Financial Times: Shenzhen factories shed 50,000

Social unrest: hundreds of workers at a toy factory in Dongguan ransack offices on Tuesday in a dispute over severance pay

Factory closures in China’s largest export centre have claimed 50,000 jobs this year as companies “face grimmer challenges than in the Asian financial turmoil in 1998”, the mayor of Shenzhen said on Wednesday.

Xu Zongheng said 682 factories had stopped production or closed this year in the special economic zone, which has been China’s leading exporter since 1992.

While there has been anecdotal evidence of factory closures and labour unrest in southern Guangdong province, which accounts for a third of the country’s exports, estimates from senior government officials of closures and resulting job losses are rare.

“Of the 50,000 [laid-off] workers, many are migrants,” Mr Xu told reporters in Shenzhen. “Some of them now work for other companies in Shenzhen, some have become entrepreneurs and others have gone back to their hometowns.”

Last week, Yin Weimin, minister for human resources and social security, identified “stabilising employment” as a government priority. On Tuesday, the World Bank cut its China growth forecast for 2009 to 7.5 per cent, below the 8 per cent many officials believe is needed to provide enough jobs each year.

Of the 8.6m people who live and work in Shenzhen, which borders Hong Kong, less than 25 per cent are classified as “permanent residents” entitled to preferential medical and education benefits. China Labour Bulletin, a Hong Kong-based worker rights lobby, cites figures from the city’s family planning bureau that suggest there could be another 6m unregistered migrants in the city.

This imbalance, which is common in towns across Guangdong’s manufacturing heartland, has raised the spectre of mass unemployment and social unrest as the global financial crisis damps consumer demand in China’s key export markets.

On Tuesday, hundreds of work­ers rioted outside a toy fac­tory in neighbouring Dong­guan. According to a report in the official Guang­zhou Daily, workers ransacked the factory’s offices and overturned police vehicles in a dispute over severance pay.

Earlier this month Liu Zhigeng, Dongguan party secretary, said that 627 companies had closed in the first three-quarters of the year, compared with 908 in the whole of 2007. “The media always exaggerates how many companies have closed in Dongguan,” he complained.

Mr Xu, who also noted that “closures happen even without a financial crisis”, did not provide comparative figures for factory closures and worker lay-offs last year. But he did promise to help workers and exporters navigate the current crisis.

“As a local government, we will fulfil our responsibilities and safeguard workers’ legal income,” the mayor said. “If companies don’t pay workers on time, we will help them get their money or use our salary bail-out fund to pay them first. We truly appreciate the contribution migrant workers have made to Shenzhen’s development.”

Mr Xu also noted that he had assumed leadership of a weekly economic analysis meeting, normally chaired by a vice-mayor, in an effort to cut red tape, lower taxes and reduce administrative fees for companies operating in the city.