News reports on recent labour unrest

China Labour Bulletin is quoted in the following articles and broadcasts. Copyright remains with the original publisher.

AFP: Little Birds turn angry in China
The Guardian: Striking Chinese workers blockade Tesco store
LA Times: Chinese factories hit by strikes amid manufacturing slowdown
AFP: China hit by labour unrest as global slowdown bites
In these Times:Is China’s Economic Miracle Hitting the Fan?
Bloomberg TV: China Labor Unrest, Strikes, Economy
China Briefing: Foreign Investors Should Be Aware of Labor Strike Tactics in China

AFP Shenzhen
Monday 5 December 2011

Faced with layoffs and wage cuts as falling demand in the West hits the country’s vast manufacturing sector, the workers who have powered China’s breakneck growth are refusing to go quietly.

Over the past month, thousands of factory workers in China’s southern manufacturing heartlands have wrested concessions from employers facing shrinking exports and rising costs in a wave of labor unrest.

In Shenzhen, workers recently gathered at the office of labor rights organization Little Bird to debate a possible strike at a factory that employs them to demand better overtime pay and compensation.

“We have never experienced this situation. We want to learn the different methods for protecting our rights,” said Ran Lin, 30, who spends 11 hours a day, six days a week testing thousands of circuit boards on an assembly line.

Ran, who supplements his 2,000 yuan (US$315) monthly wage by working overtime at the Hong Kong-invested Dongguan Yong Jie Electronics Co Ltd factory, said the company had reduced perks such as meals and housing, even as the cost of living rose.

“We made contributions to economic development. We gave so much to the company. I hope they can give us suitable compensation,” Ran said.

As a manufacturing slowdown forces employers to cut back on benefits and lay off staff, workers are reaching out to grassroots groups, such as Little Bird, and even -government-linked agencies that offer legal advice and address complaints.

“Workers’ recognition of protecting their rights has increased. They have learned to unify,” Little Bird founder Wei Wei said.

Wei said the dense concentration of factories in China’s Guangdong Province had helped to spread news of the strikes, which emboldened workers.

Thousands of workers in Guangdong and elsewhere downed tools last month as factories hit by slowing demand in the US and Europe passed the pressure of rising costs and falling orders on to staff.

China’s manufacturing activity contracted last month for the first time in 33 months, as the export-led economic growth moderated to 9.1 percent in the third quarter from 9.5 percent in the previous quarter due to falling demand.

The Chinese Communist Party fears an independent labor movement could threaten its grip on power, so it only allows only one, government-linked trade union.

However, activists say government officials have been more sympathetic to individual grievances against factories, especially those funded by foreign firms or investors from Taiwan and Hong Kong.

“The government is afraid of simmering grievances. They don’t want workers to go on the streets or to demand trade unions,” said Debby Chan of Hong Kong-based Students and Scholars Against Corporate Misbehaviour.

Authorities have addressed concerns of workers by giving more teeth to a revised labor contract law, consulting industry groups and allowing courts to handle disputes.

And in an apparent response to recent unrest, authorities in Shenzhen recently announced plans to hike the minimum wage by 14 percent to 1,500 yuan per month from January, following a 20 percent rise in April.

Geoffrey Crothall, a spokesperson for the Hong Kong-based China Labour Bulletin, said some of the recent action showed a new level of sophistication.

He cited the example of workers at five PepsiCo bottling plants across the country who protested on the same day after the US beverage giant sold its plants in China.

“That is a level of organization that we’ve not really seen before, in terms of coordination of factories in different parts of China,” Crothall said.

In strikes last year against Japanese companies, workers cloaked their protests in anti-Japanese rhetoric to make them more acceptable to the government.

“They know it’s a motivating tool to get people on their side. Chinese workers are quite politically savvy,” Crothall added.

At a Shenzhen factory owned by Hong Kong women’s underwear maker Top Form International, last month hundreds of workers refused to return to their sewing machines for several days until management paid every worker 1,000 yuan.

“They swear at us. They never give us overtime. Why should we work?” one of the strikers said outside the aging green factory building.

Another two-week strike last month by nearly 1,000 workers, which paralyzed a Shenzhen factory invested by Japanese watchmaker Citizen Watch Co, revolved around rest breaks.

Managers made employees work additional time without pay to make up for breaks, which lasted 15 minutes every two hours, workers said. They returned after talks negotiated 70 percent pay for the rest periods.

Deng Shiping, who joined a strike of thousands against a -Taiwan-invested electronics factory last year, said organizing was made easier since everyone lived together in dormitories — a typical arrangement for migrant workers.

Workers chose representatives to inform other shifts and departments about the planned strike.

“There was no leader, it was us — the workers — all together,” he said.

Tania Branigan in Beijing
Wednesday 30 November 2011

More than 100 workers have blockaded a Tesco in east China, the latest incident in a wave of industrial action in the country.

Staff occupied the entrances and exits round the clock, preventing shoppers from entering, in a protest over wages and redundancy terms, local media reported. Some held a banner saying: "We want to protect our rights. Return our blood and sweat money."

Thousands of factory labourers and others have gone on strike in recent weeks, amid increasing economic uncertainty.

Workers at Tesco in the city of Jinhua, in Zhejiang province, which is due to close at the end of the year, became concerned it would shut earlier after it began discounting goods. They asked management to pay them the overtime they were due and terminate their contracts so they would receive wages immediately, according to Zhejiang Online.

The workers may have been alarmed by previous cases in China where bosses have closed businesses overnight and fled without paying workers.

Tesco said: "China is an important growth market for Tesco. We have a strong future store opening programme with more than a dozen additional hypermarkets planned this financial year. In line with our overall strategy, we are closing one of our older underperforming storesnext month.

"We are working with the local government and doing all we can to look after our employees affected. We have offered all staff the opportunity to relocate to another Tesco store in the region and we're also helping employees unable to relocate by setting up interviews with other local retailers. Any employees who leave the business will receive a one-month additional salary as compensation which will be paid to employees prior to the store closure."

Workers feel that some will have no choice but to leave and argue they should be entitled to one month's pay for each year of employment, the compensation set out in redundancy laws.

Other complaints include an allegation that women had pay docked when they took time off to have an abortion, in contravention of provincial regulations. Zhejiang Online reported that Tesco representatives said they would investigate.

It was unclear whether protests were continuing on Wednesday. Phone calls to the store went unanswered and police said they had not heard of such an incident.

The protest is part of a spate of strikes and demonstrations. Last week alone, southern Guangdong province – China's manufacturing hub – saw thousands of workers at a shoe factory protesting outside government offices after losing overtime; hundreds striking over pay at an underwear factory; and around 1,000 walking out of a plant that makes keyboards for Apple, complaining of excessive hours.

But Geoff Crothall, of Hong Kong-based China Labour Bulletin, said industrial action was affecting areas across the country and a range of sectors. "[Strikers] include transport workers, sanitation workers, teachers – and as the Tesco strike shows, people in the retail sector as well," he said.

"Clearly the economic downturn is playing a significant part, putting pressure on business, and business in turn is passing the costs and pressure on to the workers – the ones who cannot afford it.

"Another major factor is that workers are much more determined to stand up for their rights and interests than five years ago … They are much more aware of what they are entitled to, not only legally, but what they feel they [need] to have a decent living for example. There's a higher sense of self-worth."

In the past, authorities might have detained protesters, he said, but these days they would try to resolve the issues, urging employers as well as employees to make concessions. But while last year saw major victories for protesting workers, with several substantial wage increases, it appears the tougher economic climate has made officials reluctant to put pressure on businesses.

Liu Kaiming, of the Institute for Contemporary Observation in Guangdong, said the current wave of action was part of a longer-term trend which has seen labour disputes soar.

"Employees of a new generation are emerging. They cannot accept the current working environment and ask for better benefits. China's cheap labour system is being attacked severely and conflict of this kind is becoming fiercer and fiercer."

Additional research by Han Cheng


By David Pierson - 28 November 2011

Already facing a sharp slowdown, factories in China's manufacturing heartland are now experiencing a rash of labor strikes reminiscent of the worker unrest that swept the country last year.

Thousands of workers at a massive shoe factory in the southern city of Dongguan last week clashed with police as they marched to a local government office to protest the loss of overtime.

The strike at the plant owned by the Taiwanese Pou Chen Group came shortly after 18 managers were laid off because of declining orders, according to the Economic Observer, a Chinese newspaper.

Earlier in the week, 1,000 workers walked out of a plant in nearby Shenzhen that manufactured computer keyboards for leading brands such as Apple and IBM. Employees said they were being forced to work excessive hours on weekdays so that owners didn't have to pay overtime on Saturdays, as required by law. The company acquiesced after three days.

"People had to work so late, they couldn't concentrate any longer," said Zhao Xiaobing, 38, a former employee. "They will have more strikes."

A day before in Shenzhen, 400 workers went on strike in a pay dispute at an underwear factory. Employees reportedly were denied fair wages and forced to meet unachievable production quotas, according to China Labor Watch, a New York-based workers advocacy group.

Two other strikes took place in October, one at a Shenzhen factory owned by Japanese watchmaker Citizen Holdings Co., and one at a furniture plant in Dongguan where employees were left unpaid after their boss disappeared.

"There are more protests because of the economy," said Li Qiang, director of China Labor Watch. "The management systems in factories are not suitable."

Official data to be released Thursday could show manufacturing contracting in November. The so-called purchasing managers index barely broke even in October.

Annual export growth rose 15.9% in October, down from 17.1% in September, largely because of diminishing orders from financially-troubled Europe.

Labor unrest spread across China during the summer of 2010 as workers were galvanized by strikes at plants operated by Toyota, Honda and Foxconn, the world's largest electronic components manufacturer.

Workers then were protesting low pay as inflation was driving up the cost of living. Many provinces responded by boosting minimum wages. Independent unions, however, are still illegal.

It remains to be seen if the recent demonstrations will inspire others. Unlike in 2010, local governments and factory bosses may not be as willing to increase pay now that growth prospects appear grim in many foreign markets. China's economy is also expected to taper off, because of declining exports and continued restrictions on the property market and limited options for fiscal stimulus.

"One difference between the recent strikes and last summer's is that, as far as I can see, this time workers are not winning big victories" such as 50% wage increases, said Geoffrey Crothall, a spokesman for China Labour Bulletin, a Hong Kong-based workers rights group. "This means the domino effect of one successful strike inspiring another is not happening this time. There is a lot going on now, and I think we might have to wait a while to see what kind of picture emerges." 

By Marianne Barriaux (AFP) – 27 Nov 2011

 
BEIJING — China's manufacturing heartland has been hit by large-scale strikes in recent weeks, as an increasingly demanding workforce faces off with employers struggling with high costs and falling exports.

Thousands of workers in factories in the southern province of Guangdong have gone on strike in recent days, protesting over low salaries, wage cuts or tough conditions, and triggering a strong police response and some clashes.

The unrest comes as China's exports and manufacturing activity weakens, hit by falling demand due to economic woes in Europe and the United States -- both crucial markets for the export-driven economy.

"When orders and profits decline and costs of business increase for manufacturers... their first instinct is to pass those costs on to the workers," said Geoffrey Crothall, editor of the China Labour Bulletin.

He said many factories in Guangdong were cutting back on lucrative overtime, bonuses and benefits for their workers, even as living costs remain high.

"That's why we are seeing workers much more willing to go out on strike and protest," he told AFP, adding that the recent bout of unrest was the most intense since a series of strikes in the summer of 2010.

Earlier this month, more than 7,000 workers went on strike at a factory in Guangdong making New Balance, Adidas and Nike shoes, clashing with police in a protest over layoffs and wage cuts.

In Shenzhen, the manufacturing metropolis that borders Hong Kong, more than 400 female workers at a bra factory downed tools to demand higher wages.

Alistair Thornton, China analyst at IHS Global Insight, said Guangdong's huge army of factory staff -- many of them migrant workers -- would go on feeling the effects of the global slowdown.

"There's a lot more upward pressure from the labour force as it demands higher wages, but at the same time, it increasingly looks like there's less room in the global economy for the Chinese exporter. There's a conflict there," he said.

Ji Shao, a Beijing-based labour expert at Capital University of Economics and Business, said she had just come back from Shenzhen, and painted a pessimistic picture.

She added that a huge number of small enterprises could be forced to shut their doors, pressured by high costs, difficulty accessing loans and the global downturn.

Vice Premier Wang Qishan, China's top finance official, warned just over a week ago that the global recession was here to stay and would affect the world's second largest economy.

Other countries in Asia are also bracing for a rough ride. Bank of Japan Governor Masaaki Shirakawa said Thursday that Tokyo should prepare for potential major shocks from Europe.
Manufacturing is a key driver of growth and employment in China. A fall in month-on-month exports in October -- triggered in part by the deepening eurozone debt crisis -- fuelled fears for the sector.

Mark Williams, China economist at Capital Economics, said the level of exports in the country had remained essentially flat from one month to the next since the first quarter of the year.

"The outlook is not at all positive, so a lot of employers will be extremely concerned about the position they will be in in three to six months," he added.

A survey conducted by banking giant HSBC showed that China's manufacturing activity -- which has largely been contracting in recent months -- slumped to its lowest level in 32 months in November.

Analysts say any more negative economic readings will force the government to undergo a significant policy turnaround as leaders, fearing mass unrest, seek to avoid a repeat of the huge job losses during the 2008 global crisis.

Until recently, the government had been focused on fighting soaring inflation and rolled out a series of measures to ease price rises, such as hiking interest rates or curbing the amount of money banks can lend.

These appear to have worked, as inflation slowed sharply in October, with the consumer price index rising 5.5 percent year-on-year, the slowest pace since May.
But it is still too high for the government's liking, with food prices recording double-digit growth.

"Inflation disproportionately affects the poor, and workers in low-cost exporters tend to be the poorer set of the population," said Thornton.

In his comments a week ago, Vice Premier Wang said it was better to have an "unbalanced recovery" than a "balanced recession".

"This perfectly encapsulates the shift in mentality that's gone on at the senior leadership level -- the whole of this year, they have been focused on calming the property market and controlling inflation," said Thornton.

"But now, that has been slightly put to one side. The bigger priority is now going to be maintaining growth."

But analysts say the large-scale unemployment that hit China in 2008 -- when 20 million migrant workers lost their jobs -- is unlikely to recur under current circumstances.

"It depends on how bad the global downturn is. It's clear how vulnerable the export sector is to external developments. Should the eurozone deteriorate to the extent we saw in 2008, the same thing would happen again," said Thornton.

"But at the moment, it doesn't look like it's going to be as bad as 2008-9."

Copyright © 2011 AFP. All rights reserved.

By Michelle Chen
30 November 2011


If you believe the hype about living in the “Pacific Century,” then the new millennium is bound to be a pretty rowdy one.

A few days ago about 1,000 workers in the heart of China’s manufacturing belt walked off the job at the Taiwan-owned Jingmo Electronics Corporation, saying they were tired of being cheated by overtime pay. Around the same time in the Guangdong boomtown known as Dongguan, thousands of shoe factory workers protested over overtime pay and marched with their grievances to a local government office.

This may seem like a reprise of the powerful 2010 strike wave that rippled through big-name manufacturing plants, including Toyota and Honda. Last year, workers' newfound militancy yielded some significant gains—mainly in the form of pay hikes and other concessions. But whether they’ll be able to wrest a fairer paycheck from the management this time around hinges not so much on workers’ will, as on the global economic house of cards that’s getting rocked by countless factors that the labor force can’t control. Though concessions could be coming down the pipeline for some workers, in the backdrop is an alarming slowdown in China’s exports, which drive the country’s development and stuff consumers in rich countries with an endless stream of cheap goods.

November brought news of a a sharp drop in exports to Europe, coinciding with a burgeoning financial crisis in the Eurozone, as well as premonitions that China’s housing market might soon start to go pop.

According to the watchdog organization China Labour Bulletin, the state has worked with the companies to squelch protests, and even management staff is feeling the pain:

Photographs posted online showed large numbers of police on the street and bloodied workers who claimed to have been beaten by the police. Several other workers had reportedly been detained.

The strike at the Yue Cheng factory in Huang Jiang township was triggered by the dismissal of 18 managers in late October. The company claimed they had been dismissed because of the factory’s decreasing orders and sluggish business. But one of the managers told China Business News that the real reason behind their dismissal was that the factory planned to shift production to Jiangxi in a bid to combat rising costs in the Pearl River Delta.

“We’ve been loyal workers for over a decade in this factory. But now the factory decided to fire us on the sole excuse of bad business operations and cost pressures. How can they be so irresponsible?” one dismissed manager wrote on his internet post.
2010's summer of unrest saw workers’ aspirations catching up to their demands for workplace justice, and both bosses and local governments seemed willing to placate workers with pay raises and minimum-wage hikes. But the promise of continued growth and rising standards of living may be finally petering out.

CLB editor Geoffrey Crothall told ITT:

Last year the economy was booming and employers clearly could afford to give workers substantial pay raises. That is no longer the case and many businesses are struggling. There is less profit to go around and workers demands now seem more tailored to trying to hang on to what meager benefits they did win in last few years rather than push for substantial pay increases. But even these modest demands are meeting resistance from employers and often workers will only begrudgingly agree to go back to work on the promise to fully resolve grievances at a later date.

Now that's running up against sagging demand and factory relocations to cheaper and cheaper areas, either within China or to even poorer Asian countries. This means that the growing energy among organized workers lacks the momentum to brake the downward spiral. But according to Li Qiang of the advocacy group China Labor Watch, the power of collective consciousness still counts:

The difficult global economy undoubtedly impacts China's exporting market, decreasing the jobs and lowering the salary. These are some of the reasons why we see a rash of workers' unrest in China. But we think more importantly, the strike signals the workers' arising awareness of their rights and conception of empowering themselves. Tracing back to 10 years ago, the word "right" never came to the workers' minds, not even mentioning fighting for it. In retrospect, we can see that they are more organized and prepared now than ever before. The collectivity also helps the workers to get their voice heard.

That's inspiring to hear, but if China’s capitalist “miracle” is beginning its implosion (just as it has in America), sooner or later, bosses will calculate that it’s simply more profitable to ship off to Bangaldesh and other countries with a less regulated, more impoverished “business climate.”

There is, however, the potential for workers across Asia to do what their corporate counterparts have accomplished so skillfully—consolidating to the point that they wield power across borders. Campaigns that take a global approach to fair-wage standards and regulations, or champion a broad “social protection floor,” are just starting to ripen, as are cross-border organizing campaigns in North America.

For now, those embryonic efforts won’t reach the workers struggling in Shenzhen today. But if “rights” is becoming a new part of their vocabulary, then a redefinition of “power” and “democracy” shouldn't be too far off.


Nov. 25 (Bloomberg) --

Geoffrey Crothall, a spokesman for Hong Kong-based labor rights group China Labour Bulletin, talks about labor unrest in China. Thousands of workers in southern China went on strike in the last week to demand higher pay and better treatment, disrupting work at companies including one that supplies equipment to International Business Machines Corp. Crothall speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia."

By Vivian Ni
Nov. 29 2011


Increasing labor costs have become a major concern for foreign companies mulling whether or not to invest in China, but this may not be the only labor-related issue they should be watching out for. As the recent global economic downturn brings about falling factory orders, an abundance of young, well-educated and computer-savvy Chinese workers are leading one of the country’s strongest waves of labor unrest and labor disputes, which could cause real damage to companies’ regular day-to-day operations.

Intensified labor unrest

Over a one-week period in mid-November, more than 10,000 workers in Shenzhen and Dongguan – the two leading export hubs in South China’s Guangdong Province – went on strike.

Some 7,000 workers demonstrated against an overtime work cut and relocation plans at a Dongguan-based Taiwanese shoe factory which supplies footwear to Nike and Adidas. At another Dongguan-located large-scale shoe factory Yue Yuen Industrial Holdings – a major supplier for the sports brand New Balance – some 8,000 workers held a violent strike, blocking roads and overturning cars, according to a Reuters report.

Strikes have also taken place at the Hong Kong-listed underwear factory Top Form, where hundreds of female workers protested against a pay cut, and at Apple’s major keyboard supplier Jing Mold Electronics Technology, where middle managers complained about working late hours for which they were not properly compensated.

Geoffrey Crothall, web site editor of China Labor Bulletin (CLB), a Hong Kong-based labor advocacy group, commented that the recent intensification of labor unrest is the “most significant spike in unrest since the summer of 2010.”

The “summer of 2010” Crothall referred to was the time when a string of labor protests – involving over 2,000 workers – occurred at eight companies across the country owned by (or supplying) Japanese automakers, including Honda and Toyota.

The strike at Nanhai Honda – which triggered a series of labor protests last year – finally won workers a 33 percent pay-raise during that year, from the original RMB1,544 per month to RMB2,044. Earlier this year, the company took the initiative of offering another raise of RMB611 towards workers’ salaries.

Reasons behind strikes

For the time being, the state of the global economy coupled with high inflation (which simply increases livelihood pressures) in China, have been regarded as major contributors to the new wave of labor unrest. However, in general, employers should get more prepared for an increase in labor issues, as a younger generation of workers with a higher education are starting to gain a better sense of their labor rights.

Reduced Western orders
Guangdong Province, China’s export powerhouse, is perhaps most affected by the Western economic woes. The province has witnessed a 9 percent drop in October’s exports, mainly caused by a collapse in orders from debt-ridden European countries, according to Zhu Xiaodan, Guangdong’s acting governor. The flash purchasing managers’ index recently compiled by HSBC has also indicated a slowdown in the country’s manufacturing sector.

The reduced overseas orders are forcing employers to cut overtime work hours, which ultimately leads to a pay cut for workers. China’s factory workers – who usually see a low basic salary – often count on the extra pay they can receive through working overtime. According to CLB statistics, the average basic monthly wage for an electronics worker is about RMB1,500, but rises to RMB2,500 with overtime.

“Their basic wage is never enough on its own without overtime,” says Crothall.

If the global economy continues to trend downwards, more and more manufacturing workers may face redundancy. A recent estimation by the Federation of Hong Kong Industries said one-third of some 50,000 Hong Kong-owned factories could downsize or close by the end of the year, indicating thousands of migrant workers could face losing their jobs.

A growing number of laid-off factory workers will hurt China’s social stability, an essential factor that will eventually impact business operations in the country.

“Massive factory layoffs will lead to increased protests and social turmoil in China’s urban and rural areas, spurred on especially by those laid-off factory workers and other migrant laborers particularly marginalized by society,” warned Li Qiang, founder of the U.S.-based labor advocacy group China Labor Watch.

Inflation
Employers in China are feeling increasing cost pressures during this period of high inflation. The tightening environment has had a dramatic effect on the cash flows of many companies, forcing them to trim labor pay or cut back on the number of employees.

Some companies located in China’s costly coastal cities may even be considering relocating to inland China, which often becomes an issue the workers center on during their protests. Most migrant workers prefer to live in those bustling coastal cities and are also concerned about getting degraded treatment after the relocation, Crothall pointed out.

While cash-strapped companies tighten their wage overheads, workers are further pushed to stand up, as the surging consumer prices have seriously impacted on their living standards.

“We are willing to work, but you must also pay us enough to survive, to guarantee the basic quality of life,” said one woman interviewed by Reuters protesting outside Yue Yuen Industrial Holdings.

Seeing the mounting risks of social instability, China has urged its local governments to lift their minimum wage levels. The city of Shenzhen – where a massive amount of migrant workers gather to work – has recently announced a plan to lift its minimum monthly wage from the current RMB1,320 to RMB1,500 starting in January next year.

However, the hikes in minimum wages do not seem like a perfect solution to the labor issues, as many employers – especially the ones struggling to maintain profits – have taken other avenues to save costs, which still eventually hurt workers’ interests.

A new generation leading the way


It is worth noting that, in general, tensions in China’s labor relations are rising because of the increasing dominance of a new generation of migrant workers.

A recent CLB report listed a string of new characteristics the new generation of workers boast:

Better education;
Less experience doing agricultural work;
Higher recognition of an urban lifestyle; and
Increased access to internet and mobile communications
With these characteristics, the new generation of workers – now taking up 60 percent of the total migrant worker population – is generally less tolerant of employer abuse, low pay and poor working conditions, and are more likely to stand up for their rights.

The improved access to the Internet – which makes instant information exchange possible – can sometimes expand one single protest into broader industrial actions. Last year, a wave of strikes in China’s northern city of Dalian hit 73 enterprises and involved over 70,000 workers demanding higher wages.

The availability of various social networking tools has also helped workers to better organize protests. With these high-tech tools, they can upload real-time updates on the progress of strikes, enable reporters to track events, and have lawyers/labor rights activists to provide professional advice.

The emergence of China’s new-generation of workers has brought the country’s labor relations to a new juncture and is becoming an important lesson for companies to learn from. While Honda has had to make compromises in wages, and Gucci recently had to replace its senior staff at a store after being accused of maintaining sweatshop-like working conditions, the signal being sent is clear. Namely, the days when Chinese companies can maximize their profits through minimum labor expenditures are now fading away.

Cost of labor unrest

Labor unrest can bring about massive company losses, especially for those dependent on a highly complex and integrated supply chain.

According to the CLB report, the Nanhai Honda strike led to the shutdown of Honda’s four vehicle assembly plants in China, and caused daily losses of RMB240 million. It was estimated that total losses during the strike period reached several billion RMB.

Over the same period, the strike at Guangzhou’s Denso – the major power transmission system supplier for Toyota and another 15 vehicle assembly plants – reportedly led to stoppages at six other component suppliers and forced Toyota to close down two assembly lines. Denso’s related downstream auto producers had to suffer a loss of production amounting to 3,600 vehicles per day.

Even for companies that are not so dependent on supply chains – such as some service companies – may pay a price for labor-related issues. When five former employees of Gucci’s flagship store in Shenzhen recently stood out and accused the store of maintaining deplorable working conditions, the French company soon found that the incident has noticeably hurt its brand reputation as it faced public criticism on labor exploitation.

All these costly lessons are reminding employers in China to gain full awareness of the new changes in the country’s labor relations. For newcomers, it is essential to take labor issues into consideration when making investment plans. For existing companies, it is also critical to establish effective mechanisms that help improve work conditions, labor communication, and efficient responses to labor unrest so that losses can be reduced to a minimum level.
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