Additional reports on labour unrest

China Labour Bulletin is quoted in the following articles. Copyright remains with the original publisher.

Bloomberg Businessweek: The Rise of a Chinese Worker's Movement
USA Today: Factory workers in China show more backbone
Bloomberg Businessweek: Honda’s Chinese Supplier Strikes Caught Carmaker by Surprise
Wall Street Journal: Chinese Workers Challenge Beijing's Authority
The Nation: Factory workers build on unrest
AFP: Foreign firms in China targeted in labour unrest

The Rise of a Chinese Worker's Movement
Spurred by the Foxconn suicides, and aided by an exploding Internet, China's labor ranks are organizing for higher wages and more rights

By Dexter Roberts

A nondescript Beijing suburb was recently the venue for an evening of radical politics. The New Labor Art Troupe, a performance group with a cast of laborers, ran a graphic photo of a Foxconn worker who had just killed himself. Poems were read commemorating the hard lives of migrant workers in electronics factories and on construction sites. A guitar and harmonica were hauled out and songs were sung with titles like Marginalized Life, Industrial Zone, Working Is Our Glory and Our Hell, Get Back Our Wages, and Fighting in Solidarity. Some of the hundred or so assembled migrant workers, many of them employed in small furniture factories around the capital, started crying. The evening ended with the crowd standing up for a Chinese rendition of the The Internationale, the old battle hymn of the worldwide socialist movement. "The atmosphere was militant, but there was no overt criticism of the government," says University of Hawaii political scientist Eric Harwit, who attended the two hour-plus evening performance on May 28. "They seemed really sincere that they were upset about migrant labor working conditions."

The recent Beijing performance is just one example of the rising labor activism now evident in China, activism that asserted itself in recent weeks at the factories of Foxconn and Honda Motor (HMC). It includes groups like New Labor, yet it also encompasses legal aid and other support networks at scores of universities, law firms focused on promoting worker rights, and countless migrant worker aid associations. "Civil society organizations are growing more powerful. They will push China to change," says Li Fan, director of the Beijing-based nongovernmental organization World & China Institute. Li has worked closely with labor groups as well as those pushing grassroots democracy.

The question is whether these groups can spawn a workers' movement that has the organization and mass to challenge factory owners across the country. Until a few years ago the Chinese authorities broke up sporadic workers' protests with relative ease: Local officials arrested a few ringleaders, then quickly offered concessions to the rest of the strikers to stop the unrest. Above all else, the Chinese security apparatus made sure that the leaders of labor protests in Shenzhen, Harbin, and elsewhere didn't connect with each other to form a national movement.

Today's young workers may be harder to corral. China now has 787 million mobile-phone users and 348 million Internet users—and migrant workers in their twenties are far more aware of world developments than their parents. The younger generation can follow labor actions as they unfold, whether in China's northeastern Rust Belt or southern Pearl River Delta. "They have access to information. They use their mobile phones for messaging, to send pictures and video, and to go online," says Chinese Academy of Social Sciences journalism professor Bu Wei, who is researching the use of media by migrant workers.

The more assertive workers have also benefited from a huge push by China's state-run media to popularize knowledge about the tough labor contract law promulgated in 2008. As a result, young workers know what's owed them, whether it be guarantees of double pay for overtime or safer working conditions. "Every worker is a labor lawyer by himself. They know their rights better than my HR officer," says Frank Jaeger, a German factory owner who produces cable connectors in Dongguan in Guangdong Province. Adds Harley Seyedin, president of the American Chamber of Commerce of South China: "There are Internet cafés everywhere, so the workers can get information. They are starting to ask for more. The days of cheap labor are gone."

The workers' ranks are now filled with self-starters like Xu Haitao. A 28-year-old technician in a small metal components factory in Shenzhen, Xu takes a class on labor law and worker rights every Sunday at a local migrant workers support center. "Of course, more and more workers understand their rights these days," says Xu, who surfs labor law sites regularly. "Last year I started using my own computer. Computers are not expensive anymore. I bought the pieces and constructed my own." Xu wants more workers to educate themselves. "Many capitalists and factory managers still abuse our rights," he says. "If all the workers knew the labor law—all 600 million of us—then many factory owners would go bankrupt."

These self-educated workers now have new allies in China's universities. A decade-long effort by Beijing to expand the number of students in China's universities has brought more and more of the rural population—and those with relatives and friends who still work in the factories—onto Chinese campuses. That has driven a wave of support at colleges for migrant workers, points out CASS professor Bu. Students studying law, political science, and social science are forming support groups and even provide legal aid for workers, to a degree not seen before. One of Bu's graduate students, for example, has a brother working for the Foxconn facility near Shanghai.

Many faculty members support their students' activism. "From the Foxconn tragedy, we hear screams coming from the lives of a new generation of migrant workers, warning the entire society to rethink this development model leveraged upon the sacrifice of people's basic dignity," warned an open letter dated May 19 and signed by nine sociologists from prominent schools, including Peking and Tsinghua Universities. "We call for national and local governments to implement practical measures that allow migrant workers to integrate and establish roots in the city...sharing the fruits of economic development they themselves created."

It may be a long summer for Chinese officials trying to contain this unrest. On June 3 more than 20 women workers were detained when police tried to shut down a two-week strike at a formerly state-owned cotton mill in Pingdingshan, Henan. Thousands of workers had stopped operating the looms to express their anger at their factory's privatization and to demand higher wages, reports the Hong Kong-based China Labour Bulletin. Although workers are back on the line at the Honda transmission plant that strikers had shut down, their language is anything but conciliatory. "We call all workers to maintain a high degree of unity and not to allow the capitalists to divide us," the Honda workers declared in a statement released on June 3. "We are not simply struggling for the rights of 1,800 workers, but for the rights of workers across the whole country." On June 7, another Honda plant in China went on strike.

Factory workers in China show more backbone

BEIJING — To tackle a wave of strikes at auto parts factories in southern China, company managers and government officials applied some traditional tactics. Mixing promises of wage increases with moves to hire replacement workers, Japan's Honda persuaded strikers to return to work.

The government restricted news coverage, in fear it could promote copycat strikes, and made no concessions on workers' demands for a more representative trade union. Still, change is happening in this nation dubbed the workshop of the world.

The factory towns that mushroomed across southern China in the past two decades house armies of low-paid workers, predominantly from the poorer countryside, who make the low-cost consumer goods found in homes worldwide.

Now those workers boast more awareness of their legal rights and more stomach to fight for them, says Liu Kaiming, director of the Institute of Contemporary Observation in the southern boomtown of Shenzhen.

"Today's workers go to the factories not just to earn money, but to build their futures," he says. "They have bigger demands now, and more respect for their own rights and dignity."

Collective action will spread, he predicts, as younger workers communicate and organize using text messaging and Internet bulletin boards.

Just don't expect a nationwide labor uprising, Liu says.

"Of course the government worries about a movement like Poland's Solidarity, so it still wants to keep unified leadership of trade unions," he says.

Chinese authorities permit only unions affiliated with a national trade union organization. In March, the U.S. State Department's annual report on human rights in China described its constituent unions as "generally unassertive and ineffective in protecting the rights and interests of members."

"Wages have been rising in recent years, but compared with soaring prices they remain very low," Li Qiang, founder of New York-based China Labor Watch, told the Associated Press. "The government recognizes that problem, so even if strikes are still illegal, some are tacitly condoned, though the strikes and protests have to stay within certain limits."

The demand of some Honda workers to set up their own trade union was "very unlikely" to succeed, says Geoffrey Crothall, a spokesman for Hong Kong-based China Labor Bulletin, a group that lobbies for workers' rights. "But it's been generally a very successful strike."

Workers' organizing skills are increasingly sophisticated and their demands have risen, Crothall says.

Besides wage increases, "in every strike we see demands for better work conditions, from the state of food in the canteen to the lack of ventilation in workshops, possibly dangerous machines and the lack of protective clothing," he says. Workers have become more "willing to stand up for their rights and a decent standard of living."

The disputes are based on specific local grievances, but workers are buoyed by successful strikes at neighboring plants or in the same industry, he says.

"It's not an organized movement, but individual factories learning from each other," Crothall says. Wages "have been very low for a very long time, so it's a long overdue adjustment.

Even the government has fostered a growing awareness of worker rights, says Thomas Liao, a labor lawyer at the Deheng law firm in Shenzhen. Promotion of a raft of labor legislation in 2008 and the abolition of labor arbitration fees led to a "volcanic eruption" in arbitration cases last year, he says.

However, a dragged-out arbitration process can inspire more dramatic action by some workers, Liao says.

"Striking is the most direct way to reach the upper levels of government and influence the employer," he says. The minimum monthly wage in Shenzhen will rise to the equivalent of $161 next month, the highest in Guangdong province, "but wages still remain far from high," he says.

"A multinational like Honda can afford to increase wages, but I most worry about small and medium-sized Chinese companies," Liao says. "They operate on very low profits, and rely on their low-cost workforce. If they had to increase wages, many factories would have to shut."

The recent strikes occurred soon after a rash of employee suicides at the huge facilities of Taiwan's Foxconn Technology Group in Shenzhen, which makes iPhones for Apple and other technological products that are popular globally. Foxconn rigged nets to catch jumpers and promised to double salaries for assembly-line workers.

Improving wages is just one limited way to improve labor relations, analyst Liu says.

"Foreign companies, including U.S. firms, must show more respect to workers. They earn low wages and perform dull, repetitive work with little training or education," he says. "If you give employees opportunities to grow, then you can avoid problems later."

Honda’s Chinese Supplier Strikes Caught Carmaker by Surprise

By Liza Lin and Yuki Hagiwara

June 16 (Bloomberg) -- Honda Motor Co., grappling with the worst strikes to hit its 18-year-old Chinese manufacturing business, said it needs to improve communication with employees after the walkouts took the company by surprise.

“We couldn’t predict the strikes,” Yoshiyuki Kuroda, a spokesman for the Tokyo-based carmaker, said in a phone interview. “We need to have more opportunities for managers to listen to employees regularly.”

Honda, Japan’s second-biggest automaker, made the statement after strikes at two suppliers in China halted its car output in the nation for the first time and forced the company to raise wages. A third strike, at the Honda Lock (Guangdong) Co. parts factory in Zhongshan, Guangdong province, is suspended until June 18 while union leaders and management negotiate over pay.

There are no effective channels in China for workers and management to negotiate, said Geoffrey Crothall, a spokesman for the Hong Kong-based advocacy group China Labour Bulletin. Discussions between the parties are handled by government-linked union officials who aren’t elected by the workers, he said.

“Very often, you get an accumulation of complaints related to working conditions, the attitude of managers,” Crothall said. “Gradually, things build up and it just takes one incident to push the workers to strike.”

Honda is trying to set up a system that will enable a flow of communication from workers via managers to Japanese company officials and Honda’s management team, said Kuroda, the company spokesman. He declined to elaborate on the measures.

Suggestion Boxes

Honda rose 1.4 percent to 2,755 yen as of 1:36 p.m. in Tokyo trading, while the benchmark Nikkei 225 Stock Average advanced 2 percent.

Zhang Jun, a worker at Honda Lock’s Zhongshan factory, said suggestion boxes scattered around the plant are the only means of feedback from employees to their section leaders. Zhang sees his Japanese section leader daily but never speaks to him, because of language difficulties, he said.

“When we don’t know what the other party is thinking, confusion develops,” Zhang said in a phone interview.

Honda Lock, wholly owned by Honda Motor, operates the Zhongshan factory through a joint venture with the local township government. The plant supplies key systems, door handles and sensors for Honda’s Chinese car production.

Disruptions at overseas manufacturers including Honda and Taiwan’s Foxconn Technology Group reflect pressure for higher pay in China, where a shrinking pool of low-cost labor may boost consumption and inflation.

‘Tide of Higher Wages’

“There is a tide of higher wages, and anyone, any company getting in the way, will get knocked over,” said Edwin Merner, who oversees $3 billion as president of Atlantis Investment Research Corp. in Tokyo. Rising prices in China for housing and food “will mean continuing pressure on wages,” he said.

Workers attending a June 12 protest at the Zhongshan plant said they were inspired to take action after hearing that Honda raised salaries for striking employees at a parts plant in Foshan, Guangdong, last month.

Honda said May 31 it agreed to increase pay by 24 percent at the Foshan factory to end a walkout that shut production at all four of its Chinese car-assembly plants.

Foxconn, the assembler of Apple Inc.’s iPhones founded by Terry Gou, has raised salaries and hired counselors after at least 10 workers killed themselves at its China factories this year.

Worker Protests

Honda Lock employees attending the June 12 rally hissed and yelled at a factory official who addressed them with a bullhorn, asking them to enter the factory. The workers refused, shouting that the general manager should come out and talk to them instead.

Liu Shengqi, a former protest leader, said he saw cars near the factory with signs saying Honda Lock was hiring workers. The New York Times reported the company hired replacement workers to help restore operations. Honda Lock has declined to comment on the report.

Honda started manufacturing in China in 1992, beginning with motorcycles, spokesman Kuroda said. Toyota Motor Corp., Japan’s largest automaker, and Nissan Motor Co., the third- largest, also build cars in Guangdong.

“We are telling our suppliers in China to speak to the labor unions so that we have a smooth operation there,” Nissan’s Chief Operating Officer Toshiyuki Shiga said last week in Yokohama, where the company is based.

Toyota Talks

Toyota holds talks with its Chinese workers every year from April to May, said Paul Nolasco, a Tokyo-based spokesman for the company. Wages are rising, he said, declining to disclose the carmaker’s average pay in the country.

“Toyota tries to listen to workers in China, always, to prevent strikes,” Nolasco said.

Workers and management at Honda Lock’s Zhongshan plant have set a June 18 deadline to reach an agreement, said Liu, the former protest leader.

Hirotoshi Sato, a spokesman for Miyazaki, Japan-based Honda Lock, said the company “will listen to workers’ demands again and give an answer” at that time. He declined to say what the company has offered or what workers are demanding.

Liu and Zhang, the plant worker, said Honda Lock has proposed a 200 yuan monthly pay increase. Dayshift workers were offered an additional 3 yuan per day and night workers 14 yuan per shift, Liu said.

Employees, who began striking on June 9, have demanded a 72 percent raise to 1,600 yuan ($234) a month and higher overtime wages, Honda said on June 10. The factory employs about 1,400 people.

Car Production

About 90 percent of employees are unhappy with the 200 yuan offer, according to Zhang, the plant worker. If a deal isn’t reached this week, they will go back on strike, Liu said.

It’s too soon to say whether the disruptions at the plant may affect Honda’s car assembly in China, said Takayuki Fujii, a Beijing-based spokesman for Honda Motor. So far, the carmaker has had a sufficient stock of parts to keep factories running.

“Over the short term, there is very limited impact on Honda’s sales volume as they have inventories,” said Yankun Hou, an analyst at Nomura Holdings Inc. in Hong Kong.

Honda’s two car plants in Guangzhou, Guangdong, were shut yesterday and will remain closed today for a public holiday, said Tomoko Uchida, a spokeswoman for the company in Tokyo.

--With assistance from Takako Iwatani and Naoko Fujimura in Tokyo and John Liu in Beijing. Editors: Terje Langeland, Kae Inoue

Chinese Workers Challenge Beijing's Authority
Unrest at Honda Parts Plants in Southern China Poses Dilemma for Communist Party—Labor Rights or Central Control

BEIJING—Some workers at a Honda Motor Co. plant in southern China pressed ahead with a strike Sunday as part of a wave of labor unrest that poses a political challenge for the Communist Party, whose authority in the workplace is being undermined by independent labor activists.

A number of workers at the plant agreed to a new wage-and-benefits package offered by the factory's management and returned to their jobs to resume some production Saturday, Honda spokesman Takayuki Fujii said.

But he said it was "far too early to declare an end" to the strike at Honda Lock (Guangdong) Co., which produces vehicle-key systems near the industrial city of Guangzhou. Many of the plant's more than 1,500 workers were still on strike.

The success of strikers at three Honda parts factories near Guangzhou in winning concessions is creating a dilemma for the Communist Party, which wants to be seen as supporting better conditions for workers yet is fearful that strikes led by militant workers could escalate into broader demands for more autonomous unions and pose a threat to its unchallenged rule.

All three strikes have been led by workers acting outside the state-sponsored All China Federation of Trade Unions, which, together with company managements, usually selects the leaders of state-controlled unions at such plants, according to labor experts.

Labor experts monitoring disputes in China said that one of the demands of workers at the key-systems factory is to elect their own leaders in their government-sanctioned union, according to Geoffrey Crothall, spokesman for China Labor Bulletin, a Hong Kong-based labor-rights group.

"Workers at the Honda parts plant are openly stating that the official trade union in their factory is useless," said Mr. Crothall. "That's what workers have told us. It is in the Internet chat rooms. They are very open about it."

Reports of such a move couldn't be independently confirmed by The Wall Street Journal, however.

Labor experts believe the party's leaders are very concerned about a scenario like that in Poland in the late 1980s in which an independent labor-union movement led to the overthrow of the Polish government and contributed to the dismantling of the entire Eastern bloc under the Soviet Union.

Labor experts say the question that the Communist Party needs to ask is whether suppressing the move toward allowing more independent labor unions also risks fanning more discontent. "The recent spate of labor unrest is the result of pent-up unhappiness among China's low-wage workers bubbling up to the surface," said Andreas Lauffs, head of law firm Baker & McKenzie's employment-law group in Hong Kong. "The fact that workers reportedly have started demanding the right to set up independent labor unions adds a political dimension to the labor unrest."

Last month, Honda gave striking workers at a gearbox supplier, who had paralyzed Honda's manufacturing operation in China for 10 days, a 24% increase in pay and benefits. The wildcat strike was led by a group of leaders who rivaled the factory's official, state-led and management-friendly union, which took the side of the company's management and tried to persuade the striking workers to return to work.

Tan Guocheng, one of the strike leaders who was fired along with another worker May 22, said that one of the group's major demands was that "the work union's representatives should be elected by workers." Mr. Fujii, the Honda spokesman, said the two workers were let go for violating the plant's in-house work and contract rules but not for leading the walkout.

Encouraged by the success of the strike at the gearbox plant, workers at two additional Honda parts plants near Guangzhou walked off the job last week. One strike was resolved midweek after the workers accepted a wage increase.

Mr. Fujii said the workers at the gearbox factory, which was established in 2006, were given a chance at the outset to select leaders for the official union but opted instead to receive a leader from a local chapter of the All China Federation of Trade Unions. "Some of the workers are so new at the plant that they apparently don't know that history," Mr. Fujii said. He declined to comment on the situation at the other two parts factories, citing lack of knowledge.

Labor experts say the federation has a target to start collective bargaining across the board in all companies around China by the end of 2011. Currently, wages and other conditions are generally set by management. However, the global economic crisis has derailed those plans, and there has been little progress towards that objective.

From the workers' point of view, "these state-controlled unions don't do anything. And where they exist, they are management-friendly and they don't really represent the employees," said a Western expert who declined to be quoted because of the sensitive nature of his comment.

Workers at the Honda parts plants in southern China decided, in the absence of help from the official union, to press the issues on their own, calling for higher wages, better work conditions and, in some cases, a new election to install their own leaders in the official unions.

At the gearbox factory, the strike leaders made their demands to management through the official state-controlled union. Honda executives said the union is trying to persuade the strikers to return promptly to work.

Many experts deem it highly unlikely that the government will allow workers such as those at the Honda Lock factory to install labor representatives of their choice. If China's workers were able to elect their union leaders democratically, it would mark a watershed in the country's labor movement.

Real change will come when "the Chinese government tolerates a more autonomous worker organization," said Mary Gallagher, a professor at the University of Michigan who is an expert on Chinese labor issues.

Beijing is reluctant to clamp down too hard on strikes for fear of appearing unsympathetic to the tens of millions of migrant workers whose relatively cheap labor has made China a preferred place for global companies to produce consumer goods.

The share of national income going to Chinese households has been declining for a decade, meaning that the benefits of China's growth have gone mainly to corporations and the government. Reversing that trend is crucial to achieving Beijing's effort to stem the widening disparity between rich and poor in China.

A growing issue for China's central government is the new sophistication of migrant workers.

They are clearly aware that the central government has let companies, both foreign-owned and domestic, get away with some illegal employment practices, according to Mr. Crothall and other labor experts.

One such issue is excessive overtime, especially since the Chinese economy started recovering last year from the global recession. Under national labor law, China limits overtime to 36 hours per month, according to the Baker & McKenzie lawyer, Mr. Lauffs. But at companies across China, workers routinely put in 60 to 100 hours of overtime per month, and many companies are in clear violation of the law, Mr. Lauffs said.

"I wouldn't recommend any multinational company just to assume that all this call for better treatment at the workplace will somehow stop," he said. "I think the workers have become so vocal that anything that is noncompliant will come out, and super-low wages will not be sustainable."

Factory workers build on unrest

Daniel Bardsley

June 12. 2010

Striking workers at Honda’s factory in southern China are now demanding the right to their own unions, which is descibed as a culmination of an intense wave of labour activism. Qilai Shen / Bloomberg

Given that China’s breathtaking economic growth has been based on its success in becoming the world’s manufacturing centre, the sector’s recent traumas have the potential to become even more serious.

Four Honda car plants in the southern city of Shenzhen were brought to a standstill late last month because staff at the company’s gearbox plant went on strike for higher pay.

Last week, after the Japanese car giant hoped the worst was over when it offered a wage increase of 24 per cent, problems erupted again and two car factories were shuttered a second time as a result of a pay dispute at another supplier.

Staff are now demanding the right to form their own unions instead of the state sanctioned ones, though a Honda spokesman said that workers at its Honda Lock parts-making plant had agreed to return to work yesterday.

The problems at the electronics maker Foxconn were more serious: 10 apparent suicides by workers in the past five months and a drop of about 50 per cent this year in the company’s share price.

The Taiwanese-owned firm announced pay for production line workers at its factories in Guangdong province, China’s manufacturing centre, would increase 30 per cent immediately, then by a further two thirds in October.

Prior to the increases, some staff were on basic wages of 900 yuan (Dh483) a month, and many worked 12-hour days to earn extra money.

The household name companies whose products Foxconn makes, among them the computer giant Apple, have suffered as protesters waved placards showing apples dripping with blood. The companies are expected to see higher costs by Foxconn for their products.

In the wake of the pay rises at Honda and Foxconn, other manufacturers in China have also given hefty pay increases to production staff, who spend long hours doing what are often described as boring and repetitive jobs. It follows months of reports that factories were struggling to recruit workers.

The unrest appears to have spread from the southern and coastal production hubs to plants in China’s less-developed interior. Workers in cities such as Xian having downed tools in strikes over pay.

John Zeng, a senior market analyst at the Asian Automobile Forecast Service at IHS Global Insight in Shanghai, says the problems, especially those at Foxconn, indicated “a terrible situation”.

“It’s basically long working hours, they’re not paid enough and they’re [working under] very, very big pressure,” he says. “We’re talking about the younger generation in the labour force. They have more awareness of their rights compared to their parents and they speak more loudly than before to protect their rights.”

Wages had been static for too long, Mr Zeng says.

But the figures show wages had been a shrinking part of the country’s surging economy. They represented 39.7 per cent of China’s GDP in 2007, compared with 51.4 per cent in 1995, according to a study by the Guangzhou Daily quoted by media. By comparison, in the UK last year, wages made up about 53 per cent of GDP, according to a report released by the country’s Trades Union Congress.

Geoffrey Crothall, of the workers rights group China Labour Bulletin, which is based in Hong Kong, says what has taken place in the factories of late is by no means a revolution in Chinese labour relations. But it does represent the culmination of “an intense wave of labour activism” after an increase in the number of industrial disputes in the past decade.

“There has been accumulated pressure built up for many, many years and now the workers who have been paid the minimum wage are beginning to say enough is enough,” Mr Crothall says.

There are wider economic reasons why pay issues have come to a head now. The increases announced by Honda and Foxconn are part of a pattern seen since the labour market tightened at the end of last year, according to Ren Xianfang, an analyst at IHS Global Insight in Beijing.

China’s rapid recovery from the global economic crisis has helped increase demand for labour and this, coupled with many workers deciding to return to their inland home provinces where opportunities have improved, has forced employers in the southern and coastal hubs to offer better wages.

It raises the question of whether this could dull China’s manufacturing edge, which is based on a vast supply of cheap labour.

Some analysts forecast the wage increases offered by major employers such as Honda are unlikely to spread. Dr Bala Ramasamy, a professor of economics at the China Europe International Business School in Shanghai, says heavy media coverage of the latest events has forced multinationals to improve pay.

But the bargaining power of employees at smaller, Chinese companies may be weaker.

“If multinationals pay below the market wage, it’s considered exploitation; if it’s done by the local companies, I don’t know what you call it,” he says.

The importance to the final manufacturers of their local suppliers of goods and services, especially if they remain price competitive, could keep factories from moving overseas, at least in the short term, to cheaper countries such as Indonesia and Vietnam, says Dr Ramasamy. He does, however, believe that “ultimately that will happen” even though the improvements in productivity at Chinese factories in recent years may partly offset the higher wages.

Also, wages can constitute as little as 2 per cent of the cost of making certain goods, so even significant increases may not slash profitability.

As well as considering moves overseas – Foxconn has indicated it may switch some of its Chinese production to Taiwan – manufacturers may be tempted to move inland, where the infrastructure is rapidly improving but salaries are still lower, Mr Zeng says. “There will be a trend to move the labour-intensive [industries] from the coastal to the inner [regions], rather than to other countries,” he says.

Some companies are already looking to move to the interior, with Delta Electronics, one of the world’s largest makers of power switches, is said to be keen to relocate a plant from Guangdong to Hunan province to the north.

But the need to be close to reliable suppliers could mean the factories stay put, Ms Ren says. Central cities such as Chengdu, which have good infrastructure and suitable suppliers, could prove attractive, she adds.

“However, a large-scale relocation, I don’t think that’s possible in the short term.”

And some observers say the government is happy to see the workers earning more. China wants to transform its export-driven economy into one powered by domestic consumption, as in more developed nations. Higher wages for the poorest-paid workers advance that transition.

They also accelerate the sector’s climb up the value chain from the low-cost, high-volume model that has been so successful. Higher wages in the factories also reduce China’s vast income disparities.

“The government is encouraging the wage increases by the [foreign-invested enterprises],” says Ms Ren.

In the long term, the pressure for higher wage is likely to continue to increase as fewer workers are available, Ms Ren says.

The labour force is now growing more slowly, partly as a result of China’s one-child policy. And while the working-age population is still growing, it is set to peak in 2015.

Foreign firms in China targeted in labour unrest

Allison Jackson. 17 June 2010

BEIJING — Foreign-run factories in China have been targeted in recent labour unrest as workers gamble on overseas companies responding to their demands and government officials supporting their actions.

A run of suicides at Taiwan's Foxconn, stoppages at Japan's Honda and other actions have led to hefty pay rises as firms move to protect their global brands and keep assembly lines open, experts say.

"(The workers) may feel they can get a little bit more traction with a foreign company, especially a high-profile one," said Patrick Chovanec, an economist at Tsinghua University in Beijing.

"The companies are concerned about their image at home and abroad, whereas a Chinese subcontractor making soap possibly wouldn't care what the world thought of them."

The unrest has sparked fears that the days of cheap Chinese labour could soon be over for foreign investors -- and for consumers accustomed to inexpensive goods.

In response to 11 suicides among its Chinese work force, Foxconn -- which counts Apple, Dell and Sony among its clients -- doubled salaries amid calls by labour activists for a global boycott of Apple's iPhone.

Honda offered a 24 percent rise to workers at its main parts factory while employees at a plant making car locks and key sets resumed work this week after agreeing to an undisclosed hike.

Taiwanese handset component maker Merry Electronics Co. raised the basic wages of 7,000 staff at its Shenzhen city factory by 17 percent to end a brief strike, local media reported.

And US fast-food giant KFC agreed a rise for 2,000 staff in northern Shenyang city after months of trade union pressure.

In the latest action, workers at a Toyota-affiliated parts factory in northern China walked out this week reportedly demanding a pay increase.

The strike ended Wednesday and production was unaffected, a Toyota spokesman said.

Nearly a quarter of Chinese employees have not had a raise in five years, according to the All-China Federation of Trade Unions, despite recent high inflation.

Chovanec said today's disputes resemble Nike's predicament in the early 1990s, when it faced an outcry over Asian factory conditions.

"It wasn't targeted because it was the worst offender," said Chovanec.

"It was targeted because it was high profile and they (labour activists) thought it would attract more attention and it would be more responsive."

Savvy workers also knew officials were more likely to support action against a foreign company than a domestic firm, said Geoffrey Crothall, at the China Labour Bulletin in Hong Kong.

"Owners of domestic enterprises have better connections with government officials and I think that has probably got a lot to do with it," he said.

The issue has received widespread coverage in state media and Premier Wen Jiabao this week called for better treatment of migrant workers, amid concern of wider social turmoil.

Media outlets, however, have focused on disputes in foreign-owned factories, giving the impression there are few problems at Chinese-run plants, said Crothall.

"In general, strikes are not widely reported in China. I think there is a lot going on (in Chinese factories) that we don't know about," he said.

Australian National University professor Anita Chan noted the recent actions had specifically hit Asian-run factories and signalled workers were fed up with harsh treatment.

But government sympathy may not last if disputes begin to hurt the economy. Officials have repeatedly sought to ease concerns by saying foreign firms remained welcome.

"The government's view seems to be that wage increases and better conditions for Chinese workers are desirable," said Mark Williams, senior China economist at Capital Economics in London.

"But at the first sign that disruption is causing foreign firms to rethink their investment in China I would expect the government to bring protests to a halt."

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