SCDigest: Is the Cheap Chinese Labor Party Quickly Coming to an End?
By SCDigest Editorial Staff
Through a special arrangement, presented here for
discussion is a summary of a current article from Supply Chain Digest.
rapid rise in manufacturing wages in China took a brief respite with the start
of the global recession in 2008, but as China’s stimulus fed expansion
quickly takes hold, once again wages are on the rise — as well as labor
What does it all mean? That is difficult to say, but the seeming general
acquiescence of the Chinese government to the moves suggest it’s long
planned strategy for competing other than by low wages is advancing to its
The symbol for this changing dynamic is clearly the current strike
massive transmission plant in Foshan, China, which went on for more than a
week. The labor action caused Honda to shut down its four Chinese assembly
plants and led to an increase in wages of 24 percent for workers there. The
strike highlighted the growing income disparity and inconsistency in China.
Workers at the Honda factory make about $150.00 monthly in U.S. terms, whereas
in many other parts of China, similar manufacturing workers take home about
twice that. Air conditioning, long working hours and sleeping quarters
were other issues.
What has been highly interesting to most observers there
is that the strike is taking place with little interference from the Chinese
government, which not only made no moves to stop the strike effort, but it
initially allowed state media to provide high levels of television and internet
coverage of the labor action. That is significant because it obviously sends
a message about striking as a tactic to laborers all over the country. This
new permissiveness, the New York Times reported, “coincides with growing
sentiment among some officials and economists that Chinese workers deserve
higher wages for their role in the country’s global export machine.”
clearly labor activism has increased in China since it passed the Labor Contract
Law in 2008, raising the awareness of workers as to their legal rights.
“There are internet cafes everywhere, so workers can get information,” said
Harley Seyedin, president of the American Chamber of Commerce of South China. “They
are starting to ask for more. The days of cheap labor are gone,” he said.
Meanwhile, The Wall
Street Journal reports that rising labor
costs are already driving many apparel manufacturers to look to lower wage
countries for production. Overall, China’s labor costs are up five to 15 percent
this year already, with continuing upward wage pressures.
However, there are
issues. China is also a major textile manufacturer, while the textile industries
are nascent at best in many of these lower cost countries. That means apparel
likely would have to be shipped in to these new sourcing locations. Combined
with the lack of logistics infrastructure found in China, especially the small
number of routes by ocean from ports say in Vietnam of Bangladesh back to the
U.S., logistics costs could eat away much of the gains achieved by the lower
Discussion Questions: What are you expecting in terms of Chinese labor costs?
Do you make much of the Honda strike action? Do you think China can smartly navigate
the transition to more higher value products and keep its export machine going
even with rapidly rising labor costs?
- Is the Cheap Chinese Labor Party
Quickly Coming to an End? – Supply
- Labor Dynamics Continue to Change in China as Workers get Bold – Supply