Foshan, China: Add another entry to the list of worries for the global economy and financial markets: labour unrest in China.
Rapidly rising industrial wages are beginning to allow China’s workers to share in their country’s rising prosperity. The question is whether these gains can be maintained and even increased without disrupting supply lines to companies around the world, and without discouraging much future investment by Chinese and global companies alike.
The biggest eye-opener for multinationals in China recently has been a nine-day-old strike at a sprawling Honda transmission factory in Foshan, around 100 miles north-west of Hong Kong.
The strike, which has forced Honda to suspend production at all four of its joint venture assembly plants in China, has shown that authorities are willing to tolerate work stoppages temporarily, even at high-tech operations on which many other factories depend.
Chinese policymakers are trying to let wages rise to create the foundations of an economy driven by domestic demand, without derailing the export machine that has produced the world’s strongest economic growth over the last three decades.
Even before the strike, manufacturers and buyers of low-cost products were actively seeking alternatives to China, such as Vietnam and Cambodia, said Richard Vuylsteke, president of the American Chamber of Commerce in Hong Kong. “They’re looking very seriously, and we’re seeing that in apparel and footwear,” he said. “A lot of our members are seeing appreciating wages.”
Honda has been making increasingly generous—or perhaps desperate— offers to settle the strike. The company is ready to increase total compensation by close to 50%, according to crumpled-up copies of the offer provided by striking workers.
Roughly half of the 1,900 workers are recent hires from high schools and vocational schools who are paid training rates of just $132 (Rs6,138) a month, payslips showed. More experienced workers at the three-year-old factory earn up to $220 a month.
Honda’s offer would raise total compensation for trainees to $202 a month, including benefits such as a new food allowance; older workers would get slightly smaller raises. The strikers rejected the offer because nearly half of the raises consisted of increases in benefits that might be revoked later. The strikers are demanding an extra $117 a month, all in cash.
After two days of allowing surprisingly extensive coverage by state-controlled media, the authorities on Saturday imposed a blanket ban on domestic coverage, reverting to their usual policy of hushing up labour disputes.
Labour advocacy groups say they hear of frequent strikes in China, with work stoppages occurring somewhere every day. But strikes are typically hushed up and are often resolved in a day or two, either with the police or through pressure on employers and workers to resolve differences.
Honda is not alone. Foxconn, a giant electronics manufacturer in nearby Shenzhen, said on Friday that it would raise wages by around 20% after being deeply embarrassed by a series of suicides by workers this year.
One surprise of the Honda strike is that it involves labourers whose wages appear to have already roughly doubled in the last five years: blue-collar workers in export factories in the Pearl River delta region around Hong Kong.
By contrast, the wages of young college graduates have declined as China has expanded its universities and built new ones, creating a surplus of more highly educated workers.
Partly because many young Chinese now go to university and partly because of a declining birth rate, the number of Chinese available for factory work is falling short. That is producing higher wages for blue-collar workers and giving them leverage to demand even more, as the Honda strike shows.
©2010/THE NEW YORK TIMES