Analysis of the Honda strike in the FT, Washington Post and Guardian

Workers on strike on Thursday at a Honda plant in Guangdong province voice their protest in the latest face-off between management and labour in China

If Li Xiaojuan has her way, the rest of the world will no longer be able to take cheap Chinese labour for granted. The 20-year-old, who works on the production line at a Honda components factory in Foshan, a manufacturing city in southern Guangdong province, was one of the few workers at Honda Automotive Components Manufacturing to take a public stand in an industrial action late last month.

Ms Li issued an open letter on behalf of the 16 employees chosen by workers to negotiate on their behalf, during a strike that closed the Japanese carmaker’s China operations for a full week. “We must maintain a high degree of unity and not let the representatives of Capital divide us,” the letter urged. “This factory’s profits are the fruits of our bitter toil ... This struggle is not just about the interests of our 1,800 workers. We also care about the rights and interests of all Chinese workers.”

Ms Li and her colleagues secured a 25 per cent increase in their basic monthly salary to Rmb1,900 ($280, €230, £190), in a victory that inspired copycat action at two other Honda suppliers in the province. Although salaries have been rising steadily in recent years, with a hiatus in 2008-09 during the global financial crisis, the successful industrial action signalled that workers now are prepared to fight for double-digit rises.

This raises the wider question of whether the generous margins for manufacturers predicated on a seemingly infinite supply of low-cost Chinese labour are now under threat.

For now economists say that while China is one stage in the production chain for many of the world’s consumer goods, the limited amount of value actually added by the country’s factories suggest that any rise in costs could have limited impact on consumers. Although China has been increasing the sophistication of its production, much of its output still relies on low value added assembly.

“For the vast majority of Chinese exports, particularly consumer electronics, there will be almost no effect on the consumer at the end of the supply chain,” says Nicholas Lardy of the Peterson Institute for International Economics. He adds that labour generally represents only around 5 per cent of the retail price of consumer electronics in the US and so even a 30 per cent rise in wages in China would have a negligible impact.

But this does not mean that the labour disputes will be without consequence. Tim Lawrence of UK-based PA Consulting Group, says the potential interruption of supply chains from any prolonged labour unrest in China was likely to be at least as damaging as the rise in wage costs.

“A strike will be much more damaging to a company sourcing from a single factory in Asia than a small increase in costs,” he says. “If I were a company in that position I would be questioning the robustness of supply chains.”

Beneficiaries of such shifts in thinking, according to others in the supply chain industry, include a range of other low-cost countries with a decent technological infrastructure, including Russia, Vietnam and parts of north Africa.

Stefano Bertasi, of the International Chamber of Commerce, says there have been some reports recently of European companies bringing outsourced operations closer to the home market because of concerns about reliability and quality rather than cost.

Back in China, labour activists are emboldened. “I am happy to see more workers know how to protect themselves and are brave enough to express themselves,” says Huang Weimu, a Foshan-based law student who has worked under cover at local factories, documenting abuses.

“Government officials get salary increases every year but most workers in [Guangdong] only earn about Rmb1,000 [a month],” adds Liu Feiyue at Livelihood Watch, an activist website. “This isn’t enough with inflation. There also isn’t a well established system to protect worker rights.”

While events at Honda are unprecedented in terms of their effect on a major multinational employer, it is Foxconn that has focused attention on the rising anger of China’s proletariat.

The world’s largest contract electronics manufacturer, whose clients include Apple, Dell and HP, has been shaken by a high-profile series of suicides at its “factory town” in Shenzhen, the special economic zone bordering Hong Kong. The most recent of these tragedies, last month, prompted Terry Gou, Foxconn boss, to rush to the facility to soothe the nerves of the 270,000 employees and manage the public relations disaster. The Taiwanese company subsequently announced it would more than double wages for workers who passed a three-month qualifying period.

The sheer size of a factory such as Foxconn’s in Shenzhen, combined with a strict approach to human resources management, mitigates against independent union activity. “The place is almost militaristic and kind of scary,” says a Hong Kong-based businessman and client who has toured the campus. For his part, Mr Gou has promised to instill a kinder, gentler corporate culture where workers no longer feel they have to work long hours of overtime to secure a decent wage.

Han Dongfang, a Hong Kong-based worker activist and founder of China Labour Bulletin, says such unilateral concessions are not enough to restore calm . He notes the apparent contrast between Foxconn’s first-rate physical infrastructure – amenities include cinemas and an Olympic-sized pool – and the despair clearly felt by some employees.

“The only thing that can change this is to have a real trade union go through the collective bargaining procedures and say, ‘Sorry, the piece rate is that low and you ask us to make that many pieces per hour?’” says Mr Han, who was imprisoned for his efforts to organise workers during the 1989 Tiananmen Square protests.

That is exactly what is happening at Honda’s three strike-affected factories. None has a workforce of more than 2,000, which made it relatively easy for staff to organise outside the auspices of the All-China Federation of Trade Unions.

The strikes have had little economic impact beyond Honda’s own Chinese supply chain. The political fall-out also remains uncertain, as the central government in Beijing has neither supported nor crushed them. The government is choosing to maintain a wary silence, allowing local officials and ACFTU chapters handle events one factory at a time. At Honda’s transmission factory on May 31, ACFTU representatives, distinguished by their yellow baseball caps, skirmished with uniformed staff. Images of beefy strike-breakers pushing and shoving the sons and daughters of Chinese peasants made a striking image. ACFTU officials in Foshan declined repeated requests for comment.

The ACFTU’s Yellow Hats were not, however, able to interrupt the Honda workers’ momentum. The industrial action began on May 17 at Ms Li’s transmission factory. The strike garnered international attention a week later, after forcing the closures of Honda’s joint-venture car plants it supplies in Guangzhou, Guangdong’s capital, and the city of Wuhan in central China. In this respect it was an affront to the state as much as to the carmaker, whose joint-venture partners are government-owned enterprises.

The transmission factory strike was resolved on June 4, allowing Honda to resume operations. But just two days later, reflecting the interconnected and overlapping nature of auto industry supply networks, workers at another Foshan factory that makes exhaust components went on strike, again forcing the Japanese carmaker to suspend production. And just hours before workers and management at the second Foshan factory appeared to reach a temporary resolution on June 9, their colleagues at a separate Honda door locks factory downed tools as well.

There is no evidence that the workers at these factories co-ordinated their activities. Such a development would surely trigger a clampdown from central government, which permits isolated protests – indeed, strikes are a routine occurrence all over the country – but will not tolerate any attempt at wide-scale organisation.

Recent events at Honda and Foxconn have turned the spotlight on disturbances that would other­wise attract little attention at home, let alone from the global media. These include a brief protest on June 6 at a Shenzhen factory belonging to Merry Electronics, a Taiwanese audio electronics-maker. There were also clashes between police and workers at KOK International, another Taiwan-owned factory near Shanghai, two days later.

Workers are, however, acutely aware of strikes at other factories from reports in official media, blogs and internet chat forums. Guangdong newspapers were initially allowed to cover the first strike at Honda. At its height, most of the media camped outside the transmission factory were from local outlets. While their coverage was eventually reined in, it was too late to put the union genie back in bottle. “Power lies in unity and hope lies in defiance,” workers at KOK International wrote in a petition letter. “Witness the allowance we got at the end of last year and the successes at Honda and Foxconn, which are good examples for us.”

For all their recently discovered boldness, China’s workers are fully aware of the dangers they face as the labour movement enters new ground. At rallies, many Honda strikers hid their faces with surgical masks and rarely agreed to divulge their full names.

Even Ms Li, spokeswoman for the transmission factory’s independent worker representatives, declines a request for a face-to-face interview, saying the wage agreement with management included an undertaking not to speak to the media. “We are busy with production right now,” she says. “But everybody should protect their own rights, and sooner or later we will start to build our own independent union.”

Like guerrillas after a successful skirmish, staff at Honda’s transmission factory will probably continue to lie low – at least until next year’s wage discussions. But they have already inspired workers across the country and, many argue, done the government a service in the process. “I think more strikes are on the way,” says Mr Liu of Livelihood Watch. “But they won’t destabilise society. On the contrary, they are outlets for worker anger. Social stability will be threatened only if the government tries to limit these actions.”

Chinese workers marched out on strike at a Honda parts supplier today as the swelling wave of labour unrest in the workshop of the world raised the prospect of fairer wages for local employees and an end to cheap products for western consumers.

Following industrial action this week at foreign-invested plants in Jiangxi and Xian, labourers at Honda Lock in Zhongshan, Guangdong province, demanded a pay rise and improved collective bargaining rights.

About 500 workers demonstrated outside the gates of the Sino-Japanese joint venture and said they wanted to elect their own representatives rather than accept the so-called "enterprise union" imposed on all factories in China by owners and the communist party.

Riot police blocked the road and management representatives used loudhailers to warn of "serious consequences" before the crowd dispersed without a resolution.

Workers want greater negotiating rights and a rise in the base salary from 1,500 yuan (£100) a month to 2,000 yuan, but they say the management has conceded little ground.

"They have no sincerity at all. They only agreed to increase wages by 100 yuan. We're very disappointed," a 27-year-old migrant worker from Guangxi province told the Reuters news agency. "If we don't resolve things by tomorrow, we probably won't go back to work for another week."

The rally is the latest of at least five strikes at foreign firms in the past two weeks. Honda has been the focus of most unrest. Two suppliers – of exhausts and transmissions – have just resumed production after earlier stoppages.

Honda said employees of Foshan Fengfu Autoparts agreed to a pay raise of 366 yuan, an increase of about 23% on the previous monthly salary.

Japan's Brother Industries also announced the end of a week-long strike that halted assembly lines at its sewing machine factory in Xi'an, the provincial capital of Shaanxi.

While Japanese companies appear to be the most affected, they are not alone. This week, workers at a Taiwanese rubber products factory in Shanghai rallied for higher wages. Late last month, the South Korean carmaker Hyundai promised a 25% pay rise to curtail a strike by 1,000 employees at a supplier in Beijing.

The electronics company Foxconn, which has been hit by a spate of suicides, has promised to increase salaries at its Shenzhen plant by nearly 70% if workers meet certain conditions.

Industrial unrest has broken out sporadically in China for many years but labour activists say the latest cluster of strikes represents a new trend as workers organise more effectively and ask not just for pay rises but structural reforms allowing them to engage in collective bargaining. In several cases, workers have clashed with the institutionalised unions that are supposed to represent them, but are actually often appointed and funded by managers, and beholden to the governing Communist party.

In the latest strike, employees hired a legal consultant – Professor Chang Kai of Renmin University – to advise them in negotiations. He framed the unrest as a traditional class conflict.

"Workers now realise that they can't protect their rights as individuals so their awareness of the need for collective action has increased," Chang told the domestic media. "In the case of Honda, the behaviour of the unions makes us wonder what position unions should take in the conflict between workers and capitalists."

According to labour activists, strikes have been on the increase since a major demonstration in 2008 by workers at Yantian port in Shenzhen, which is owned by Asia's richest man, Li Ka-Shing.

Liu Kaiming, director of the Institute of Contemporary Observation, a labour rights group in Shenzhen, said: "That was the tipping point because they demanded their own representatives. Workers in China are becoming more and more powerful. They are not just asking for higher wages; they are asking for an elected union. Their appeal is not just about individual issues – they are asking for collective rights and benefits."

Demographics have strengthened workers' bargaining power. A bulge in the working-age population is tapering off and a new generation of rural migrants are less willing to accept the poor conditions that their parents endured.

This has prompted speculation that the era of cheap Chinese labour may be coming to an end, which could add to inflationary pressures across the globe, reduce the competitiveness of mainland products, and make the government in Beijing more reluctant to increase the value of the yuan.

Foreign labour rights activists, however, were cautious about predicting a transformation in the balance of power between labour and capital.

Geoff Crothall, of China Labour Bulletin, said: "It is too early to say this is a tipping point. Millions of workers are still willing to work on a low wage out of economic necessity. There is still an oversupply. But the trend is clear: more workers are unwilling to work for low pay in bad, often dangerous, conditions. They are more discerning than in the past and more willing to face up to management."