Results tagged “Guangdong” from The China Sourcing Blog
In 2008, about 130 million people worked as rural-to-urban migrants in China's cities, making up around a third of the total urban labour force. As they are heavily active in exporting sectors that were impacted by the downturn in the last two years, around 15% of the migrant workers (or 20 million people) are said to have lost their jobs in 2008 based on a survey carried out in 15 provinces by the Ministry of Agriculture in January 2009.
But that was then. Now in 2010, various media reports in February highlighted a shortfall of a many as a million migrant workers in Guangzhou and Dongguan. People's Daily has published statistics collected by Guangdong's human resources and social security departments stating that by February 22 this year, more than 3 million migrants had returned from other provinces to Guangdong, much less than the almost 7 million migrant workers who had originally left for the Spring Festival holiday. Guangdong's enterprises, the report stated, currently lack the services of about 900,000 workers, of which most are needed in labour-intensive industries, although technical workers are said to make up 32% of the shortfall. In Dongguan, more than 20% of migrant workers are not expected to return to work now that the Spring Festival is over, according to one survey.
So what happened to China's migrant workers? Much of the reason for the current shortages is being put down to the explanation that the pressures forcing migrant workers to industrial zones in the big cities are just not so intense, at least not now. Due to gradually increasing incomes in rural areas and the growth of second- and third-tier cities, many workers no longer have to make the trek to Shanghai for menial labour, or they can go somewhere else closer to home.
Consider for example the following chart, illustrating the changing income levels in rural and urban areas in China in recent years:
Income levels of both urban and rural households have been steadily increasingSlide 2
The current shortage of migrant labourers is not the first time this has happened in China; in fact, the economic upswing of the same year (2004) also caused labour shortages in the cities (see source 2 below).The cities are not taking it lying down, however, and apart from simply raising wages, much is being done to continue attracting migrant workers. Shanghai will this year become the first Chinese city to provide free education to all school children of migrant workers, and a government advisor in February announced that young migrant workers will be granted more social service benefits and will be assisted to buy or rent homes in smaller cities closer to their home villages, not in expensive places like Beijing or Shanghai. The government is apparently also considering amending its election law to increase the number of rural representatives that can be elected to the legislature from the current one deputy for every 960,000 rural residents.
Yet while many migrants are enjoying the luxury of choosing to stay away, many more of them are inexorably drawn into the cities with all these locations have to offer. Over the past decade, over 200 million people have entered the cities through official or unofficial migration, and the share of agriculture in employment has declined from 326 million in 1998 to 270 million in 2008. As a rapidly developing economy, China's urbanisation rate has increased from 18% in 1978 to 44.9% in 2008. Yet throughout the country, less than one quarter of the rural population has migrated (see source 2 below), suggesting vast potential for further migration as China's urbanisation rate increases.
And today's migrant workers are different from older generations who only laboured on building sites. Now, a new generation - born after 1978 - plays an important role in city life, and People's Daily has described them as white collars who now pay much more attention to their own labour rights and are opinionated on equality and fighting discrimination.
No surprise then that many migrant workers choose not to return to the cheap factories in Guangdong and Dongguan.
Further reading on China's migrant workers:
1. How much do we know about the impact of the economic downturn on the employment of migrants? (Meng, Kong, Zhang), ADBI Working Paper Series, February 2010.
2. China's labour market in transition. Job creation, migration and regulation (Herd, Koen, Reutersward), OECD Economics Department Working Paper No. 749, February 2010.
But that was then. Now in 2010, various media reports in February highlighted a shortfall of a many as a million migrant workers in Guangzhou and Dongguan. People's Daily has published statistics collected by Guangdong's human resources and social security departments stating that by February 22 this year, more than 3 million migrants had returned from other provinces to Guangdong, much less than the almost 7 million migrant workers who had originally left for the Spring Festival holiday. Guangdong's enterprises, the report stated, currently lack the services of about 900,000 workers, of which most are needed in labour-intensive industries, although technical workers are said to make up 32% of the shortfall. In Dongguan, more than 20% of migrant workers are not expected to return to work now that the Spring Festival is over, according to one survey.
So what happened to China's migrant workers? Much of the reason for the current shortages is being put down to the explanation that the pressures forcing migrant workers to industrial zones in the big cities are just not so intense, at least not now. Due to gradually increasing incomes in rural areas and the growth of second- and third-tier cities, many workers no longer have to make the trek to Shanghai for menial labour, or they can go somewhere else closer to home.
Consider for example the following chart, illustrating the changing income levels in rural and urban areas in China in recent years:
Income levels of both urban and rural households have been steadily increasingThe current shortage of migrant labourers is not the first time this has happened in China; in fact, the economic upswing of the same year (2004) also caused labour shortages in the cities (see source 2 below).
Yet while many migrants are enjoying the luxury of choosing to stay away, many more of them are inexorably drawn into the cities with all these locations have to offer. Over the past decade, over 200 million people have entered the cities through official or unofficial migration, and the share of agriculture in employment has declined from 326 million in 1998 to 270 million in 2008. As a rapidly developing economy, China's urbanisation rate has increased from 18% in 1978 to 44.9% in 2008. Yet throughout the country, less than one quarter of the rural population has migrated
And today's migrant workers are different from older generations who only laboured on building sites. Now, a new generation - born after 1978 - plays an important role in city life, and People's Daily has described them as white collars who now pay much more attention to their own labour rights and are opinionated on equality and fighting discrimination.
No surprise then that many migrant workers choose not to return to the cheap factories in Guangdong and Dongguan.
Further reading on China's migrant workers:
1. How much do we know about the impact of the economic downturn on the employment of migrants? (Meng, Kong, Zhang), ADBI Working Paper Series, February 2010.
2. China's labour market in transition. Job creation, migration and regulation (Herd, Koen, Reutersward), OECD Economics Department Working Paper No. 749, February 2010.
Part I: Impact and Evolution. There is a crucial difference between a meltdown and a slowdown. Like the difference between 25% and 8%.
As an indication of the kind of losses that can characterize a meltdown, Italian Prime Minister and media mogul Silvio Berlusconi lost more than 25% (or $2 billion) of his stock value with the 38% decline of the Italian stock market so far. In contrast, with the Chinese economy caught in a less ominous-sounding slowdown, according to Hurun's 2008 China Rich List the average wealth of China's 800 richest people declined by only 8% this year, and the compiler of the list concluded that China's rich are surviving the credit crunch in better shape than expected.
Yet as a palpable indication of the real impact of the global financial crisis on China, real estate estate heiress Yang Huiyan - the richest person in China last year - saw her wealth fall from $17.5 billion to $4.9 billion. And while the Chinese economy is currently seen to be slowing rather than melting, the plight of Yang Huiyan and other Chinese property developers in the current crisis forms part of a significant impact on China's real economy, reflected (as the Times put it) in human misery in real lives.
The impact of the financial crisis has also been seen to precipitate contractions in China's auto export industry, and to complicate matters for Chinese internet-based startups dependent on foreign venture capital. Difficulties in accessing credit for trade, moreover, have exposed overcapacity in China's steel and heavy industry sectors and exacerbated raw material price decreases across the board, and have apparently even stranded container-loads of goods in harbors because they cannot be financed.
Yet much of the actual human misery in China associated with the crisis has fallen on the export manufacturing base in the Pearl River Delta, where an already dire situation has attained the features of a crisis. At least 2.7 million factory workers in southern China stand to lose their jobs after demand slowed considerably for electronics and toys. 9,000 of the 45,000 factories in the cities of Guangzhou, Dongguan and Shenzhen are expected to close down in the coming months. This year's orders from the US for Christmas products made by Chinese manufacturers have fallen off a cliff, and the latest CLSA China Manufacturers Purchasing Index (based on monthly questionnaires sent to 400 Chinese manufacturers), released in early October, indicated the steepest fall in the volume of both domestic and foreign orders since the survey began in June 2004.
52% of China's toy exporters, still reeling from inflated manufacturing and labor costs as well as a spate of recalls in 2007, have gone out of business in 2008, as have a number of Hong Kong-linked firms. One of the biggest of these was Smart Union Group and its Hejun Toy Factory in Dongguan, whose bankruptcy earlier this month was ascribed by local media to the firm's attempt to overcome tough export conditions by committing more resources while existing on loans. When Hong Kong banks tightened their credit facilities in the wake of the financial crisis, 7000 factory workers in China suddenly found the factory gates barred.
Yet if the financial crisis is wreaking havoc in southern China, Guangdong Vice Governor Wan Qingliang is not too ill-disposed to what's been going on. By emptying the cage for the new birds, as he put it, Wan sees the financial crisis as an opportunity to further the process of transplanting modern manufacturing into Guandong's melting low-value empire. And if the misery in Guangdong can be passed off as unavoidable growing pains, bringing hardship to millions yet ultimately facilitating modernization, then its fate is tied up with an historic turning point where the need for transition has become critical under the influence of the ongoing financial crisis. As China approaches 30 years of economic reform, the growth that has brought China this far needs to be reconstituted to shift the balance of the Chinese economy from FDI and exports to domestic consumption, services and innovation.
With the latest hardship brought on by the financial crisis, the suffering toy factories of Guangdong could become monuments to a China that is slowly fading from view: a China characterized by low-value industries and blemished by recalls of unsafe and poor quality products. Guangdong, once the harbinger of China's economic miracle and now caught up in the crunch of the financial crisis, could contribute to bringing the era of the dirt-cheap China price to a close by advancing China's transition to modern manufacturing. Yet in Guangdong, the current price to pay is an overbearing share of misery, for which the promise of the China of tomorrow is little solace.
Image from Mainstreetmeltdown.com, displaying an ice sculpture that was installed by two artists in New York's Manhattan financial district, slowly melting away as a monument to the plight of the US economy.
Next week, Part II: Opportunity in Crisis.
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