China Labour Bulletin is quoted in the following article. Copyright remains with the original publisher
7 July 2013
By CHAO DENG And COLUM MURPHY
RUGAO, China—An anxious shipyard worker named Li and the deserted shops around him offer a glimpse of the tough choices that many of China's most bloated industries present to Beijing.
The 46-year-old Mr. Li, who gave only his surname, said he works for China Rongsheng Heavy Industries Group Holdings Ltd. 1101.HK -10.11% The company on Friday said it is struggling to pay employees and suppliers and is in talks with its bankers for additional credit. Rongsheng also is seeking financial help from the government and shareholders amid a prolonged industry slump.
Mr. Li, speaking in a quiet supermarket in this eastern Chinese city centered on shipbuilding, said he is waiting for months of back pay.
"If something happens within the family and there's no money, then there is no hope," said the father of two, who migrated from Yunnan province to work in the Rongsheng shipyard.
The struggles of Rongsheng, its workers and its hometown illustrate the hard choices China's government faces in trying to overhaul its economy. Ranked among the biggest three Chinese shipbuilders, Rongsheng offers a potential test of Beijing's willingness to allow a major employer to fail as China's economy restructures. While overcapacity in several industries threatens to become a drag on China's economic growth, many of the companies in those sectors are big employers, important to social stability in their communities.
Early last week frustrated workers blockaded the gates to Rongsheng's Rugao shipyard demanding that the company pay unpaid salaries for April and May, according to workers interviewed over the weekend. Mr. Li said many workers are talking about halting work again in August if overdue salaries aren't paid.
"It is always important for us to be deeply concerned about the welfare of our workers," a Rongsheng spokesman said, declining further comment.
China's slowdown—the economy grew at a 7.7% annual rate in the first quarter, compared with 7.9% in the fourth quarter—appears to be fueling labor tensions. China Labour Bulletin, a labor-rights group based in Hong Kong, said 201 labor disputes took place in China in the first four months of this year, almost double the figure a year earlier.
"China's credit crunch, a lack of export orders and the general economic slowdown have made the problem worse over the last couple of years," said Geoffrey Crothall, a spokesman for China Labour Bulletin. "When orders dry up, workers are often the first ones not to get paid."
Rugao is feeling the effects.
Across the street from the shipyard's main gates, an ad hoc town had sprung up to serve the once bustling facility, which at its peak employed around 28,000 people. A company representative last week said that its workforce now has about 12,000 people.
On a street near the shipyard over the weekend, the majority of storefronts were locked up and windows taped over. Few customers hung around the remaining restaurants and stores, which sell items ranging from household appliances and company uniforms to train tickets for workers to return to their hometowns.
"Business has declined by 67% this year. We can't even afford the rent," said barbershop-owner Yu Zhaoqiao, who moved to the neighborhood four years ago. "At one point, we had 13 on staff. Now it's just me."
Mr. Yu has converted one of his two rooms into an electronics shop because there weren't enough barbershop customers, but he says the entire operation will close if business doesn't improve.
Upstairs from his shops, dormitories that once were filled with Rongsheng workers appear empty. "Now it's the rats that live there," Mr. Yu said.
A man who gave his surname as Chen said he and his friends have invested hundreds of thousands of dollars of their own money and bank loans into the supermarket since its opening last September across the street from the shipyard.
"Business has not been good since the beginning of the year," the 34-year-old said. He said nearby mom-and-pop shops starting closing in March and so, too, will his supermarket if the Rongsheng shipyard shuts down. "We wouldn't be able to find workers to hire even if we wanted to" because most of his employees were wives of Rongsheng workers, he said.
A Rongsheng contract worker with the surname Wu said his salary was between 4,000 yuan and 5,000 yuan, or roughly $650 to $800, a month. "We're a lot less busy, than before," said Mr. Wu, 40. "We used to work Saturdays and Sundays, and now we never work on weekends. Last year it was at least 30 days a month."
He said he has got some odd jobs to tide him over until he gets his back pay and that he planned to stay in the area until the Rongsheng issue was resolved. "It's not easy to get your salary if you leave," Mr. Wu said.
Back at the supermarket, Mr. Li, the Rongsheng worker from Yunnan, already was thinking of an alternative. "If the shipbuilding industry is not good, maybe I can go work at a shoe factory," he said.
—Dinny McMahon contributed to this article.