A major decision was announced yesterday: Chinese group Sun Paper will set up a paper mill close to Little Rock, Arkansas.
The investment is 1 billion USD. Direct and indirect job creation is estimated at over 1,000 jobs.
Is the typical Chinese opportunism at work?
Chinese companies usually make decisions by grabbing opportunities. They seldom follow a long-term strategy. Is it the case here? I don't have this feeling.
This Chinese group has negotiated investments and tax breaks by putting several states in competition. But this is pretty common nowadays.
The timber industry in South Arkansas was struggling, which means there is overcapacity and prices of raw materials will probably be low. This is an opportunity, but again it is a logical decision following a simple market study.
Once a paper mill is set up, it is not easy to move to another place. And this type of industry works on long cycles -- this is not toys or consumer electronics.
What can the paper mill's 250 employees expect?
Sun Paper's chairman described its project as follows:
the highest efficiency, the most environmentally progressive factory in the pulp and paper industry in all of North America
If this is true, this is undeniably good news for Arkansas.
However, what can future employees expect? Based on the experiences of other Chinese-owned factories in Alabama, American workers will probably have the following complaints:
- Poor safety records -- this is quite important in the paper making industry, but Chinese companies are far, far behind Western companies in this regard.
- Lack of training programs -- employees turn over very fast in most Chinese factories, and very little investment is made in training.
- Poor maintenance of equipment -- Chinese companies tend to neglect all preventive measures, even if they keep machines up more often over a longer lifetime. Expect their equipment to break down more often than industry average. The good news is, they can find the talent they will need in-country if one day they understand what they should do.
- Strong pressure on purchasing prices -- timber suppliers can expect tough pricing negotiations. But this is the norm in their industry--no issue here.
- Difficult communication between employees and management -- China is a "high power distance" culture. Employees have to listen to their managers and never talk back. In an American factory the opposite is true!
- Difficult communication between Chinese and non-Chinese -- Chinese people tend to trust people in their inner circle. They will have trouble extending their trust to local managers and supervisors.
- A focus on low wages -- jobs at the production operator level will not pay well. Expect below market salaries.
- Discriminatory practices -- the concept of discrimination is foreign to Chinese businessmen, while Americans are VERY sensitive to it. Expect some cultural shocks... if not clashes.
I hope I am wrong. We will know soon enough. How long will it take before the plant is unionized?