In a new article, “China’s Low-Cost Model Is Locked In,” China Labor Watch Executive Director Li Qiang examines why China’s longstanding model of low-cost manufacturing has become increasingly difficult to reform, even as its economic and social costs grow.
Beginning with the July 2026 factory fire in Jinjiang, Fujian, which killed at least 28 people, the article argues that weak labor and safety enforcement reflects a deeper structural conflict. Local governments are responsible for enforcing labor protections, yet they also depend on manufacturers for employment, tax revenue, exports, and economic growth. Strict enforcement can therefore undermine the same businesses and local economies officials are expected to support.
Drawing on the Jinjiang factory and Foxconn’s massive Zhengzhou iPhone plant, the article also examines how manufacturers can obscure their actual employment practices through piece-rate work, dispatch labor, incomplete employment records, and complex pay arrangements. These practices make violations more difficult to detect and mean that stronger rules from Beijing alone may not be enough without changes to enforcement incentives and factory practices.
The article argues that a model built around low wages, long hours, and weak enforcement is now creating broader problems for China. At home, it suppresses household income and consumption, contributes to wage disputes, and leaves local governments dealing with the consequences when financially distressed companies fail to pay workers. Abroad, China’s enormous trade surplus and labor conditions in its supply chains are attracting greater scrutiny through tariffs, forced-labor import restrictions, and new European regulations.
Ultimately, the article argues that stronger labor protections are consistent with Beijing’s own goals of expanding domestic demand, pursuing common prosperity, and achieving higher-quality growth. Reform will carry economic costs, but continued delay carries costs of its own: many of the pressures China now faces are not the costs of reform, but the costs of postponing it.
Full article available here.
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