not consider it wrong to treat employees as components to obtain surplus labor. After all, Ford did it, supported by Frederick Taylor's scientific management ideas. Terry Gou is addicted to this simple profit model based on difference in labor earnings, a model that will hinder any company that wants to develop complex high value-added services requiring a staff that can think and react. It is such services that Foxconn needs to develop to face an increasingly complex competitive situation.

 

China's rapid economic growth seems inevitably accompanied by mining disasters and spreading pollution. But as Chinese factories create more profits, injuries at work in the past are morphing into suicides. The first generation of Shenzhen's migrant workers who created Made-in-China with their diligence and fortitude were chosen by America's Time magazine as its annual "Man of the Year" figures in 2009. The new generation of workers, though from the same places, didn't grow up in the same era of extreme deprivation and poverty. They have been exposed to another side of the world, and expect dignity and care. Perhaps Time should recognize another group of Chinese workers as its annual figures-those who have committed suicide. Their suicides are not only a symbol of the end of a mode of growth at the cost of physical and mental cruelty, sweat, blood and tears, and the consuming of China's people, but also a symbol that China is entering a new era, with a profound change in social and economic structure brought about by dramatic demographic changes.

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