Guangdong Strikes Cast Shadow Over Manufacturers
A time of year typically known for labor unrest is taking a worrisome twist, with major new strikes occurring at top microwave oven maker Galanz and shoe making giant Yue Yuen (HKEx: 551), whose clients include Nike and Adidas. These latest signs of labor unrest in the important Pearl Delta manufacturing hub come just weeks after workers staged another strike at an IBM (NYSE: IBM) factory being sold to Chinese PC leader Lenovo (HKEx: 992). The fact that these industry leaders are seeing such major problems so early in the year hints at even bigger problems for smaller factories, which are struggling under the weight of soaring costs and sagging export orders.
Let’s start this labor unrest round-up with Yue Yuan, one of the world’s leading shoe makers which is owned by a Taiwanese company. According to the latest reports, more than 1,000 workers have halted production at the company’s massive manufacturing complex in the Pearl Delta city of Dongguan due to a dispute over benefits. (English article; Chinese article)
Reports about the demonstrations are quite varied, with Yue Yuen officially putting the number of striking workers at around 600. But 2 labor rights groups put the figure much higher, one at around 10,000 workers and the other at tens of thousands. The workers were unhappy when Yue Yuen reportedly failed to pay them the full among they were owed for social security and housing.
Police reportedly stopped the protesters when they marched through the streets of Dongguan and now local officials have stepped in to try to mediate the dispute. Both actions are relatively common in situations involving Chinese labor disputes, although the scale of this particular one looks a bit larger than usual.
Meantime, other reports are saying another labor dispute at Chinese-owned Galanz has been resolved and production has resumed at the factory in the Pearl Delta city of Zhongshan. (Chinese article) Once again, the size of the strike and also the nature of the dispute aren’t too clear due to conflicting reports from the Internet and company management.
Internet reports had said as many as 2,000 people walked off the job last week due to dissatisfaction over low salaries. A company spokesman said the figure was highly exaggerated, and only 100-200 people actually went on strike. The spokesman also provided a relatively amusing explanation for the action, saying the workers had simply decided to create a ruckus after having too much to drink one night.
Figures from workers and managers are probably both exaggerated, though I do suspect the workers’ figures are closer to the truth. These particular actions come just over a month after about 1,000 workers at an IBM plant in Shenzhen went on strike to protest their transfer to Lenovo as part of an M&A deal. (previous post) That dispute ultimately ended with most of the unhappy workers deciding to quit, even though Lenovo promised to keep wages and benefits unchanged.
As I said at the outset, this kind of labor unrest is quite typical at this time of year. Part of the reason is weather related, as warmer spring temperatures are more conducive to outdoor activities like protesting. Part is also seasonal, as many workers have recently returned from trips home to visit family during Chinese New Year and may be thinking of changing their jobs.
But this year’s early spree of unrest at such major firms also does seem to reflect economic factors related to China’s slumping exports as its economy slows. Accordingly, I would expect to see more of this kind of activity in the next few months, and the unrest could even spread outside the Pearl Delta as warmer weather comes to the rest of China.
Bottom line: Two new strikes at major Pearl Delta employers hint at more labor unrest ahead, reflecting growing pressure on manufacturers due to rising costs and slowing export orders.
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