Why Are Chinese Factories Turning to Bangladesh - Essay Example

Why Are Chinese Factories Turning To Bangladesh? Table of Contents Introduction 3 ThesisStatement 4 Globalisation as a Driving Force for Chinese Factories to Turning to Bangladesh 4 Classifying the Political and Economic Conditions of China and Bangladesh 6 The Role of Stakeholders with an Interest in the Situation 7 Critically Evaluation of the Objectives of Government 8 Conclusion 9 Works Cited 11 Introduction Over the previous decade, globalisation has been a major driving force which has influenced many business entities to expand and to operate their activities beyond the shores of their own country (A Global Ethic Now, “Driving Forces Behind Globalisation’). This scenario has been a major instigator for business organisations in China to look forward to better and more convenient option especially for manufacturing purposes in a foreign destination. China, in recent years, has been regarded as one of the fastest developing economies in the world. One of the key reasons behind the continued and sustained growth of the Chinese economy has been industrial growth (World Bank Office, Beijing, “China Quarterly Update”). However, in recent years the Chinese economy has witnessed a noticeable slowdown. The volatile world economic environment as well as rigid domestic polices have the combined factors that have contributed towards this scenario (World Bank Office, Beijing, “China Quarterly Update”). Thus, in order to mitigate this problem the Chinese factories or manufacturers have started to look beyond their own shores to import products. Consequently, Bangladesh has become a favourable option for them because it provides efficient workers and comparatively lower wage rates. This strategy by Chinese manufacturers has been mainly prompted by the prevailing condition in their own market to manufacture products (Cawinfo, “Chinese Factories Turn to Bangladesh as Labour Costs Rise’). Thesis Statement The report intends to discuss the key reasons behind the Chinese factories turning to Bangladesh as a destination for especially importing products. The major driving forces of globalisation have also been considered in the report to comprehend the scenario. Globalisation as a Driving Force for Chinese Factories to Turning to Bangladesh The drivers of globalisation have been an imperative factor behind the Chinese manufacturers desiring to outsource their business in a foreign destination such as Bangladesh which majorly includes, open markets, International Trade Relation Policies, progress in transport and information technology, privatisation and liberalisation (A Global Ethic Now, “Driving Forces Behind Globalisation”). These key drivers that have encouraged the Chinese factories to turn to Bangladesh as a possible location for outsourcing are opening up of different national markets to all sorts of companies and removal of trade restrictions. However, in recent times, the one of the biggest problems which has been faced by Chinese manufacturers is the labour crisis. In China, a continued war in relation to labour rights has been a critical issue which has affected the industrial sector in recent times. The war has been engaged with a huge number of people who come under certain different categories of business world. The workers, trade unions, corporate, Non-Governmental Organisations (NGOs) and political parties in China are deeply engaged in this serious issue. It has resulted in an impact on worker privileges, wages, working environment in China. This battle is badly affecting the Chinese economic conditions. It has become a tough task for manufacturing organisations to abstain from the intermediary cooperation among worker organisations and their allies to procreate a sustainable relation in between the justice related to economy and social activities. It is quite apparent that a host of challenges for worker and social movements are being created in the economy of China. The manufacturing industry which relies significantly upon the workers is facing major strife to deal with scenario of rising labour costs and prevailing labour rights issue (Global Labour Strategies. “Why China Matters: Labour Rights in the Era of Globalization”). From previous two decades, China has experienced volatile economic growth that has involved a vast number of jobs and capital resources around the world. Global cooperation is the main driving force in China’s labour market which had been the main reason for low labour costs in China. Due to the low wage rates the labourers are not ready to work and they are intending to struggle for obtaining their desirable wage rates. As a result of this, the labour crisis has arisen and the business entities of China have started to consider that other countries would be suitable business destination to them. It would also enable them to move away from prevailing crisis in the market and to focus on ensuring their business growth. As a developing country, Bangladesh is a suitable option to Chinese manufacturers to avoid such kind of problems. Bangladesh has efficient labour force to carry out smooth business operations on a regular basis. Moreover, the wages rates of the labourers in Bangladesh are quite low, which is a key attraction for the manufacturing sector to focus on the Bangladesh (Global Labour Strategies. “Why China Matters: Labour Rights in the Era of Globalization”). Classifying the Political and Economic Conditions of China and Bangladesh In relation to Bangladesh, it is recognised that the country has its own geo-strategic and geo-economic conditions which are favourable for establishing a business. Bangladesh is located in the centre of South and Southeast Asia. Thus, it is a probable route for commercial connections with other regions. Moreover, Bangladesh is located in between the two developing countries such as China and India, and these countries are also looking at Bangladesh as a market segment for their products and services. The political scenario of Bangladesh is quite favourable for commencing business transactions. The government of Bangladesh is creating opportunities through devising attractive prospects for foreign companies to enter in their market. Encouraging foreign direct investment (FDI) has been a major step taken by the government in order to ascertain that the economy of the developing country of Bangladesh receives a major boost (Unnayan Onneshan-The Innovators, “Bangladesh Economic Update”). In 2007 election in Bangladesh, the military-backed temporary government apparently created a political violence and got rid of corrupt officials from office. The current political position of Bangladesh is constructive for entering in the market of Bangladesh; however, there has been a recent history of certain political turmoil in the nation from time to time (Unnayan Onneshan-The Innovators, “Bangladesh Economic Update”). In 2010, Bangladesh’s GDP was observed to grow by 5.7% as compared to the growth of 5.9% growth in 2009. The global economic recession had abridged demand for exports in Bangladesh in 2010. The merchandise exports in the nation decreased by 7.7% in November 2009. The United States and Bangladesh had discussed the prospect of a Trade and Investment Framework Agreement (TIFA). Over the past four decades, the economy had survived and started to show signs of constant vitality. The increasing growth rate of the nation is scarcely high. On the other hand, the constitution of China was first adopted by the National People’s Congress in 1982 and afterward it was amended. The state council is the authorised government of China. The civil services are controlled and initiated by state council. At present, a significant political change is taking place in China, although China is expected to maintain a stable political system in ensuing future. The political liberalisation of China is progressing at a high rate (Lawrence and Martin, “Understanding China’s Political System”). According to International Monetary Fund (IMF), China’s economic growth rate is superior to Canada, Italy and Spain, which has facilitated it to obtain a strong position in relation to economic growth factor. After the United States, China is the second biggest economy in the world in terms of Gross Domestic Product (GDP) and purchasing power parity (PPP) (House of Commons, “A Political and Economic Introduction to China”). The Role of Stakeholders with an Interest in the Situation Stakeholder theory, initially coined by R. Edward Freeman, is a theory related to organisational administration as well as business ethics that intend to deal with values along with morals in controlling a corporation (Freeman, 2010). It has been observed that addressing the interests of the stakeholder groups is a significant aspect for any organisation in order to remain viable and sustainable in the business operations as without their support an organisation might cease to exist (Freeman, 2010). In relation to the assessed scenario the key stakeholders are Chinese factories i.e. owners, workers in Bangladesh who have been receiving the benefits derived from the increasing amount of work they are receiving and governments of both the nations. In relation to stakeholder theory as observed by Freeman, the scenario of Chinese factories turning to Bangladesh can be related to a ‘business planning and policy model’ (Elijido-Ten, “Applying Stakeholder Theory to Analyze Corporate Environmental Performance: Evidence from Australia’s Top 100 Listed Companies’). It can be stated that the prime stakeholder in this context i.e. Chinese manufacturing companies especially the garment manufacturers or factory owners have the key role to play as they have been focusing on deriving the approval of other related groups with the business entity which can in turn provide greater profitability to the companies. Therefore, these stakeholders can obtain significant benefit by endeavouring to relocate their manufacturing operations to Bangladesh as it is recognised that labour wage rate is quite low in Bangladesh which can enable them to maintain viability of the operations. The workers in Bangladesh can derive significant benefit out of the prevailing scenario as they can obtain greater employment opportunities and can also display their commendable skills by manufacturing quality products and outsourcing them to Chinese companies. It can enable to open up greater prospects for the industrial growth in Bangladesh. Moreover, the governments of both the nations play a pivotal role in the discussed scenario as they are the primary authority which is required to provide relevant consent for the business deals taking place between the Chinese companies and Bangladesh workers. Critically Evaluation of the Objectives of Government In the modern economy, the government of a country takes certain aspects in consideration while allowing foreign import and export activities. With the advent of globalisation, a number of countries have started to derive significant benefits from increased trade activities conducted with a foreign country. Similarity, it is observed that the government of Bangladesh in recent years is focusing on obtaining greater revenue by allowing foreign direct investment in the nation. The increased activity of Chinese manufacturing companies in Bangladesh as consented by the local government can provide manifold benefits. It can facilitate to generate greater employment opportunity and reduce the prevailing rate of unemployment which is a major concern in a developing nation such as Bangladesh (Islam, “Bangladesh Expatriate Workers and their Contribution to National Development”). Contextually, it can also facilitate to perk up the prevailing condition of the Bangladesh economy as foreign revenue generated from increased export activities to China can be extremely useful. The Chinese government can also be observed to be seeking certain crucial benefit out of the prevailing scenario. This is because increased outsourcing of manufactured products in the prevailing condition can enable to mitigate the internal conflicts occurring between labourers and manufacturing organisations as they would be able to reach out a meaningful consequence by focusing on dialogues, while the business activities would not be harmed by any means. Conclusion From the entire report, it is apparent that the drivers of globalisation have been valuable components that have facilitated nations around the world to increase trade activities with one another. Increase of trade activities by removal of trade barriers has enabled the manufacturing companies in countries such as China to look beyond their own economy to conduct their business operations. In China, it is observed that prevailing scenarios of labour conflict and rising labour cost have affected the operations of manufacturing companies. Therefore, the Chinese manufacturers have started to search for convenient options especially for the purpose of carrying manufacturing of the products such as garments and importing them. With regard to Bangladesh, it has been recognised that the wage rate of labourers is quite low as compared to China. Thus, through the outsourcing of a significant operation like manufacturing, operational cost can be reduced substantially which can in turn provide benefit to the companies to remain sustainable. Thus, these key factors have motivated Chinese companies to turn to Bangladesh as a cost effective destination of manufacturing. Works Cited A Global Ethic Now. Driving Forces Behind Globalisation, 2012. Web. 07 Nov. 2012. Cawinfo. Chinese Factories Turn to Bangladesh as Labour Costs Rise, 2012. Web. 07 Nov. 2012. Elijido-Ten, Evangeline. “Applying Stakeholder Theory to Analyze Corporate Environmental Performance: Evidence from Australia’s Top 100 Listed Companies”. Swinburne University of Technology (2005): 1-33. Print. Freeman, R. Edward. Strategic Management: A Stakeholder Approach. England: Cambridge University Press, 2010. Global Labour Strategies. Why China Matters: Labor Rights in the Era of Globalization, 2008. Web. 07 Nov. 2012. House of Commons. “A Political and Economic Introduction to China”. Research Paper 06/36 (2006): 14-46. Print. Islam, Md. Nurul. Bangladesh Expatriate Workers and their Contribution to National Development. Resources, 2011. Web. 07 Nov. 2012. Lawrence, Susan V. and Martin, Michael F. “Understanding China’s Political System”. Congressional Research Service (2009): 2-3. Print. Unnayan Onneshan-The Innovators. Bangladesh Economic Update, 2012. Web. 07 Nov. 2012. World Bank Office, Beijing. China Quarterly Update, 2012. Web. 07 Nov. 2012. Read More