Investors worry about labor costs

0 CommentsPrint E-mail Global Times, June 10, 2010
Adjust font size:

Honda's Beijing-based spokesman, Zhu Linjie, told the Global Times Wednesday that he was unaware of the latest labor action in Honda's Zhongshan facility.

Meanwhile, a strike at the Foshan Fengfu Autoparts Co, which is 70 percent owned by Honda and Moonstone Holdings, a Taiwanese company, entered its third day Wednesday without any sign of resolution.

Two factories of Honda joint venture Guangqi Honda in Huangpu District and Zengcheng City, Guangzhou, capital of Guangdong Province, had to suspend production Wednesday and won't resume production today due to a shortage of supplies, Yang Guang, a PR staff member with Guangqi Honda told the Global Times.

Yang confirmed that about 200 workers joined the strike at the Foshan Fengfu plant, demanding higher pay and compensation for a two-week strike last month at Honda's engine-gear factory in Foshan, which forced their factory to suspend production for about a week.

"The strikes have seriously disrupted the production pace and annual production plan of Honda," Yang said.

The company has offered wage increases of between 24 and 32 percent to the disgruntled employees, bringing their pay to about 1,900 yuan per month.

Separately, a spokesperson for a Taiwanese-owned machinery firm in Kunshan, East China's Jiangsu Province, which was hit by a strike Monday, said Wednesday that employees had returned to work.

About 50 workers at the KOK Machinery factory in Kunshan were injured in a clash with police after about 2,000 assembly line workers went on strike Monday morning, demanding higher pay and improved working conditions, according to reports.

"The management and workers reached an agreement, including a deal on the wage issue," Dong Xueping, the company's deputy human resources official, told the Global Times Wednesday, without revealing details.

"Employees who took part in the strike will neither be punished nor sacked," Dong said, denying that anyone was injured during the incident.

Domino effect

Professor Lin Xinqi, director of the Human Resources Department at Renmin University of China, told the Global Times that the recent wave of strikes highlight the frustration of workers whose salaries have not seen a significant increase in the past 30 years.

Labor's share of national income declined to 39.7 percent in 2007, down from 53.4 percent in 1996. During the same time, the corporate share jumped to 31.3 percent from 21.2 percent, official statistics show.

Lin expressed concern that the recent wave of strikes might cause domino effects throughout the Chinese manufacturing industry and force companies and foreign investors to relocate their factories to areas with lower labor costs.

Arthur Chiao, the director of the Taiwan Electrical and Electronic Manufacturers' Association, suggested that Taiwan companies move their production bases from the Chinese mainland to lower-cost countries such as India, Indonesia and Vietnam.

On Tuesday, Terry Guo, chief executive officer of Foxconn Technology Group, said in Taipei that he is planning to transfer part of the company's production from the mainland to Taiwan, the Oriental Morning Post reported.

Chen Weiliang, president of Foxconn International, said its company has been transferring its operations to inland cities over the past 18 months and has relocated some production lines to other countries, including India, which are closer to their clients and have lower labor costs.

Also Tuesday, Zeng Jintang, vice president of Merry Electronics in Shenzhen, said his company is considering moving some of its production lines to inland China after workers at a Shenzhen factory went on strike Sunday over a pay dispute and shift arrangement, the Shanghai-based National Business Daily reported.

In response to concern that some foreign enterprises may consider relocating their factories due to the spate of strikes, He Weiwen, the managing director of the China Society for WTO Studies, disputed that the impact will be lim-ited.

"The cost of labor, in fact, is not always the most crucial factor for manufacturers. Quality of labor, government efficiency, the finance environment … are what companies care a lot about in deciding where to invest and open factories," He said.

Some analysts also argue that the rise in production costs will be offset by an improvement in worker productivity. It will also gradually help dole out manufacturing of the lowest-value products in China, and move to a higher-tier manufacturing mix.

Qiao Jian, a professor at the China Institute of Industrial Relations, told the Global Times that China won't immediately lose its competitiveness in cheap labor costs, as labor-intensive industries may well move to the central and western regions of the country in the process of optimizing the industrial structure.


Print E-mail Bookmark and Share

Go to Forum >>0 Comments

No comments.

Add your comments...

  • User Name Required
  • Your Comment
  • Racist, abusive and off-topic comments may be removed by the moderator.
Send your storiesGet more from