Financial Times: Daunting Departure

January travellers at Guangzhou: are their tickets one-way or round-trip?

From his post at Dongguan Eastern Long-Distance Bus Station, Xie Shaoning is witness to the world’s greatest annual human migration. During the chun yun, or “spring rush”, which occurs in the weeks surrounding China’s lunar new year, tens of millions of workers head home to their families.

The Chinese government estimates the country’s population of internal migrant workers at 130m. Of these, about 80m have gone so far as to leave their home province behind – typically moving from poor interior to richer coast – in their search for work and better futures for themselves and their children. The city of Dongguan, where Mr Xie oversees his transport hub, is one of the largest export centres in China’s southern Guangdong province, which has become known as “the world’s workshop”.

Last month, however, he began to notice that the migrant workers streaming through the terminal were not travelling as lightly as normal. Some were weighed down by television sets or even refrigerators. “Many have been laid off by factories and are taking all their belongings back home,” says Mr Xie. After the holiday, he suspects, “they may not return”.

China’s migrant workers form the base of the global supply chain. It is they who produce the cheap manufactured goods that American, European and Japanese consumers have come to take for granted. But the global financial crisis, with its depressing effect on consumption in the world’s richest economies, now threatens to rebound on China’s manufacturing class.

That could have damaging repercussions across China, irrespective of whether workers stay at home in large numbers or return to the south when the holiday season ends next month. Jobs in the export sector provide an important safety net for the country’s rural labourers; their factory earnings cushion poor agricultural communities in interior provinces. In an already sensitive political year – the government will ignore the 20th anniversary of the Tiananmen Square massacre in June and celebrate 60 years of Communist party rule in October – the last thing the authorities need is tens of millions of restive, underemployed factory workers with only subsistence farming on which to fall back.

The downturn is evident. In November, China recorded its first year-on-year export decline in seven years. Exports fell 2.2 per cent nationwide – with Guangdong recording a 5.1 per cent slide. As factory closures gather pace, fears are growing of a mass exodus back to rural areas that could struggle to reabsorb the workers. Wen Jiabao, China’s premier, has listed the job prospects of displaced migrants and new university graduates as his government’s biggest worries. His remarks last month coincided with a State Council directive ordering local governments to prioritise job creation for returning migrants.

ORIGINS OF MIGRATION:

Family affair:

The economic reforms initiated in 1978 by Deng Xiaoping freed China’s peasants from Maoist-era controls that had shackled them to rural communes. As factories proliferated in the Pearl River delta and other regions in the 1980s and 1990s, they attracted tens of millions of rural former labourers.

But with no entitlement to education or health benefits in coastal cities, many migrants are forced to leave their children behind in the care of elderly grandparents. It is this forced separation that has given rise to the massive lunar new year migration, as it is the one time of year when families can be reunited.

Some 20m migrants have found employment in Guangdong’s Pearl River delta area, on the assembly lines that produce one-third of Chinese exports. Their fate and intentions remain unclear, however, largely because the onset of the global financial crisis coincided with the tail-end of the annual manufacturing cycle. “October is the last deadline for the year,” says Ivan Ting, executive director for Kader, a Hong Kong toy manufacturer with operations in Dongguan. “You have to get [your products] on a ship by the end of October in order to get on shelves [in the US] by Thanksgiving.”

Most of the workers now heading home would have been departing in a few weeks anyway for lunar new year, which falls on January 26. “A 2,000-worker factory near my Dongguan office just closed,” says Zhang Zhiru, founder and director of the Shenzhen Chunfeng labour disputes centre. “Some factories stopped arranging overtime so workers could only earn their basic [monthly] salary of around Rmb900 [$132, £87, €97], which leaves very little after deducting living expenses. Many have decided to head home early.”

“Anyone who gets laid off in Dongguan in October is just going to go home for the holidays, remove themselves from the labour force and return in February,” adds Arthur Kroeber, managing director of Dragonomics, a Beijing consultancy. The government, he also notes, faced an arguably more daunting challenge in the 1990s, when the state sector shed 30m workers.

Nor has the outflow from the Pearl River delta yet been alarmingly heavy. Mr Xie, for example, characterises his bus station’s passenger flow as “normal”. Guangzhou’s main railway station, a big transit point for homeward bound workers, reported a 20 per cent year-on-year increase in passenger traffic for December – moderately above its natural trend growth of 10 per cent.

Anecdotal reports from government authorities monitoring the return migration in China’s inland provinces are inconsistent. While officials in Zhaotong, a city in Yunnan province, fret about the strain that returning workers have been putting on local food supplies, their comrades policing long-distance bus stations in impoverished Gansu province have recorded only a trickle of returners.

A straw poll of Roman Catholic priests in half a dozen poor inland parishes, where many residents have left home in search of work, found none who enjoyed a better attendance at Christmas mass because of an early exodus from the coast. “Not many people have come back early,” says Ye Yong, a priest in an area of Sichuan province hard hit by May’s devastating earthquake. “Some did return, but not because of the financial crisis. They want to reconstruct their homes.”

Official estimates of the number of migrant workers who have headed back early range from 4.85m to 9m. But in February, in whatever numbers workers flow back to coastal manufacturing zones, another wave of factory closures is thought likely to confront them. Local governments and courts will struggle to defuse the resulting tensions, especially at the beginning of the manufacturing season, when migrants will be expecting to recoup their holiday travel costs and then build on their earnings.

“Lean years will provoke more protests than the fat ones did,” says Jerome Cohen, an expert in the Chinese legal system at New York University’s School of Law. “What is going to happen when more and more factories close? Chinese workers have learnt that collective [protest] action is effective.”

Kader’s management recently learnt just how jittery China’s army of the employed is these days. In late November, workers ransacked an office at the company’s Dongguan factory after management chose not to renew 400 staff contracts. “We have to be careful who we keep. [We have to ask ourselves] ‘Are these the right people we want to have a tenured position with us?’ ” Mr Ting says.

The Beijing-recognised labour movement has apparently been told to take a softer line. Last year Han Dongfang, director of the Hong Kong-based China Labour Bulletin, was encouraged by the new-found aggressiveness of the official All China Federation of Trade Unions, which was not only unionising more and more companies but also striking collective bargaining agreements with the likes of Wal-Mart for the US retailer’s Chinese operations. Now he worries that ACFTU is being reined in because of the government’s concerns over the economic outlook. In November Kong Xianghong, vice-chairman of ACFTU’s Guangdong arm, told the official Southern Daily newspaper: “Since most companies are having a tough time at present, we will temporarily stop collective bargaining. It will be resumed depending on the economic situation.”

“ACFTU just stopped all bargaining to make sure the companies can make it through these difficulties,” says Mr Han, who was imprisoned for seeking to organise an independent union during the 1989 Tiananmen Square protests. “The financial crisis should be an opportunity for government and union officials to be more aggressive in terms of addressing problems at factories. Then there would be fewer street actions and conflicts could be avoided.”

But even with quiescent unions, factory managers are bracing themselves for their most challenging year ever, because of the downturn and a new labour contract law that makes it much harder to hire and fire workers – part of the problem encountered by Mr Ting at Kader. By the same token, the law also reduces the incentive for workers to jump from factory to factory, depending on which offer the most overtime.

“One of the things Pearl River delta companies have excelled in is ramping up for specific production runs,” says Michael Enright, a Hong Kong-based regional development and competitiveness expert. “It’s almost like the motion picture industry – everyone comes together for a specific project and then disperses.”

“In the past we planned for a highly volatile workforce,” agrees Mr Ting. “We would go from 6,000 to 9,000 back to 6,000. When they saw there would be less work, they would go to another factory. Going forward we have to be mindful that [headcount] might be more stable. We’re asking customers to give us orders [year-round] to level out revenues.

On the year ahead, “we are cautiously neutral”, he adds. “The slump is coming from the US but everywhere else is pretty good. It’s a bit scary. You see the news and it seems the whole world is melting down but it doesn’t show in our numbers ... It’s not the end of the world – or maybe I just don’t see it coming.”

SPRING RUSH: ANNUAL JOURNEY ECLIPSES BOTH THANKSGIVING AND HAJJ

During the 2008 spring rush, or chun yun, China’s overburdened rail network alone transported 196m passengers over the official 45-day travel period. Millions more travel home for the lunar new year holiday on long-distance buses or, increasingly, by air.

That average daily passenger volume of 4.4m on China’s railways compares with the approximately 2.5m Muslims who descended on Mecca last month for the five-day Hajj pilgrimage, which ranks as the world’s largest annual religious gathering. The Hajj, however, is by far the better known of the two migrations, thanks to its international character and the dramatic pictures it yields of white-cloaked faithful descending on the Masjid al-Haram mosque.

Marvel migrant? Checking Spider-Man dolls on a production line in Dongguan

The Thanksgiving travel period in the US offers a more appropriate comparison, given its continental scope and similar family focus. According to the Department of Transport, an average of 11m trips of 100 miles or more are made each day over a six-day travel window in late November. Unlike in China, however, more than 90 per cent of Americans travel to visit family in the relative comfort of their cars.

Last year’s Chinese spring rush, which climaxed in early February, shed some of its previous anonymity when snowstorms paralysed the country’s rail network and trapped hundreds of thousands of workers at the main railway station in Guangzhou, capital of the southern Guangdong province. The station is a main funnel point for migrants travelling in and out of the Pearl River delta manufacturing region. The Hajj-like spectacle of desperate crowds trying to push their way into the station became international news. That only one person died in the crush was a miracle.

The drama at the station last year highlighted Guangdong’s complicated relationship with migrant labourers, without whom the province’s economic transformation from rural backwater to manufacturing powerhouse in just 30 years would have been impossible. However, when united by a common grievance, they can also pose a potent threat to the “social stability” so craved by the Communist party.

While the next lunar new year begins on January 26, workers have been trickling home earlier than normal as the global financial crisis dampens consumer demand abroad and export orders dry up. The result should be a much more orderly spring rush. But that is small comfort to government officials worried about how many jobs will be waiting for the migrants when they return in February.