China Economic Review: Demographics and downturn combine to spark a spike in strikes across China

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

Monday, November 10, 2014


Credit, it turns out, is the lifeline of Chinese labor.

New credit rose to a three-month high in September as the People’s Bank of China sought to bolster lending, injecting half a trillion yuan into the country’s five largest banks. How much of this actually reached China’s workforce in the end is unclear, but it wasn’t enough to tamp down a growing number of strikes in sectors historically plagued by wage problems and middlemen eager for a cut. Strikes doubled in the third quarter compared to the same period in 2013, totaling 372 incidents, with 165 in September alone, according to records kept by the Hong Kong-based group China Labor Bulletin (CLB). The strikes have broadened geographically and across industry sectors throughout China this year – particularly construction, where workers face increasing arrears thanks to the country’s ongoing property-led downturn.

The rise in protest frequency and broader distribution reflect major changes in Chinese labor that will reverberate throughout the global economy for years to come. The domestic labor pool continues to shrink and wages continue to rise as investment and provincial policies shift in reaction to a changing economy that needs serious readjustment. Whether China proves up to that task will depend in no small part on how mobile, networked and rights-aware its current cohort of workers is, and on how willing authorities are to allow labor to slip, even slightly, from their grip.

More places, more often

China Labor Bulletin’s strike map, the most comprehensive independent resource on mainland strike activity, showed evidence of major trends for the third quarter in the frequency, location and sector of labor strikes. In modern times strikes have tended to peak ahead of the lunisolar new year in January or February, when manufacturing and construction workers are typically paid for their work on a project. This year, however, strikes have only increased since then.

While Guangdong province remained the heaviest hitter at 71 strikes, its share of the total continued an ongoing relative decline, with Zhejiang, Jiangsu, Shandong and Sichuan all host to 20 or more strikes apiece from July to September of this year. Goffrey Crothal, a spokesman for CLB, said that while Guangdong and other coastal provinces had long been the heart of organized labor in China, “as the development of inland provinces accelerates and there’s a relocation of manufacturing from coastal areas to inland areas you’re seeing more and more disputes arising in those areas as well.”

Mary Gallagher, an associate professor of political science at the University of Michigan and director of the school’s Center for Chinese Studies, said that while she believed the strikes recorded by CLB were actually happening, it was important to consider whether the increase in figures was due to more people reporting strikes, rather than an actual increase in the total. However, she said, “I think now we can have some confidence to say that it does seem like strikes are increasing.” Gallagher also noted that that some of the high-profile strikes of the past few years weren’t always a matter of workers taking advantage of a better bargaining position gained through labor shortages and protective laws, but rather reactions to mergers and bankruptcies that had prompted project or factory shutdowns.

Crothal emphasized that a softening of China’s economy and lack of credit this year had provided ample impetus for workers to take action by increasing disputes over non-payment of wages, which accounted for nearly half the number of strikes recorded this year. While tightening credit had deprived many workers of payment in the last nine months as managers used more of available funds to stay afloat, he suggested credit, if loosened, would likely be intercepted by middlemen and managers: “Workers are always the last to be paid.” Under the current system workers often don’t get paid, so they strike until they do. There is no negotiation phase to speak of before that.

Behind many of these contradictions lies the world’s largest union by numbers, which holds a monopoly on representation of the country’s workers, and has consistently failed at meaningful mediation on their behalf to the point that its role is essentially ceremonial. There has not been a legally protected right to strike in China since 1982, when Deng Xiaoping struck it from the constitution as the country hit the capitalist road. That left the duty to protect workers’ rights with the mainland’s only sanctioned union: The All-China Federation of Trade Unions (ACFTU).

That the ACFTU is essentially worthless in mediation between labor and management can be seen in the growing strike numbers of recent years: Previously concentrated in China’s South and East, but now spreading nationwide. Because the ACFTU can be reliably expected to side with management in the vast majority of disputes, laborers have become experts in uniting as on-the-spot unions that can effectively strike to gain leverage. These are formed and disbanded as necessary, often with guidance from labor rights groups that operate under constant pressure from local authorities keen on keeping wages down and GDP up.

Go West?

Low worker wages are used as a selling point for China’s inland cities trying to attract factories away from the coast, but the past five years have seen changes in income levels across the country increasingly undercut this sales pitch thanks to a shrinking labor pool and rising wages.

Labor in China has historically been from west to east: The National Bureau of Statistics pegged total rural laborers working in cities at about 262 million in 2012, with over 66% of migrant workers from inland China employed outside of their home province. However, in recent years there has been some pullback thanks to a narrowing wage gap between inland and coastal provinces. In 2012 the average wage in western China was RMB2,226 a month, only RMB60 less than in eastern China.

“The labor market is pretty integrated right now, and labor is pretty mobile,” said Albert Park, professor of economics at Hong Kong University of Science & Technology. “If there’s a huge wage gap, migrants move to the high-wage area.”

The past five years have seen income rise across regions in China at similar rates. The trend has been helped along by a shrinking working-age workforce, Park said, which decreased by 2.4 million last year according to the National Bureau of Statistics. “Assuming reasonable growth environment globally and domestically, I think you can expect wages to continue rising,” he said. Combined with the higher cost of living near the coast there is now less incentive for laborers in some sectors to stray so far afield. Still, average wage comparison does mask the broader range of salaries – high and low – paid to workers, which varies at the provincial or even county level.

Minimum wage, meanwhile, fails to communicate how much workers really make, though it can still direct them to or away from a given region. A Wall Street Journal investigation in September found electronics manufacturers in Chongqing – the golden child of China’s “Go West” campaign meant to direct investment inland – resorting to forced student labor to fill positions which had been created by the drive inland, but left unoccupied by migrant workers who preferred the higher minimum wages offered on the coast. Thanks to a 2010 decree by the Ministry of Education stating that vocational schools have to supply students to fill labor shortages, Chongqing-based factories for brands including Apple and HP are now filled with “interns” who have to work low-wage assembly lines, sometimes for up to a year just to graduate.

For manufacturers a move to the interior now entails striking a tricky balance between the sometimes slim benefits in terms of labor expenses and downsides including transport cost for goods and the lack of logistic and infrastructural establishment. Cities like Chongqing are footing the bill for such discrepancies in order to convince manufacturers to make the move, but times are increasingly tough for the property sectors of many other provinces out west. The post-crisis boom days, when the country was awash in stimulus money, are long over. As stimulus goes, so goes construction, and with it construction workers.

That recession of investment has provided catalyst for trouble in the construction sector, which in the last half-decade became a substantial source of migrant employment. Thanks to massive stimulus spending after the 2008 financial crisis, housing and infrastructure accounted for more than 17% of migrant employment as of 2012. While manufacturing still employed more than a third, the relatively low percentage of manufacturing strikes located in the west compared to the east seems to suggest that the sector has not yet become a core driver of inland economies. But construction strikes in the west have accounted for over 11% of the total this year.

The 2008 stimulus gave a huge boost to construction, Gallagher said, “and if that sector has become the dominant sector in inland china – which it seems it has – then if that sector goes down, there’s definitely going to be labor instability coming out of that.” While the resulting infrastructure might prove beneficial in the long term, she said, in the short term it might not necessarily seem like a success if not supplemented by manufacturing.

In lieu of another broad stimulus, that seems unlikely based on recent trends in foreign direct investment in China. Between 2001 and 2010 manufacturing dropped from 66% to 47% of total FDI, while real estate grew to become the second-largest recipient at 23%, according to a report by the Economist Intelligence Unit. A recent breakdown of FDI by Ryan Rutkowski of the Peterson Institute for International Economics in September noted that while foreign investment in manufacturing had dropped US$4.2 billion, FDI in the services sector had grown nearly enough to make up for it. That bodes well for foreign investment China-wide, but less so for cities out west hoping for a second coming of quick GDP growth, hauled uphill on the backs of low-paid labor.

Social, if not socialist

Another contributor to the increase in strikes throughout China is social media, which when combined with low-cost smart phones (and the rising wages to buy them) has helped spread knowledge of strike techniques, working conditions and wages among a more wired workforce.

Messaging-networking platform Weixin (branded as WeChat abroad) serves as a go-to organizing tool among laborers that can quickly rally a group of workers to a cause and inform everyone involved about the latest developments. Labor activist groups, which provide guidance to mainland worker movements and essentially step into the role that the ACFTU refuses to fill use microblog-networking platform Weibo to spread word to a wider audience.

Geographically there is more adoption of social media in top-tier cities, and there is less internet penetration in provinces farther from the coast. But in the last few years nearly all provinces in the west crossed or came close to the 33% mark for net penetration; among workers, the smart phones necessary to use networking apps are ubiquitous enough to have real impact even if not everyone on the assembly line has one. And while the last two years witnessed an unprecedented crackdown on online dissent, CLB’s Crothall said most of the accounts he followed to keep tabs on strike activity were all still fairly active.

Among the techniques spreading through these social vectors to the workforce at large is the practice of peaceful sit-ins, following deployment of the tactic by a group of jewelry workers in Foshan. Typically workers strike by hitting the streets and making some noise. “That has the advantage of attracting the attention of the authorities,” Crothall said. “It also has the disadvantage of attracting the attention of the authorities.” Protests sometimes escalate as managers are taken hostage or public order is disturbed, and police violence is often used to quiet things down.

But social media has now clued workers in to the fact that blocking traffic brings out truncheons and gets protesters thrown in the hoosegow. Instead, dissatisfied laborers have begun to simply occupy offending factories, reckoning that if they aren’t violent it will be harder for officials to find an excuse – or for hired toughs to incite violence – in order to justify a crackdown. Gallagher called the development “hugely significant,” and potentially a huge boon to the movement if the trend develops into a more concentrated effort to push for civil and political rights around labor issues. Whether authorities will let them is another matter.

Since Deng deleted the right to strike from China’s constitution in ‘82, the act has occupied a legal gray area that left authorities free to condone or condemn as they pleased. New rules for collective bargaining out of Guangdong may upend the status quo and, depending on how implementation there fares, find their way back to migrants’ home provinces.

In late September the Guangdong provincial legislature passed the Regulations on Enterprise Collective Consultations and Collective Contracts in the face of growing strikes throughout the export-oriented Pearl River Delta. The regulations, which come into effect on January 1, appear to hold employers’ feet to the fire by requiring them to hold talks with workers over matters including wages and working hours. But while an early version upheld workers’ right to strike if talks with employers failed, the final version not only removed that clause – it inserted one that effectively banned workers from striking altogether.

“The law doesn’t make anything better,” said Gallagher. She said the regulations were a reaction to strikes that resulted from the ACFTU’s inability to bargain on behalf of workers that avoided the core issue of a lack of independent unions. “It will probably further increase repression of strike activity, and probably will also further exacerbate labor tensions.”

As strikes spread across the nation to even central and western regions, the coastal province long home to more such protests than any other appears to be closing the door on the possibility of a more inclusive approach to labor. But with worker numbering fewer and organizing better, that might not be enough to stop them from busting it down.

Doug Strub contributed research for this article; map and charts formatted by Jason Wong

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