economics

May 31, 2010

Unrest May Signal New Phase in China Economy

Filed under: Uncategorized — ktetaichinh @ 5:50 pm
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Honda has been making increasingly generous offers — or perhaps desperate offers — to settle the strike. The company has already offered increases in total compensation of close to 50 percent, according to crumpled-up copies of the offer provided by striking workers.
There were signs on Saturday that the Honda strike was beginning to test the government’s patience. After two days of allowing surprisingly extensive coverage by state-controlled media, the authorities imposed a blanket ban on domestic coverage, reverting to their usual policy of hushing up labor disputes.
Labor advocacy groups say that they hear of frequent strikes in China, with work stoppages occurring somewhere every day. But strikes are typically hushed up and are often resolved in a day or two by the authorities, either with the police or through pressure on employers and workers to resolve their differences
Honda is not alone in facing intense pressure to raise wages. Foxconn, a giant electronics manufacturer near here in Shenzhen, said on Friday that it would raise wages by about 20 percent after being deeply embarrassed by a series of suicides by workers this year and criticism of working conditions.

The overall effect of wage increases on China’s competitiveness is not entirely clear, because of incomplete national data on average wages and productivity. Nicholas Lardy, a specialist in the Chinese economy at the Peter G. Peterson Institute for International Economics, said that Chinese productivity was rising so quickly that actual labor costs per unit of production appeared to be flat.

One surprise of the strike here is that it involves laborers whose wages appear to have already roughly doubled in the last five years: blue-collar workers in export factories in the Pearl River delta region around Hong Kong.
By contrast, the wages of young college graduates have actually declined in recent years as China has rapidly expanded its universities and built new ones, creating a surplus of more highly educated workers.

The president of a big Chinese corporation, who insisted on anonymity because of the sensitivity of labor issues, said that his company paid 4,000 renminbi a month a decade ago for recent graduates with computer science degrees, which is $585 at current exchange rates, and only 3,500 renminbi now.

If anything, conditions are growing worse for new college graduates, not better. A survey in Beijing released earlier this month by the Communist Youth League Beijing Committee and the Beijing Youth Stress Management Service showed that a fifth of new college graduates with bachelor’s degrees and a tenth of graduates with master’s or doctoral degrees were willing to work for free in their first jobs because they despaired of finding paid work.

The government has tried to respond to the glut of college graduates by ordering state-owned enterprises to hire large numbers of them and try to find tasks for them to do. But these enterprises are increasingly expected to be profitable and have not absorbed all of the graduates, with the result that big cities in China have growing numbers of unemployed or low-paid college graduates.
These graduates are typically the only child in a family because of China’s one-child policy, and their families have frequently invested much or all of their savings in their educations.

Partly because so many young Chinese now go to university and partly because of a declining birth rate, the number of young Chinese available for factory work is falling far short of the demand from employers. That is producing higher wages for blue-collar workers and giving them leverage to demand even more, as the Honda strike shows.

http://www.nytimes.com/2010/05/29/business/global/29honda.html?adxnnl=1&hpw=&adxnnlx=1275152449-KC+XbLQHT7G5s1gwsQvALg

If wages do rise, that could bring higher prices for Western consumers for goods as diverse as toys at Wal-Mart and iPads from Apple.

The Chinese media may also have found it a little easier, politically, to cover this strike because Honda is a Japanese company, and anti-Japanese sentiment still simmers in China as a legacy of World War II. Certainly, the strike is hitting Honda hard, as the resulting shortage of transmissions and other engine parts has forced the company to halt production at all four of its assembly plants in China.
Honda has an annual capacity of 650,000 cars and minivans in China, like Jazz subcompacts for export to Europe and Accord sedans for the Chinese market. Because Honda’s prices in China are similar to what it charges in the United States, the cars tend to be far out of reach financially for most of the workers who make them.

A Honda spokeswoman declined to discuss specific issues in the strike negotiations.

The intense media coverage may evoke historical memories of the 1980 shipyard strike in Gdansk, Poland, that gave rise to the Solidarity movement and paved the way for the fall of Communism in Eastern Europe. But the reality here is much different.

Instead of tens of thousands of grizzled and angry shipyard workers, the Honda strike involves about 1,900 mostly cheerful young people. And the employees interviewed say their goal is more money, not a larger political agenda.

“If they give us 800 renminbi a month, we’ll go back to work right away,” said one young man, describing a pay increase that would add about $117 a month to an average pay that is now around $150 monthly. He said he had read on the Internet of considerably higher wages at other factories in China and expected Honda to match them with an immediate pay increase.
The profile of striking workers seems to run more along the lines of slightly bookish would-be engineers — perhaps without the grades or money to attend college — rather than political activists. Besides their low wages, the workers seem focused on issues like the factory’s air-conditioning not being cool enough, and the unfairness of having to rise from their dormitories as early as 5:30 for a 7 a.m. shift.Workers said that in addition to their pay, they also received free lodging in rooms that slept four to six in bunk beds. They also get free lunches, subsidized breakfasts for the equivalent of 30 cents and dinners for about $1.50.
Although China is run by the Communist Party and has state-controlled unions, the unions are largely charged with overseeing workers, not bargaining for higher wages or pressing for improved labor conditions. And they are not allowed to strike, although China’s laws do not have explicit prohibitions against doing so. Workers at the Honda factory dormitory said that the official union at the factory was not representing them but was serving as an intermediary between them and management. Li Jianming, the national spokesman for the All China Federation of Trade Unions, declined to comment.

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