The Costs Of Operating In China

Naomi Rovnick exposes the less-than-rigorous auditing practices of Chinese companies:

[Apple’s] worst finding was that one of its manufacturers—which supplies other companies too—was employing 74 children. In total, it found 106 cases of child labor across its factories. Apple also reported that 158 of the factories it uses were not auditing their own suppliers. We italicize the last part of that sentence because failing to probe Chinese suppliers’ subcontractors is something labor activists and manufacturing experts have long suspected multinationals do. …

The deal is that when a Western buyer takes business to a new factory, the boss will show off a facility where staff who seem happy with their lot are working 7-10 hour days with decent meal breaks. That is the five-star factory. And some multinationals may stop their audits right there. However, because China’s rising wage inflation means “five-star” facilities are expensive to run, it is not uncommon for factory owners to sub-contract orders to sweatshops that mistreat staff and employ children.