Financial Times: China sports shoe factory halts production as strike escalates

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

April 22 2014

By Demetri Sevastopulo in Hong Kong

The world’s largest sports shoe manufacturer, which supplies Nike and Adidas, has been forced to halt production at a huge Chinese factory after thousands of workers continued to protest yesterday over pay and benefits.

Yue Yuen Industrial, a Hong Kong listed-company that produces one-fifth of the world’s athletic shoes, has faced labour unrest at a factory in Dongguang where employees have been on strike since April 14.

George Liu, executive director at Yue Yuen, which also supplies Puma, Asics and New Balance, said 40,000 workers had to stop work after protesters disrupted efforts to restart production at one complex. He said the factory was unsure how many were aggrieved and how many were responding to peer pressure.

The factory complex in Dongguan, a manufacturing metropolis in Guangdong province’s Pearl River Delta, is facing disruption over claims that Yue Yuen has for years failed to pay the correct amount of social security and housing allowance contributions required under Chinese law.

The strike comes as the balance of power in China’s labour market gradually shifts from manufacturers to workers because of demographic and social changes that have made it harder for factories to hire workers. In recent months, IBM and Walmart have faced strikes in China over issues including pay and conditions.

'But while factories often face protests in China, the size of the Yue Yuen strike is unprecedented. “It is important simply because of the sheer scale,” said Geoff Crothall at China Labour Bulletin, a workers rights group. “It does make it rather unusual.”

The workers say Yue Yuen calculated social insurance and housing contributions as a percentage of their base salary instead of total monthly pay, including payment for overtime and bonuses. In defence, Mr Liu said China’s nascent regulations were not clear on what standard companies should use for these calculations, saying “various regions have their own interpretation”.

One Dongguan government official said companies should make contributions on the basis of total pay following the 2011 passage of a national social security law. But Zhai Yujian, a labour expert at Shenzhen University, said Guangdong already had regulations in place before that requiring the basis to be total pay.

Mr Liu said Yue Yuen had already been planning to change the calculation method from May, before the recent unrest, to reflect the increased competition for workers.

On Sunday, Yue Yuen said it would respond to the grievances by agreeing to base contributions on total pay from May. It also said it would backdate owed payments, and provide an additional monthly living allowance of Rmb230 ($37).

But the offer has failed to quell the protests, which continued through yesterday. Mr Crothall said “the fact that they have not ended the strike suggests that there is a trust issue”. Mr Liu conceded that the company had to do a better job explaining its offer to its employees, but added that seminars had been disrupted by protesters.

Chen Jun, who has spent 10 years working at the factory, said workers were continuing their strike because they did not believe the company had met demands.

Additional reporting by Julie Zhu

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