The tide turns in Sichuan: Rural labourers find opportunities closer to home

21 August 2012

Sichuan, the Chinese province perhaps most synonymous with the export of rural labour, now has more rural labourers employed at home than in other provinces. In the first half this year, there were 10.9 million rural workers from Sichuan employed inside the province, up 23.7 percent year on year. By contrast, there were 10.1 million rural migrants employed outside the province, down 4.1 percent year on year, according to official statistics.

Sichuan now joins the other well-known labour exporting province, Henan, in having more rural labourers at home than away, giving further weight to the view that we are seeing a significant regional rebalancing of labour in China.

And it is a trend that many workers welcome. One rural labourer from Hubei who had recently returned home pointed out that there was no longer a substantial difference between wage levels close to home and wages in the coastal provinces. Moreover, he said, he now had more time to spend with his children and elderly parents.

A sound equipment salesman from Hunan who has been working in Shenzhen for a year and earns around 3,000 yuan a month told CLB that, although he can save a lot of money in Shenzhen, he does not feel at home in the big city.

“When you stand on the busy streets and watch the passers-by, you feel the income gap, the different social classes and values. It doesn’t give a firm footing to a worker like me,” he said. “If my hometown has the same development opportunities, I would definitely go back.”

Inland provinces such as Sichuan and Guizhou, amongst others, have already established themselves as a new engine for economic growth in China and they are expected to maintain that status in the future. In the first half this year, Guizhou and Sichuan registered 14 percent and 13 percent growth respectively, against 7.4 percent growth in Guangdong and 7.2 percent growth in Shanghai, both below the national average of 7.8 percent.

Fixed asset investment in China’s central and western regions has also grown faster than in the east. They saw 25 percent and 24.2 percent growth year on year respectively in the first seven months this year, compared with 19.2 percent growth in fixed asset investment in the eastern region.

Francis Cheung, head of China/HK strategy at CLSA, said the major strength of inland provinces in attracting investment is that the government is putting more money into infrastructure development and more migrant workers are coming home, turning inland provinces into low-cost and competitive economies.

“Although overall infrastructure growth in China has been declining rapidly as the government spent so much money in 2009 and 2010, new infrastructure spending is mostly in central and western provinces and these two regions are going to get a larger share of investment spending from China in future,” said Cheung.

Investment incentives in Sichuan, for example, include more favourable tax, land, mining and bank lending policies for both domestic and foreign enterprises. These policies have already attracted major Taiwan companies like Foxconn, Compal and Wistron, as well as their suppliers, who are eager to move inland to cut production costs amid the global economic slowdown.

Foxconn, the world’s largest electronics manufacturer, said back in 2010 that it would cut the number of employees in Shenzhen from 450,000 to 300,000 and transform the Shenzhen plant into to a research and development, pilot production and logistics centre. In the same year, it opened its iPad plant in Chengdu, the provincial capital of Sichuan.

Foxconn chairman Terry Guo said the plant plans to achieve an annual output of 100 million iPads by 2013 and recruit 500,000 workers by 2015. There are currently around 80,000 workers in Foxconn, about one fifth of the total number of new jobs created by major investment projects in Chengdu last year, according to statistics from the Chengdu Human Resources and Social Security Bureau.

For an entry-level worker, Foxconn is paying a basic wage around 1,550 yuan a month in Chengdu versus 1,800 yuan in Shenzhen. Most rural workers from Sichuan don’t care too much about this 250 yuan gap as their living expenses are relatively low and they can enjoy a better quality of life closer to home.

Not only are rural workers being attracted by job opportunities close to home, they are also setting up new businesses in the province with the skills and experience gained from years of working in coastal provinces. Statistics from Sichuan showed that in the first half this year, migrant workers who returned to Sichuan had set up more than 2,000 businesses with a total revenue over ten billion yuan.

However, Francis Cheung also had a word of caution: If land and labour costs in central and western provinces continue to rise rapidly, factories would be unwilling to relocate there due to their inferior logistics network.

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