Factory Closings and Unrest in China

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.”

Print Friendly, PDF & Email


  1. Anonymous

    So all I have to do is…..nothing, and China will implode?

    I’ll do nothing, buy nothing, become a breathatarian.

    For all of you who haven’t associated with many Chinese, they are rabid nationalists and xenophobes. They hate our guts with a passion, but all the while smiling smiling smiling.

    -Still they hate out guts. Please burn China, burn to the ground!

    I’m sorry, but culture is learned, and most Chinese learn they are superior and they should hate our guts. Dumb Americans have deluded themselves into thinking we are one big happy family.

    (oh, the Japanese hate us too, but they respect the bomb)

  2. Anonymous

    anon 12:43

    Nobody hate your guts, they hate your ignorance and the tendency to rub it into other people’s face.

  3. doc holiday

    OT? China may have a little karma coming their way? Then again, it’s probably a great honor for China to have and maintain the youngest known political prisoner in the world.

    FYI: Gedhun Choekyi Nyima (born April 25, 1989) is the eleventh Panchen Lama as interpreted by most Tibetan Buddhists. He was born in Lhari County, Tibet. On May 14, 1995, Gedhun Choekyi Nyima was named the 11th Panchen Lama by the 14th Dalai Lama, Tenzin Gyatso. After he was nominated Panchen Lama, Chinese authorities had Gedhun Choekyi Nyima and his family removed from Tibet.


    Also hear and experience:
    Fleetwood Mac’s Coming your way

  4. doc holiday

    This just seems sad:

    China on Thursday made a direct request to India for blocking the proposed six-day meeting organised by the Dalai Lama in Dharamshala

    from November 17 to discuss the future of Tibet.

    > Tibet's exiled spiritual leader, the Dalai Lama, said Monday that talks with Beijing to win greater autonomy for his Himalayan homeland had been a failure and that Tibet was "now dying" under China's firm grip.

    He said that six years of direct talks between his personal envoys and Beijing had brought no substantial achievements.

    "Inside Tibet, the situation (has) become much worse. Sometimes I describe Tibet as passing through almost like a death sentence. This old nation, with ancient culture, heritage, (is) now dying," he said.

  5. k

    I want to post a comment, but “Do no evil” Google prompts an ad which directs me to “Looking for a beautiful Asian bride” and I can “Join Free” :)

  6. Anonymous

    Red China is massive. I wish percentages were used showing how much of the population/workforce is affected or what ratio of the factory base closed down.

    200 workers looking for back pay out of a trillion population is not very representative especially if the child labor is just going to return back to school.

    [a newborn almost every second there]

  7. Lee

    I am very disappointed reading some of the comments to this post.

    I am a huge admirer of America and its achievements…however, please do not delude yourself into thinking that only the Chinese and Japanese hate your guts… American foreign policy has managed to make detractors of your most ardent supporters. You may not like hearing that..but it is the truth.
    And this is not xenophobia talking.

  8. Lee

    With all due respect to the Dalai Lama, Buddhism has been around for 3000+ years and has been the dominant cultural tradition for a long time…I am very happy that America is not Buddhist.

    If America had been Buddhist..they would be busy contemplating their navels instead of providing ease of life to the world through the invention of:
    Cars, air conditioners, light bulbs, planes, tv’s, telephones, record players, computers, Need I go on…

    A cultural tradition which has no interest in making material life easier is a dead end…

  9. thomas j

    Looks like the natives are getting restless:

    China has weathered patches of growth well below recent double-digit rates before without major upheaval—notably after the Asian financial crisis of the late 1990s. But the spread of mobile telephones and internet access has made it much easier for the disgruntled to organise. The strike in Sanya, which began on November 10th, broke out a few days after a similar one in the south-western city of Chongqing, 1,200km (750 miles) away. Around the same time as Sanya’s protest began, a smaller taxi strike was also reported in Gansu province in the north-west.

    Both in Chongqing and in Sanya, taxi-drivers attacked cars that refused to join the strike. The official press said drivers in Chongqing damaged at least 20 vehicles, including three police cars. In Sanya it reported that 15 cars were attacked, resulting in the arrests of more than 20 people. Since the strike began in Sanya taxi-drivers have been gathering outside the city-government headquarters. By November 11th their numbers had swollen to about 300, according to the state-owned news agency Xinhua. “The government is completely corrupt,” says one of the protesters.


  10. River


    First you point out that Buddhism has been around for 3,000 + years and then you comment that ‘Buddhism is a dead end’. You come off as a bit conflicted.

    Buddhism is just one more ideology but is aimed at those fed up with over consumption. Christianity, in the evangelical form, targets the saps on the other end of the spectrum.

  11. mft

    China’s leaders’ concern about increasing labor unrest if the economy suffers a hard landing is probably mainly based on fear of the unknown. At present there is no leadership which could organise such unrest into a political force, so that it is mainly a question of policing (which has its own costs). But history teaches that sudden and unexpected changes can happen, with new leadership arising either inside or outside the Chinese Communist Party. Without being a China expert, I suspect that the current leadership most of all fears a nationalist trend within the CCP which questions the cautiously cooperative, don’t rock the boat foreign policy stance which China has pursued for many years.

    Somewhat related to this, I have for some time been suggesting that if there is a global economic depression, China may occupy the role filled by the USA in the first Great Depression. Michael Pettis in his blog China Financial Markets has an interesting angle on this. I quote: “While everyone watches fairly closely and with dread to see if the US re-enacts new versions of Smoot-Hawley by attempting to resolve declines in domestic demand via beggar-thy-neighbor trade polices, the real threat may come from somewhere else. Current-account-surplus countries may, just as they did in the 1930s, find themselves under immense pressure to support their export sectors. Already we are seeing this in China, and I suspect a lot of other Asian exporters are also casting at ways to boost their own export industries.” It’s worth reading the entire post at http://piaohaoreport.sampasite.com/china-financial-markets/blog/Can-Smoot-Hawley-return-in-a-who.htm

  12. Lee

    River: Not conflicted

    At zero BC/AD and for the next thousand years Buddhism was the dominant religion of Asia, including India…cultures that were advanced turned to navel gazing during this time…we know what the next few hundred years wrought…

    Nice religion if you are Richard Gere…but for poor people who need progress…it has been a real problem.

  13. Anonymous

    At the minute protests seem to be localised and directed at employers. Quite obviously from the report their is a risk of cascading unrest as suppliers of collapsing industries don’t get paid.
    The main risk from an external point of view is that china may be forced to clamp down on unrest. This could affect external investment and force the government to defend their currency rather than trying to hold it down.
    This could have a big impact on the dollar and maybe US treasury debt (Brad Setser might disagree). I also worry about production destruction as demand drops perhaps setting us up for a commodity spike later which could affect China’s trade surplus build up.

  14. thomas j


    It’s unfortunate you do not understand Buddhism and equate meditation with navel gazing. Meditation is an amazing tool for concentrating and training the mind in order to perform whatever task may be required.

    Buddhism also sets forth an admirable code of conduct that includes not stealing, not killing, not lying, not drinking and not engaging in adultery that is common to all the major religious traditions.

    The fact that certain individuals who consider themselves Buddhists do not live up to these standards does not in any way invalidate the teachings of the Buddha.

  15. Anonymous

    Agree with above. China has had many labor protests in part to hours vs pay and overtime/conditions for years.

    Nothing new there, just the over all world situation puts it into a new light.

    So long as the out flow of unemployed is slow and steady and not a flood, the rural ares should be able to take the influx. Thats not to say they will be happy or always go peacefully.

    In response to the comments in other post here on China/Japans popular cultural/racial beliefs.

    I would like to be the first to apologize for them. All cultures/races have a feeling to a degree, of some how being better than others. Its a gimme.

    I know that my own fellow Americans have embarrassed me many times with their ignorance/actions as guests in other country’s. If you ask me we are the ones that have a problem with our down cast gaze at others. I say this as some one who has spent a large part of their life living out side the US and not in 5 star accommodation but with the average people of the region.


  16. Lee

    Thomas j

    No you are confusing Yoga with Buddhism…practice of Yoga pre-date Buddhism…the ;Do Not;s; also pre-date Buddhism…Buddhism teaches looking inward rather than outward…unfortunateoy, the real world is outside.

  17. Anonymous

    civilization has destroyed most peaceful cultures that came in its way. Not many are left by now .. and Tibetan culture is next in line. Only cultures which have somehow made a compromise and accepted civilizational values of agression, over consumption, war on nature etc, have survived. But civilization will ultimately eat itself unless it transforms itself.

    Nobody can destroy Buddhism. Buddhism talks about Eternal Truths. Nobody can destroy truth. civilizational lifestyles and values which are unsustainable will die out. The core Truths that Buddhism teaches will prevail ultimately.

  18. Anonymous

    oh and adding to the above comment. Lee:

    western notions of “progress” are highly lopsided, and neither beneficial to the overall well being of humans or larger environment. Wait for the next fifty years and see how the end game of this global industrial economy plays out as it tackles problems such as climate change, resource constraints, high environmental degradation.

  19. AAI

    There are many long-run positives in this article for economists looking for a gradual re-balancing of “global imbalances.” Many sources of increased China domestic market consumption (workers learning their rights, China’s fiscal stimulus, workers moving to less export-intensive industries such as agriculture, government probably seeing increasing pressure to boost social programs to prevent mass protests), and decreased export-driven growth (plunging export trade, quickly shuttering capacity that was feeding exports).

  20. Bob_in_MA

    “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.”

    Why are month-to-month changes never mentioned in regards to Chinese statistics? Exports are FALLING. Did they fall to August’s level? July’s?

    The only figure ever given is yoy change.

  21. Sanchit


    Two things I’d like to clarify in your assumptions:

    1) The destruction of Buddhism (or reduction in importance) is more a political phenomenon than a rejection of its principles. Civilizations largely followed (or were forced to follow) the religion embraced by their rulers.

    2) You equate meditation with yoga. They are two completely different things. And yes, meditation predates Buddhism, but that does not make it any less significant that the benefits of meditation form the central tenets of Buddhism.

  22. Anonymous

    Interesting amount of ignorance about China in this thread.

    Oh well.

    “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.”

    This must be the first time anyone has said that a Communist governments legitimacy is based on the Western ideal of maintaining economic growth.

    Apparently the view of communism has changed a lot in the last few years. Used to be they were the evil dictators who didn’t care what happened to the people, now they worry about economic growth.

    My, how things do change.


  23. Hillary

    Bob in MA – YOY is more accurate because exports from Asia to the US are highly seasonal. There’s a drop off after Christmas with a gradual ramp-up that peaks in September for goods transported via ocean and October or November for goods transported by air. The two week-long holidays in China (one in January, one in August) also virtually eliminate exports for those weeks.

Comments are closed.