Wall Street Journal: Strains Show in China's Job Market

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

11 June 2013

BEIJING—A wave of strikes and worker protests in China's southern export belt is a fresh sign that slowing growth and rising wages have started to pinch the labor market on the world's factory floor

China Labour Bulletin, a Hong Kong-based labor group, has recorded 201 cases of labor disputes, including strikes, in the first four months of the year in China, almost double the number of cases in the same period last year. In the export hub of Shenzhen alone, 17 cases have been recorded.

China's factories, which have been key components in its export-driven growth of the past decade, are under pressure from rising wages, sluggish demand at home and abroad as well as a stronger yuan. Some are shutting their doors or moving deeper into China's interior, or in some cases to other countries, to hold down costs, often with little compensation for workers.

A survey of more than 4,000 employers by human-resources consultancy Manpower Group found that the net employment outlook deteriorated to 12% in the second quarter, down from 18% in the first, and the lowest level since the end of 2009. The net employment outlook is the difference between the percentage of firms anticipating adding workers and the percentage planning to reduce head count in the quarter ahead.

China's leaders have so far resisted pressure to shift economic policy into stimulus mode. In his summit meeting with U.S. President Barack Obama, President Xi Jinping suggested he was comfortable with the slower pace of growth, according to a government website. But if fraying labor markets trigger rising social unrest, that calculus could start to change.

Still, the situation doesn't so far appear as bad as at the end of 2008, when the global financial crisis triggered a wave of bankruptcies and pushed tens of millions of Chinese workers out of jobs. Then, the prospect of mass unemployment was part of the reason for a massive stimulus package that helped China maintain rapid growth.

When workers of the Jinshuntai Arts Factory came back from China's Labor Day holiday in May, they saw a notice on the factory gate saying the plant in Shenzhen had been closed due to "management difficulties." There was no word on compensation for workers, according to former employee Li Geming.

"I've been working here for 15 years. I just want my compensation for working all these years," said 45-year-old Mr. Li, who had been employed at a company warehouse.

Jinshuntai Arts, set up in 1992, produced a range of toys and Christmas decorations, according to the website of the Shenzhen Municipal Market Supervision Administration. It is owned by Taiwan businessman Zheng Rongwen, the former chairman of Shenzhen's Taiwan Merchant Association. He didn't respond to calls on his cellphone, which subsequently appeared to have been turned off, and employees at his office in Taiwan said they hadn't been in touch with him.

More than 200 former employees gathered at the plant on several occasions to protest the sudden closure, most recently on May 20. But the dispute remains unsettled, said Mr. Li, one of the many migrant workers who have been drawn to the factories of south China from their homes in the interior.

The Shenzhen Federation of Trade Unions said it has already intervened in the dispute but didn't give further details.

China's gross domestic product expanded 7.7% in the first quarter from a year earlier, not bad by global standards but below the norm for China. Economic growth was 7.9% in the fourth quarter of 2012, and economists have been cutting their estimates of growth for this year.

The latest economic data have added to the gloom: Export growth fell to 1% year-to-year in May—pointing to weak demand for the goods produced by many of China's coastal factories.

As export demand slows, Factories are also becoming less competitive. The average monthly wage for migrant workers at the end of 2012 was 2,290 yuan ($374), up 11.8% from 2011, according to official data.

The yuan has also risen strongly against the dollar, hitting sales of exporters and squeezing their profits.

Some smaller firms have left Shenzhen for nearby cities where labor and land are cheaper. Some of the labor disputes arose when workers refused to move.

Shenzhen Grand Best Furniture, which once had about 60 workers, has moved to Huizhou, a smaller city about 68 miles from Shenzhen, according to current and former workers.

A former worker, Xie Shuixian, 46 years old, said he had been making couches for more than a year at the factory when it moved away. He said workers had protested the move but had since accepted a settlement.

"There's no way we can stop them" from moving, Mr. Xie said, saying he received two months of back wages and a small settlement of 1,000 yuan as compensation.

The company's human-resources officials didn't answer phone calls.

Not all the signs on China's labor markets are negative. Continued strong increases in wages point to strong demand. May data from Zhaopin.com, a leading recruitment website, shows a record number of new positions posted. That suggests that outside the factory sector, the hiring picture is stronger.

Still, experts say that trouble for China's blue-collar workers is the shape of things to come.

"As China's growth potential drops and labor costs rise, the number of labor disputes will undoubtedly increase in the future," said Liu Cheng, a labor-law expert at Shanghai Normal University.

—Liyan Qi

A version of this article appeared June 11, 2013, on page A14 in the U.S. edition of The Wall Street Journal, with the headline: Strains Show in China's Job Market.

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