In factory towns across China’s export powerhouse in the Pearl River Delta, a vicious cycle of slowing orders from the West and increasing wage pressures has led to a series of major strikes that could reverberate through the economy.
From shoe and bra factories in the east of Guangdong Province, dubbed “China’s world factory,” to a cluster of watch, sport and electronics plants to the south and west, hundreds, even thousands, of workers have crippled production for major Western brands.
A Reuters team that visited four factory towns in the region this week saw significant signs of industrial strains despite attempts by security guards to block access to workers.
Photo: Reuters
The strains underline recent warnings of a looming export slowdown from a senior Guangdong official and a survey of countrywide industrial activity this month that showed the worst contraction since 2009.
At Yue Yuen Industrial Holdings’ giant shoe factory in Huangjiang town — a major supplier for sports brand New Balance — the mood remained tense after most of its 8,000 workers took to the streets on Thursday, blocking roads, overturning cars and clashing with police.
Security guards patrolling the sprawling industrial estate on motorbikes prevented two Reuters correspondents from mingling with workers near a lakeside area ringed by food joints and dormitory blocks, eventually forcing them out.
At least four factory workers who talked to reporters, including two slurping steaming bowls of noodles in an alley near the factory, said the strike was still simmering into a sixth day, with workers clocking in but refusing to work at assembly line posts.
“We are willing to work, but you must also pay us enough to survive,” said one of them, a rosy-cheeked woman in a pink jacket. “To guarantee the basic quality of life, even [Chinese Premier] Wen Jiabao (溫家寶) has said that,” she said.
A middle-aged male colleague sitting beside her said: “Even during the financial crisis we didn’t see pressure like this.”
WAGE HIKES
The shoemaker, one of the world’s largest, said the impact was “minor” with its orders still healthy. However, it conceded that cost pressures, namely wages, were building in regions like Guangdong, where another round of minimum wage hikes on Jan. 1 could deal a further blow to factory owners.
Experts and labor advocacy groups warn an external economic slowdown in debt-stricken Europe and countries like the US could exacerbate the risk of social upheaval in China.
Besides labor disputes, Guangdong — a crucial locomotive of China’s economic growth with a GDP matching Indonesia’s — has been roiled in recent months by riots over rural land grabs in Lufeng City and abuse of power several hours drive west in the city of Zengcheng that saw angry crowds ransack government buildings.
A former deputy editor-in-chief of the official party newspaper, the People’s Daily, said the number of “mass incidents” in China, an official euphemism for social disorder, was consistently above 90,000 per year from 2007 to 2009.
While strikes are relatively frequent in Chinese factory towns, including a spate of wildcat actions last year that afflicted major global firms like Honda, the current crop of labor unrest comes amid a far darker global economic backdrop and a tight domestic credit environment in China.
Slick, globalized supply chains mean belt-tightening in the West rapidly translates to reduced orders at Chinese factories.
As leaner times provoke aggressive factory cost-cutting and wage trimming, Chinese workers increasingly lashed by persistent inflation are often in no mood to compromise.
In a recent report, consultancy Exclusive Analysis said it saw growing risks of “violent labor unrest” flaring up in Chinese factories and causing property damage and losses.
“Real-time use of social media by striking workers and firms’ decreased ability to meet workers’ demands due to falling Western export demand are likely to drive this violence,” it added.
STEEP DOWNTURN
Europe’s economic woes, Chinese manufacturing fragility and flat consumer spending in the US have all raised the risk that the world is headed for a steep downturn.
Donna Kwok, an economist at HSBC, said while the labor unrest might not leave a significant dent on growth so far, “events unfolding in both the eurozone and the US pose a more serious threat to China’s manufacturing sectors, especially if they topple both of China’s two top export markets into simultaneous recession”.
The Federation of Hong Kong Industries recently warned up to a third of about 50,000 Hong Kong-owned factories in adjoining Guangdong and elsewhere in China could downsize or close by the end of the year, potentially putting at risk hundreds of thousands of migrant worker jobs.
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