Agencies
When a BYD executive claimed “foreign forces” and some domestic media were “deliberately smearing Chinese brands and the country” on social media in response to a Brazilian investigation that found 163 Chinese nationals working in “slavery-like conditions” at the EV giant’s construction site, veterans in China’s outbound investment field said it seemed like the real problem was being handwaved off.
Some contended that the race to the bottom is so deeply rooted in Chinese business soil – with low costs and low prices forever the golden rule – that it is spreading overseas amid the rapid global expansions of Chinese companies.
Their mindset often entails outcompeting others by submitting the lowest bid, then cutting costs to make that bid financially viable, according to Liu Tanghua, China region general manager of the Terra Regia Industrial Park in Mexico. The BYD saga reminded Liu of his experience more than 20 years ago when he went abroad for the first time to India and Sri Lanka, working as a translator for construction projects under Chinese companies.
“Two decades later, as China is getting much stronger, people think there should be improvements in all aspects,” Liu said. “But such a routine remains the same.”
As more and more Chinese companies build factories overseas amid insufficient domestic demand and persistently elevated trade barriers, experts have warned that transplanting the vicious-competition approach to foreign lands will only serve to backfire, hamper their local operations and hurt the reputation of Chinese firms as a whole.
“Chinese companies have to adapt to the local context: you cannot go to other countries with a certain Chinese way of doing things,” said Dominique Turpin, a professor of marketing and the European president of the China Europe International Business School (CEIBS) in Shanghai.With increasingly heightened geopolitical tensions and the growing visibility of Chinese brands, the stakes have become much higher, and any misstep could lead to dire consequences, according to the analysts.
The labour issue is a particular landmine that Chinese companies could easily step on. With shallower roots in local supply chains that are not as efficient nor as fully competitive as those of China, they have less say or flexibility in terms of procurements, so penny-pinching on labour costs tends to be a more viable approach.
BYD’s construction site in Brazil is far from the only Chinese-funded project subject to a labour investigation by foreign authorities. In July, hundreds of US special agents raided Fuyao Glass’ factory in Moraine, Ohio, over allegations including “labour abuse”. Chinese tyre maker Linglong’s factory in Zrenjanin, Serbia, was also accused of forced labour during construction.
All of the above companies laid the blame on their subcontractors. In contrast to its tough self-defence taken on Chinese microblog service Weibo, BYD acknowledged the problems at the Brazilian construction site in an official Portuguese-language statement and announced that it would immediately terminate its partnership with its on-site subcontractor, Jinjiang Group, which had provided outsourcing services to BYD for decades.
“What is also important for the Chinese to understand is that their brand can suffer not only from their own actions, but also from the actions of their supplier,” Turpin said.
Furthermore, inappropriate behaviour from one company would reflect poorly on the “Chinese” image in general, he said.
While it is common for companies to outsource their labour recruitment to subcontractors, Chinese firms have a specific preference for subcontractors with a Chinese background, either run by Chinese nationals or immigrants, to avoid language and cultural barriers, said Ocean Yuan, founder and CEO of Grape Solar, an American seller and manufacturer of solar power equipment.
These labour-dispatching companies usually have their headquarters or collaborators in mainland China, where they can recruit workers directly and fly them to another country, and in the US, some would hire illegal immigrants from Chinatowns in places like New York, according to Yuan, who has been consulting for Chinese solar firms venturing into the US.These companies are perceived as “bush league” in the American manufacturing sector, and the prices they offer could be much lower, Yuan said.
“All the Chinese bosses could think about is costs, costs, costs,” Yuan said. “It’s deeply rooted in the minds of Chinese, forced by the competitive broad environment.
“But in high-value countries like the US, you don’t have to do this. Even though the costs are higher, your profits are also higher.” In Brazil, labour costs can be even lower than in China. In 2024, the minimum monthly wage in China was between 1,600 and 2,700 yuan (US$218-US$368), varying by region, compared with R$1,412 (US$226) per month in Brazil, according to official statistics.
But compared with locals, it would be much easier to ask imported Chinese labourers to work longer hours.
“If you look at the hourly wage, it could be much lower than the local level,” said Liu from the Terra Regia Industrial Park.
Now, if someone in a Spanish-speaking country says, “trabajar tan duro como los Chinos”, or “to work as hard as the Chinese”, Liu said, “that is not a compliment”.
While comments such as “locals are lazy” and “locals do not work hard enough” are often heard from Chinese managers working at their companies’ foreign plants, Turpin said they essentially ignore that the competitive conditions are not the same.
“If you want the Europeans to send you the communist trade unions that we had in Europe, we would be happy to do so,” Turpin said. “But you cannot do the kind of protest in China where people take to the street, asking for better working conditions and extra pay.” Compared with emerging markets, Chinese firms would have less room for error when it comes to making severe mistakes over labour issues in places like Europe, where compliance standards are much higher, said Song Xin, founder of Sinnvoll Global Strategy and a former policy adviser at the European Parliament.
