This front page New York Times story on factory closings in the Pearl River delta covers ground already discussed in some detail on this blog. However, its report gives more detail on the resulting labor unrest.
From the New York Times:
For decades, the steamy Pearl River Delta area of southern Guangdong Province served as a primary engine for China’s astounding economic growth. But an export slowdown that began earlier this year and that has been magnified by the global financial crisis of recent months is contributing to the shutdown of tens of thousands of small and mid-size factories here and in other coastal regions, forcing laborers to scramble for other jobs or return home to the countryside….The slowdown in exports contributed to the closing of at least 67,000 factories across China in the first half of the year, according to government statistics. Labor disputes and protests over lost back wages have surged, igniting fear in local officials.
After the shutdown of their shoe factory, called Weixu in Chinese and China Top Industries in English, Mr. Wang and some co-workers took to the streets in protest, demanding two months of back pay, or $440 on average. The government called in the riot police….
Under pressure from Beijing to maintain social stability, local officials are also trying to tamp down unrest by doling out back wages. Here in Chang’an, after the worker protest, the government shelled out more than $1 million to pay back wages to most of the workers at the shoe factory. (Mr. Wang and some other laborers say they are still without back pay.)
The slowdown in exports has accelerated a major shift in the nature of Chinese manufacturing: small factories that were already being pinched by rising costs of labor, transportation and raw materials, as well as by the appreciating yuan, are closing en masse….
“There’s very serious damage being done down there, I don’t deny it, and I think it’ll get worse because we haven’t seen the full impact of the economic downturn in Europe,” said Arthur Kroeber, managing director of Dragonomics, an economic research and advisory firm based in Beijing. “I think next year we might see export growth in the country as a whole go down to 0 percent.”
The export sector is still growing but has slowed considerably; year-on-year growth was at 9 percent in October compared with 26 percent in September 2007, Mr. Kroeber said.
The social problems arising from the slowdown have stirred anxiety in the top leadership of the Communist Party, whose legitimacy is based on maintaining economic growth. Prime Minister Wen Jiabao is pushing for policies that will increase domestic consumer consumption to wean China off its reliance on exports. Last Sunday, the government unveiled a stimulus package worth $586 billion over the next two years — the largest ever announced in China — to help create jobs, mostly by building new transportation infrastructure.
Foreign governments expecting China to take the lead in addressing the global crisis will be disappointed, say analysts and scholars. Chinese officials say they are focused on trying to ease domestic problems and keeping the country’s annual growth rate above 8 percent, which they see as vital to generating enough new jobs. Some analysts say economic expansion could drop to as little as 5.8 percent in the fourth quarter this year, down from about 11 percent in 2007.
“I think China foresees that it’ll need to spend a lot of money to get itself out of the current domestic situation,” said Victor Shih, an assistant professor of political science at Northwestern University who studies the political economy of China. “On the global financial crisis, China will not take a leading role.”
The mass layoffs have led to a profound change in the movements this year of migrant workers like Mr. Wang who spend virtually the entire year away from home. Many are heading home early for the Chinese New Year, in late January, and say they might not return to work in the coastal regions. A worker in the railway station in Guangzhou said that from Oct. 11 to Oct. 27, there were 1.17 million passengers on trains leaving the station, an increase of 129,000 over the same period last year. There have been reports of a similar jump in other regions.
Once in the interior, the workers will have less incentive than in the past to return to the coastal provinces. Rising grain prices have made farming more profitable. The Chinese government announced a rural land reform policy last month that could spur some farmers to stay on their land and make better use of it….
In Zhangmutou, a town here in the Dongguan area, many of the 7,000 workers who lost their jobs when a Hong Kong-owned toy factory called Smart Union shut down last month have returned home. Li Dongmei, a former human resources employee, said her two older brothers who worked in the factory had taken the 20-hour bus ride home to Hunan Province. Ms. Li, though, still lives across from the abandoned factory building because she is eight months pregnant.
“This place isn’t too stable economically,” Ms. Li, 25, said as she sat on a terrace outside her cramped apartment. “Guangdong isn’t so good anymore.”
As was the case with the Weixu shoe factory, Smart Union closed without any notice, and hundreds of angry workers poured into the streets to demand that the local government pay them back wages. Many such factories were run by Taiwanese or Hong Kong managers who fled the mainland. Chinese police and courts have limited reach in Hong Kong, which has a separate legal system, and they have almost no ability to prosecute people in Taiwan, which is treated as a renegade province and does not have formal political or diplomatic relations with the mainland.
The wave of factory shutdowns is taking place at a time when migrant workers are more aware than ever of their legal rights and know how to put pressure on local governments. Two national labor laws were enacted in January that, among other things, require companies to pay severance and give out more long-term labor contracts. The laws could lead to more labor disputes and protests, said Mary Gallagher, director of the Center for Chinese Studies at the University of Michigan.
“Increasingly, the migrant workers know their rights,” she said.
Here in Chang’an, nearly 200 workers showed up outside the south gate of the four-story Weixu factory on Tuesday to demand from the government severance payments that generally ranged from $1,500 to $3,700 each. They signed their names on a list and put a red fingerprint stamp next to each signature….
The Taiwanese chairman of the shoe factory, Zhuang Jiaying, did not return calls seeking comment. The collapse of the factory started a domino effect: Related businesses, like a smaller factory that put labels on Weixu’s shoe boxes, have also failed. Hundreds of additional laborers have lost their jobs, and more than 200 creditors have yet to collect millions of dollars, said Yang Qiusheng, the manager of the factory that handled the labels.
“I had to fire people who had worked for me for a long time,” he said. “When I see this shoe factory, this enterprise, I feel very sad and sorry. I never thought it would end like this.”