Lord Jim O’Neill on Rising Powers and Interdependent Futures
Lord Jim O’Neill, creator of the acronym BRIC for Brazil, Russia, India and China, opened the final conference of the ESRC Rising Powers and Interdependent Futures programme with a keynote lecture about Rising Powers and 21st century globalisation. Based on an analysis of cyclical and structural trends in the world economy, the talk concludes with a discussion of policy options to improve globalisation, involving both governments and the private sector.
Listen to the full keynote lecture given on 21 June 2017 in Manchester here:
Workshop on Labour Standards and Labour Law Reforms in the Rising Powers: Trends and Prospects in Public and Private Regulations
In a recent workshop held in Cambridge in September 2016 researchers from the Centre for Business Research (CBR), University of Cambridge, and from the Global Development Institute, University of Manchester, discussed the findings from ESRC-funded research. The workshop focused on labour law reforms, labour standards and corporate social responsibility (CSR) practices in Rising Powers, including China, India, South Africa and Brazil.
A series of podcast interviews produced by CBR summarizes the findings presented at the workshop.
Full podcast documenting day 1 of the workshop
Listen to the full podcast from Day 1 of the workshop:
Interview with Simon Deakin, Parisa Bastani and Louise Bishop
- Simon Deakin, University of Cambridge, Professor of Law and Director of the Centre for Business Research
- Parisa Bastiani, University of Cambridge
- Louise Bishop, University of Sheffield
‘The CBR-LRI Dataset: Methods, Properties and Potential of Leximetric Coding of Labour Laws’. By Zoe Adams, Parisa Bastani, Louise Bishop and Simon Deakin.
Key quotes from the podcast
Simon Deakin said:
“This dataset provides a time series of historical data on the evolution of Labour Laws and how they become more or less protective over time. We looked particularly at laws relating to the individual employment contract, dismissal laws are part of it too, and collective labour laws. It also includes the right to strike and also collective bargaining. Together these laws help to constitute and regulate the world of work and the labour market and they have important implications for worker management relationships and also for equality within society”.
Parisa Bastani said:
”I looked at the quantitative trends in the data and what sort of analysis can come out of certain structure in the data. Once the data has been coded we needed to know what can be done with it.”
Louise Bishop said:
“I looked at the materials, the text books and the legislation that explore what the laws of that country were and then I was involved in making judgements about what values they should be given. I made notes to ensure the score given was as transparent as possible.”
Listen to the podcast with Simon, Parisa and Louise below:
Interview with Simon Deakin and Prabirjit Sarkar
- Simon Deakin, University of Cambridge
- Prabirjit Sarkar, Jadavpur University
‘Does Labour Regulation Improve Income Distribution at the Cost of Decreased Employment and Productivity?’ By Simon Deakin and Prabirjit Sarkar.
Key quotes from the podcast
Simon Deakin said:
“We looked at the impact of labour laws on income distribution. Does it make us more equal and if it does what is the trade off, is it decreased employment and lower productivity or the reverse? This is a huge question. We used a regression model that tried to estimate the short term and long term effects of an external change such as a legal change that impacts on the economy and employment relationships. It also alters costs for firms maybe negatively and maybe positively. If undercutting is ruled out firms can observe labour standards more reliably and credibly if there is legal support for them.
We looked at 36 OECD countries, and combined this with our longer dataset series – we didn’t have to make any assumptions about missing data – and we found that labour laws, when they become more worker protective on average have the effect of increasing the so called labour share. This is the share of national production going into wages, as opposed to profits. Worker protective labour laws increase labour’s share of national output and to that extent one may say that this results in more equal distribution. These laws, particularly dismissal laws, generally do increase productivity. They induce firms to use labour more efficiently.”
Prabirjit Sarkar said:
”We had proper econometrics data over a continuous time period and we took a proper control and we used GDP growth. I think employment depends more on GDP growth than labour regulation.
We didn’t find any evidence that labour regulation hurts labour. We used three models and either we got no result or we got a result favourable to the labour regulations, so in that way it goes against the conventional standpoint. Our findings support the socialist rather than the neoliberal standpoint. When labour regulations are there that makes labour more productive and more committed, and they are more efficient because they have a better wage.”
Listen to the podcast with Simon and Prabirjit below:
Interview with Simon Deakin, Bimal Arora and Corinna Braun-Munzinger
- Simon Deakin, University of Cambridge
- Bimal Arora, University of Manchester
- Corinna Braun-Munzinger, University of Manchester
- Corporate Social Responsibility (CSR), Regulation and Governance Bridging Private-Public and Advanced-Rising Powers Chasm’. By Bimal Arora, Khalid Nadvi and Rudolf Sinkovics
- ‘Chinese CSR Standards: Policy Goals on Social Upgrading and Industrial Policy Goals in GPNs.’ By Corinna Braun-Munzinger
Key quotes from the podcast
Bimal Arora said:
“CSR has been implemented in different ways. The first is the community development aspect of it, and secondly there is the environmental issues and sustainability and the third part is compliance for those firms who are part of global value chains. In India the three forms of CSR are very much evident and that is where the link comes from the private to the public regulation. Two years of CSR law in India demonstrates that companies are increasingly adopting these practices although we need to wait three years to test the impact fully. The emerging trends seem to suggest that more and more companies are engaging. They are putting mechanisms in place, human resources in place, financial resources and policies in place and gradually this is shaping up.”
Corinna Braun-Munzinger said:
”I was looking at one particular CSR standard in China in the apparel sector. Where do those CSR standards come from in China overall? These have to be seen in terms of the wider policy goals within China and its industrial policy, and policy shifts such as sustainability and increasingly strict labour laws starting with the labour contract law adopted in China and the labour regulation coming in after that, as well as increasingly strict environmental regulation. Especially around 2005 you really see a turning point where there was a much more proactive attitude towards CSR in China.”
Simon Deakin summizes:
”Ideas spread because of globalisation, CSR which began in America and Europe spreads from there to emerging markets. India and China have been undergoing a process of industrialisation which is based upon a capitalist neoliberal model and this was the model of the West. India and China are now capitalist states and many people would say they are now moving towards a Western liberal model but they may be developing a distinctive form of capitalism. In China labour law fulfils a dual purpose of fairness at work and employee voice, on the one hand, and industrial upgrading on the other. India is a different story, much of its labour regulation is not enforced and there are loopholes which are even encouraged by government. The BRICS are not one group they are much less monolithic than the West is. India’s unregulated to semi-regulated sector is as much as 85 or 90 per cent of the workforce but there has been a steady rise in wage labour and formal employment in China as in other East Asia countries.
I would argue that over the long run, democracy and civil dialogue and employee voice have been complementary to and certainly compatible with industrial and economic development. I wouldn’t accept the view that democracy has been incompatible with economic growth, and I would expect, over time, pressure for democratisation in states which currently don’t have it, that is a consequence of economic development. It was so in the global North and the West. The worst thing the West could do would be to row back on social rights or democratic rights because of a feeling it must somehow compete with the BRICS when they are not as fully democratic as we would like. That would be a catastrophe. A catastrophe for democracy but also for our economies, they wouldn’t gain from a rowing back on social rights. We hear that social rights have to be sacrificed and employee voice has to be downgraded. In this country a Trade Union Act was passed earlier this year, which is the most authoritarian anti-labour measure we have seen in this country, for many decades. This is symptomatic of a view in this country and other countries that worker rights are a luxury or a harmful fetter upon innovation and nothing could be more destructive than that view.”
Listen to the podcast with Simon, Bimal and Corinna below:
Full podcast documenting day 2 of the workshop
Listen to the full podcast from Day 2 of the workshop:
Interview with Matthew Alford, Natalie Langford, Khalid Nadvi and Simon Deakin
- Matthew Alford, University of Manchester
- Natalie Langford, University of Manchester
- Khalid Nadvi, University of Manchester, Professor of International Development, The Global Development Institute; Director of Research for the School of Environment, Education and Development; Research programme co-ordinator for the ESRC Rising Powers and Integrated Futures Research Programme
- Simon Deakin, University of Cambridge, Professor of Law and Director of the Centre for Business Research
- ‘The Intersection of Public and Private Interests in the Development of Social Standards in “Southern” Markets: The Case of the Indian Tea Industry’. By Natalie Langford
- ‘Public and Private Governance in South African Fruit Global Value Chains: Complementary, but Who Benefits?’ By Matthew Alford.
Key quotes from the podcast
Natalie Langford said:
“The Indian tea industry has been of great interest for labour scholars and academics because it has been regulated by a huge raft of public regulations since independence in the late 40s. But these labour laws have not been very stringently applied. In recent decades we have seen, as consumers in Europe and America become aware of where their tea is being sourced from, new private standards such as Fairtrade, the Rainforest Alliance and the Ethical Tea Partnership have emerged.
We have seen the growth of middle class consumers in recent years and this raises really important questions as to what is the role of fair trade in the Rainforest Alliance when markets are declining in Europe and America. What kind of standards can we expect to see in India as Indian consumers become more aware about social and environmental conditions? My case studies looks at Trustea which was launched in 2013 and I wanted to unpack whether it was influenced by local institutional actors or if the standard setters in Europe are now becoming strategically involved as we see a shift to the Southern markets.
European NGOS and European governments’ are playing a major role in standard setting. Consumers feel they are making a real difference by enforcing these standards and buying Fairtrade but this isn’t always the case and there is still a need for a more politically based approach.”
Matthew Alford said:
“The interesting interaction I was looking at drawing upon global value chains and production networks literatures was the interaction between public national standards and global private standards. What I found was that the ETI based code (Ethical Trading Initiative), which was the private standard, demanded that fruit producers in South Africa adhere to the minimum wage, the public standard in South Africa. But very critically that minimum wage was insufficient to protect farm workers’ in terms of their living costs which resulted in this huge labour crisis. There was a very significant strike that occurred at the end of 2012 and beginning of 2013 at the end of my primary field work. Thousands of predominantly casual farm workers’ downed tools and demanded better working conditions and particularly higher wages of their employers, local producers and also the South African government. Tragically three farm workers’ were killed and farms were torched. In the end the lead firms who were involved in sourcing from the sector said they were adhering to the ETI based codes and private standards and they called for national minimum wages to be met as part of their responsibility.“
Khalid Nadvi said:
“What was very interesting in this workshop was that we were able to bring together work from two projects under the ESRC Rising Powers Integrated Futures Programme. We looked at labour standards, but from different disciplinary angles and different methodologies. What we have learned is that by bridging across the disciplines of legal studies, law and development, as well as development studies, and by bringing quantitative and qualitative methodologies to the work, we end up with a much richer set of insights on how countries like China, India, South Africa, and Brazil engage with questions around labour regulation and labour standards, and the issues around Corporate Social Responsibilities.
In the future we need to look at these countries more specifically and to look at regional variations within these countries. However, I think at the same time the traditional North South view of the World and the traditional ways in which we were thinking about or fearing that these countries might begin to challenge the consensus that had emerged in the global north around social and environmental standards, that fear is a little bit over emphasised and we need to unpack that a bit better.
In the countries where we have done our research the qualitative research in Manchester or the quantitative research in Cambridge we are beginning to see that there are improvements taking place – it is slow – in terms of the regulatory framing of labour rights and also the implementation of them. These outcomes will have some impact on workers in these countries. There are still problems, and the workers’ struggle continues, but both studies in Cambridge and Manchester suggest that this is a much more nuanced, much richer and more varied terrain than we had earlier expected.”
Simon Deakin concluded:
“In the Rising Powers – which have now risen – as they have become more capitalist, we see tensions in terms of previously protected markets becoming subject to global competition and turbulence particularly in China which has seen amazing rates of growth, and South Africa and India. I would say as the BRICS become more capitalist and more market orientated they need strong labour laws but they may not always get them. This is a process which went on in the global North a Century ago, and there are some similarities. The lesson from this are that the institutions of labour law, labour rights, employment contracts, labour courts, are developing quickly today in China, South Africa and India. This is where much of the action is.”
Listen to the podcast with Matthew, Natalie, Khalid and Simon below:
Interview with Simon Deakin, Boya Wang and Enying Zheng
- Simon Deakin, University of Cambridge
- Boya Wang, University of Cambridge
- Enying Zheng, University of Cambridge
- ‘The Effects of Labour Protection on Productivity: Evidence from the New Chinese Labour Law’. By Simon Deakin and Boya Wang
- ‘Pricing Labour Capacity: The Unexpected Effects of Formalizing Employment Contracts in China’. By Enying Zheng and Simon Deakin.
Key quotes from the podcast
Simon Deakin said:
“The paper discusses the effects of a very important legal measure which is the Chinese Labour Contracts Act which was passed in 2007. It was a major event in China’s recent legal evolution and the development of its labour market because it represented for China a move away from a low cost, flexible, under regulated labour market regime to one where there was something more like a floor of basic rights inserted into every employment relationship. One of the critical rights was a right to a formal written employment contract. We address the economic effects of the introduction of this law and the related strengthening of standards in connection with working time and dismissal. Along with this has come in many cities and regions a right to a higher minimum wage.
China is moving away from a model of employment where the cash nexus contract almost played no role, and where there was no freedom of movement for workers, they were tied to a firm and they were deployed by the state on graduation or completing their schooling or training to work for a firm, often for life. In a capitalist economy as China is now, the things we associate with capitalism, technological dynamism and the labour contract promote a certain type of economic growth, and this has brought hundreds of millions of people out of poverty in China. China itself has become more unequal but China is almost alone responsible for the reduction in world poverty that has occurred over the past twenty years. In many other countries poverty got worse. The purpose of the paper is not to judge if capitalism was right or wrong for China, but to evaluate what happens when you make that move: are workers better or worse off in a capitalist system? Their labour rights give them certain benefits but in a capitalist system there is a fundamental inequality which exists between employers and workers and employers can play the system so these worker protective reforms don’t always have the intended effects. China’s market economy really does need labour law and if there are unexpected effects there are varoius ways of dealing with that. They shouldn’t scrap the new labour laws, but they can’t go back to the past in China either, that is to the pre-capitalist period.”
Boya Wang said:
“My preliminary results confirm that the enactment of the 2007 labour contract law actually eroded the listed companies’ profitability and you see the conflicts between the profit and the productivity orientation. I would like to know in the long term whether these two goals will converge and if higher productivity will be translated into higher profitability. I hope the database we created will have some policy implications in that a single law can’t really generate a simple impact at firm level, that really requires complementary, social and economic conditions. When policy makers are thinking about the law and legislation they also need to think about what are the local conditions? Will the local institutions and economic conditions support the enforcement of this law or increase the impact or contradict the laws intention?”
Enying Zheng said:
“Under this contract law a firm cannot fire a worker as freely as they did before but that is not the whole story because people are often working in not very attractive jobs so the workers don’t care about that type of protection, even if they are paid the minimum wage. They can move elsewhere. Chinese workers’ don’t perceive the labour law as workers from outside the field think, they have their own rationale. They adopt certain clauses that will be beneficial to them.”
Listen to the podcast with Simon, Boya and Enying below:
Workshop on Law and Finance in Rising Powers
There has been much talk about the rise of the BRICS, or the so-called rising powers of Brazil, Russia, India and China, and South Africa, but how much do we know about trade and capital flows between the Western economies and these developing countries, and about how law and finance operate in these regions?
Are contracts in emerging markets enforceable in the normal way? What is the role of political forces in shaping legal enforcement? How is cross-border trade conducted against the backdrop of language barriers and different legal cultures? With growing numbers of international mergers affecting the BRICS, do shareholder rights regimes flow from one country to another? Is there a “race to the bottom” in protection for workers?
This workshop held at the University of Cambridge brought together researchers associated with several projects under the Rising Powers and Interdependent Futures programme. A series of podcast interviews with speakers at the conference gives a synopsis of their findings.
Interview with Simon Deakin: Law and Finance in Rising Powers
In this podcast interview, Simon Deakin, Director of the Centre for Business Research, and Professor of Law at the University of Cambridge, has said that he is optimistic that the developing economies in the BRICS will find new ways to facilitate how business is conducted and will over time reduce the role of corruption in their economies.
Following the workshop, Simon said:
“I am trying to be both optimistic and realistic. It is of tremendous importance not just for the BRICS but for the West that we do not see a race to the bottom. In the West we have a social norm that we don’t bribe officials, but in countries where there is a social norm to bribe an official to get somewhere, that is a very different world. We take for granted that by and large there is a very low level of corruption in our society and when we see corruption in the west we try and stop it. We must continue to take that line and we must encourage campaigns against corruption in all relevant contexts. However, we have to realise that corruption arises where there isn’t a functioning rule of law, so we can’t afford to preach to the BRICS; we need to help them to establish the appropriate laws and processes.
We have to take the view that transitioning from a clan based system and an authoritarian based system, such as China and Russia had, to one based on democracy and the rule of law, is a very difficult process and admit that we don’t fully understand how that process works. We have great models which explain how the free market works but this is where it is already established, where there is already a rule of law. We don’t yet have a convincing model of moving from one system to another. We need social science to help inform us in our policy making.”
Listen to Simon’s podcast below:
Interview with Gregory James and Mathias Siems: First Results from the Extended Shareholder Protection Index
Gregory James, Senior Lecturer in Economics at Loughborough University, and Mathias Siems, Professor of Commercial Law at Durham University, presented work on shareholder rights in developed and developing countries.
“We looked at 30 Countries, both developed and developing economies, and the convergence of legal rights in these economies. Does convergence in company law lead to some convergence in legal systems, towards best practice?
Interestingly, we found that in countries where you wouldn’t really expect it like Russia and China shareholder protection is good, at least on the books, compared to somewhere like Germany.
We are using the CBR shareholder protection index and other research methods, and the interesting finding we have from the legal data was that all the countries were keen on improvement for shareholder protection. There seems to be a global trend in terms of fads and fashions for global rules protecting shareholders – that is interesting from a political economy perspective. We also found that while similar legal rules may flow across borders the operation of those rules is often quite different in practice.“
“Rather than shareholder protection always being a good thing, it could be the other way round, it could be that legal systems that are less protective maybe advantageous – because you don’t need to be bothered by too much red tape. We could ask, do we really need to protect shareholders to the maximum? Is shareholder protection always good or may it be counter-productive in some circumstances?
We don’t have a global law maker, we don’t have the UN regulating corporate governance or company law so we have to look to country level. Do we need global rules or will we see national standards becoming more uniform?”
Listen to Gregory and Mathias’ podcast below:
Interview with Boya Wang: Corporate Governance and institutional factors of firm valuation during the financial crisis of cross provincial data of Chinese companies
This podcast features Boya Wang, a Research Fellow at CBR, University of Cambridge.
“I have done some field work trips in China interviewing business people and that is where my business research hypothesis developed from. There is a divergence between the central and local government, their roles, and their incentives in corporate governance practices. The western media generally hold a monolithic view of the Chinese state as a unified entity, but actually it is not. Marketization and political reform have led to a divergence of interests across the local bureaucracies.
The financial crisis provides the ideal test ground to test my hypothesis. During the financial crisis Chinese business was suffering from one of the worst economic situations and in this case the appropriation incentives will be strong. I think that this will expose many existing and neglected weaknesses in the corporate governance system.
The political reforms and crack- down on corruption that is happening now are a reflection of what is happening in the economic sector and where we can see the rise of large non-state firms such as Alibaba and Tencent. These private businesses constitute a new constituency. For the Chinese party state, this will counter balance the conservative or entrenched interests and their power. I don’t think China will morph into the political situation that we find now in Russia.“
Listen to Boya’s podcast below:
Interview with Rilka Dragneva-Lewers, Larry King, and Sveta Borodina
This podcast features interviews with Rilka Dragneva-Lewers, Senior Lecturer, University of Birmingham: The EUs influence on Company Law Reform in the Eastern Neighbourhood; Larry King, Professor of Sociology and Political Economy University of Cambridge: The Governance Grenade, the Effect of mass privatisation on corporate governance in Russia; and Sveta Borodina, Research Associate, CBR University of Cambridge: Law and Finance in Russia.
“My main area of interest is the Ukraine, which stands out amongst the rest of the eastern European states in that it was probably the last country to reform its law on the books and it is of course in a state of very serious turmoil at the moment.
The main approach of the EU has been to insist on legal approximation so it has pursued both integration and stimulating economic development through reform of the laws. But as we have seen this is definitely not enough and this external pressure has not been a critical factor, for legal change. Businesses manage to protect their property rights through various extra-legal ways through access to political power for example and protection.
The difficultly with large businesses in Ukraine is that there are often run by holding companies and they are owned by oligarchs. This has meant that there has been a very strong business effort to keep transparency low and maintain the privacy of dealings. Transparency remains a critical issue in business dealings.
At the EU level the economics is quite complex. The EU despite having had a very strong response to Russia’s policy in Ukraine with sanctions still suffers from a lot of disagreement with its member states because Russia’s approach of subsequently imposing its own sanctions against the EU has been divisive.“
“There are many different ways to privatise and we looked whether how you privatise makes a big difference, for example how do you allow state owned enterprises to compete with other private firms? How do you allow domestic owners to emerge which then go on to privatise firms and which will probably have much better outcomes? This happened in Poland and much of Central and Eastern Europe, and here there is a big role for foreign investors. However, when you try to privatise everything at once, without waiting for domestic owners to emerge, or without inviting in competitive auctions involving foreigners, you have to embark on artificial privatisation.
Rather than that being a corrupt process in itself, my argument was that it created corruption. It led to firm failure. Creating owners who had no capital, who had no expertise, who had no connections, and who couldn’t monitor firm insiders, created a perfect storm for firms to fail. Once they started to fail it created a fiscal crisis for the state as nobody was paying taxes.
This led to a situation where firms were retreating from the market as state bureaucrats, who were already demoralised from the transition and were not being paid, were now ripe for corruption. What emerged in many of these countries, Russia or Ukraine, is a system of social property relations that were based on client type ties between political officers and captured businessmen who were what we call Oligarchs.
Clearly these systems needed to change but Russia for example could have done what Poland did and it could have protected its domestic market and allowed competition to drive enterprise restructuring and reforms of the state but they tried to do everything at once and that led to disaster.
In summary, you can’t really describe these countries as in transition from socialism to a market society, what you have is a new type of market society developing, one in which the relative separation of the political and the economic spheres is different. There is much less separation and to be in big business you also have to be in a political community in these countries.”
“In Russia people tend to do business with their friends and acquaintances and there is also the concept of reputation so people know each other. They rely on law to formalise what they have agreed informally previously. Trust used to be the way of making deals but nowadays lawyers are getting involved at earlier stages and they look at the letter of the law before the signatures are put on the paper.
“People are starting to understand that if you lead your business according to the rules you are more secure you are safer and you will have more chances of keeping your business in case there is an attack from a hostile acquirer.
“I was very pleased to find that the micro side of the business is improving and that it has improved considerably and the technocrats are moving the country in the right direction but the trouble is that the political set up is in conflict with this forward movement.”
Listen to Rika, Larry and Sveta’s podcast below:
Interview with Khalid Nadvi: Changing Labour Regulations and Labour Standards in China
This podcast consists of an interview with Khalid Nadvi, Reader in International Development University of Manchester, and the research programme co-ordinator for the ESRCs Rising Powers and Inter-dependent futures programme
“Our paper has been looking at how our changing labour regulations are impacting on labour standards in China. The paper that we presented is an introduction to a special issue of the International Labour Review which is on this theme coming out in December 2014.
What we are trying to look at is how does the rise in the labour regulation that we have seen in China in recent years impact on questions around labour standards working around labour conditions and labour rights.
I think things are changing and what we are beginning to see in those changes is that increasingly there is an improvement in real wages. There has been a lot of labour activism and in fact grass roots activism with wild cat strikes and so on, and one of the consequences of that is that there has been a rise in real wages in much of the region along the coastal belt and pearl-river delta and the province of Guangdong. But the nature of the labour regime in China and the working conditions in China is varied and so if you move further inland to inner provinces you might still see very poor conditions and very harsh working environments.
We need to do more analysis of ways in which national, regional and local levels of government engage with this agenda. Looking at labour regulations and the law that has been passed is not going to be enough we need to see how they get implemented and what our evidence is pointing to is that the nature of that implementation varies at the local level. There are reasons why those variations take place.
When you look at the BRICS, Brazil is the most interesting it is a fascinating story of the ways in which regulation around law, around finance, around labour standards, have really moved ahead. Brazil is interesting and is almost an outlier. China falls somewhere in the middle and Russia is at the other extreme, where we don’t see very strong legal institutions beginning to take effect and so therefore we see all sorts of issues around corruption.”
Listen to Khalid’s podcast below:
Interview with Caroline Humphrey and Sayana Namsaraeva: Cross-border trade between China and Russia
This podcast features Caroline Humphrey, Emeritus Professor of Social Anthropology at the University of Cambridge: Cross-Border E-trade and its Vicissitudes, and Sayana Namsaraeva, Research Associate Department of Anthropology, University of Cambridge: The Effect of Exchange Rate Changes Post-Ukraine on Trans-border Trade between China and Russia.
“My paper was called e-trade between China and Russia and it was about the objective facts of how e-trade is taking place these days. One the one hand it is greatly encouraged and the relationships between China and Russia are getting much closer and this is a lovely high tech thing that could develop but on the other, in practice it has all sorts of problems.
The problem is the big Chinese internet firms don’t accept payment from Russian banks and cards, and also the cheapest and best sites are in the Chinese language so they need interpreters to find out what the information is on those sites. They use mediators, middle men firms that have mushroomed up in Russia, and that helps them get access to the goods but it means that it is much more expensive for them and rather slow and cumbersome.
I think there are some perils of trading. There are perils that the goods may be incorrectly described or that they arrive in the wrong quantity, that kind of thing, but there isn’t much come-back for the Russian consumer, the legal situation is not good at all. Deliveries from China to Russia have to go through several complicated ways of crossing the border and they have to pay big customs duties.
You can send goods back if they are absolutely wrong in relation to what you ordered but if it is a minor issue, or it doesn’t look like it did in the catalogue, you certainly couldn’t. There is a certain amount of muddle, particularly in the Russian postal service that is coping with a gigantic numbers of parcels from all over the place, and things do often seem to get lost in there. Bribery is absolutely very common indeed particularly when crossing the borders.
At the moment it is a punt if you want to buy something online and whether and how fast that will change is very difficult to say. But it is also exciting, because with the internet you have access to this huge range of goods and almost all of it produced in China.“
“My research is on women border traders who do regular shuttle trade between Russia and China to buy things cheap and to sell dear on the Russian side.
I think this kind of shuttle trade is very important for the local economies both for Russia and for China but at the same time, the border economy exists in the shadow economy of both countries.
Border traders work in the professions in the week, they may be nurses, doctors, teachers but at the weekend they go to China and become shuttle traders to resell it. This is how they survive and how they support their families.
The younger generation can go online and do this click and delivery thing but the elder generation that is not familiar with the internet still prefer to go to the real shop and touch and feel the real thing.
Until recently border trade was also associated with tourism from Asia because as well as buying things they also spent quite a lot of time enjoying life in China, going shopping, eating out, visiting parks and saloons, and learning more about Chinese culture.
Now there is a growing economic disparity between Russia and China, because once the Soviet Union was a very powerful regional super power State, but recently with China’s economic growth, the power balance has changed, and Russia has moved from being an older brother to the position of the younger sister.
Nowadays people are really in an uncertain financial situation and with the devaluation of the Ruble they can’t plan their futures and because of this 40 per cent devaluation crossing border points are half empty. People need to save money in order to survive.”
Listen to Caroline and Sayana’s podcast below: