Nine Dragons and a Whole Lotta Labor.

The Chinese blogs are alive with the sound of class resentment, triggered by the so-called “pro rich” proposals that Zhang Yin – once China’s richest woman – presented to the National People’s Congress last week. They certainly sound self-serving – especially the one to drop the income tax rate on China’s top earners. But what seems to have gotten the delegates – and the blogs – churning most viciously was Zhang’s proposal to “exempt labor-intensive companies from signing permanent contracts with their employees who have worked for more than 10 years.” That is to say, Zhang isn’t happy with how China’s new labor law protects long-term employees from dismissal without cause in labor intensive industries.

No surprise, the news-reading and blogging masses are indignant that Ms. Zhang, Chairwoman of Nine Dragons Paper (and the esteemed Worldwide Chinese Ambassador of Love), one of the world’s largest paper manufacturers, would dare to propose legislative reforms that are – they claim – so baldly in her own interest.

Now, this is really not my battle, and I’d have absolutely nothing to say on this topic but for the fact that Ms. Zhang decided to respond to the criticism via New Culture, a newspaper based in Jilin. The essence of the response, as summarized by South China Morning Post, was thather company was not labour intensive because it had the world’s most advanced hardware and technology.

As it happens, I am one of the few (only?) foreign reporters to have ever visited the enormous 2.4 million square meter Nine Dragons facility in Dongguan, and so – if I may – I’d like to weigh in with an objective opinion on Ms. Zhang’s claim that technology has overcome the need for large numbers of employees at Nine Dragons.

Briefly, though: my rare opportunity to visit this closely-held company came as a result of an invitation to accompany and cover a US paper industry trade mission to China. In fairness, Nine Dragons was not aware that a member of the media was present in their facility, and so out of an ethical (journalist’s) obligation I’ve always maintained a bit of silence on this subject. I took a few photos along the way, but none in the actual production facilities, and so there’s really no point in posting them here – even if they had been on-record.

Anyway. Zhang Yin is correct on one matter. The Nine Dragons facility in Dongguan is not only the world’s biggest single-site paper mill, it is also one of the world’s most technically advanced ones. And this doesn’t merely apply to the paper-making technology, either; the waste water treatment facility was imported from Europe, and is unquestionably one of the best – if not the best – in China. Had Nine Dragons relied upon Chinese technology, it would have been a dirtier business, no question (and that’s why I think Zhang’s “pro-rich” proposal to cut tarriffs on imported environmental equipment is eminently reasonable).

But even with all of that technology, the Nine Dragons plant in Dongguan houses thousands of workers in high-rise dorms with enough capacity to justify on-site supermarkets and restaurants. Like every other recycled paper mill that I’ve visited in China (more than a dozen), Nine Dragons employs staff to run its machines, maintain its machines, and work in its multi-story office building. Unlike many other Chinese recycled paper plants, Nine Dragons maintains a massive fleet of trucks to transport waste paper from port to mill (Nine Dragons is the largest importer – by volume – of American goods into China). And, unlike mills in the developed world – but, again, like mills elsewhere in China – Nine Dragons maintains a large staff who spend their days breaking apart large bales of imported scrap paper and separating out any trash that might be hidden within them. This is a crucial, crucial job that can’t be replaced with technology; and, not insignificantly, it is one of the reasons (among many) that China has become one of the world’s leading manufacturers of secondary paper. Below, an example of this operation as performed at a Northern Chinese secondary paper mill:

breaking-bales16.JPG

Bluntly: you can’t have a profitable recycled paper operation in China without lots of these guys. And because Nine Dragons is the biggest recycled paper operation in China (by leaps and bounds), it has more of these guys than the competition.

I’ll leave it to others – those with more of an axe to grind in this battle – to explain why Zhang Yin wouldn’t want to award open-ended contracts to employees who do this kind of job for more than a decade. No doubt, it’s quite the burden. For now, though, I’ll just conclude by noting that – ahem – Zhang’s characterization of her business hardly conformed to what I saw when I was given a guided tour.

One thought on “Nine Dragons and a Whole Lotta Labor.

  1. I’ve read through your convincing articles about Zhang and her Nine Dragon fortune. Informative and reasonable point of view, I must say. Thank you!

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