Jun 09

Power Grows for Stricking Chinese workers. Good for China?

Written by guest on Wednesday, June 9th, 2010 at 11:57 am
Filed under:-mini-posts, Analysis |
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Chinese Workers: “I’m mad as hell and not going take it anymore.”


The Recent suicides at Foxconn seems to be a watershed moment for Chinese workers who are fed up with the long hours, low pay and crappy cafeteria food. Recent strikes at this company, Honda and KFC recently announced substantial pay raises raises alarm bells for the companies and questions if they can still can produce goods affordability in China. China has already facing a of shortage workers in Guangdong/Shenzhen areas as well while the Chinese government is willing to stand aside and allow these strikes to happen.

While many Western Businesses are afraid this this is just the beginning, I believe that this is no longer business as usual where some Western Company where they can just build a factory in China Workers will come. The Chinese government is already making it harder for business to produce low end, high carbon goods.

While it might sound bad about the ability for China to continue to be the “factory of the world.” I don’t believe it is. The workers mostly strike in places where it is to the East of China where labor intensive industries are starting to get discouraged. China is constantly encouraging Western Companies to set up shop in central or Western China while enticing Western and Chinese Companies to produce value added goods or services. I believe the landscape will be good in China for the next few years the when Chinese government encourages development of the 2nd the 3rd tier cities and can still be the “factory of the world.”

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15 Responses to “Power Grows for Stricking Chinese workers. Good for China?”

  1. Legalist Says:

    I agree. Especially I’m disgusted Honda pays minimum wages. Autoworkers should make into the rank of middle class, with job security and good salary.

  2. TonyP4 Says:

    Supply and demand should take over on the rising wage decisions. If you can find a better offer, work some where else. If you cannot find enough workers, raise the salary. Simple as that.

    When the wages are not competitive, the employers will move jobs outside China, like Vietnam. China needs to move to mid tech for the majority of the products for better profit margin and develop a stronger internal market before they can afford to lose low-end jobs. It is part of the progress to a developed country. However, when the boat is shaken too much, it will sink.

    Coastal and southern cities are developed first. The other cities are not primed for full development. Inner cities are too far away from the port for exporting the goods. Many cities along the Yangtze are in better shape in power supply and navigation after the Three Gorges Dam. The west territory has a lot of problems that may not be fixed easy in our life time unless there are oil and minerals discovered.

  3. ChineseInUK Says:

    Agree with what has been written & commented so far.

    Despite the fact the rising in wages was triggered by sad news of suicides, this is great news for China, as this will start a chain of reactions:

    1. Coastal city can lead the way in China’s moving up the value chain into higher tech operations
    2. Inner Cities get the chance to start on the development trail
    3. The increased wages help to sustain China’s domestic demand and continuing ecomonic growth

    Who is going to pick up the tag on all this? The OEMs in China? Highly unlikely. They are already on water-thin profit – the standard factory profit margin is $1 per iPod/laptop. The Western consumers? The price constaints are high in the recession. It is the Western brand name holding corporations that are most likely to have their net profits sqeezed. I’m afraid my heart is not bleeding for them the slightest.

  4. Wukailong Says:

    In the long run this isn’t so much the West vs. China as a question of how valid the modern system is, where poor countries are supposed to provide low-income labor as their “comparative advantage,” and rich countries reaping most of the benefits. It’ll probably work as long as there’s are large income disparities between countries, but what happens when there isn’t?

  5. TonyP4 Says:

    There are always income disparities between countries as the world’s natural resources (minerals, oil and farmland) are not evenly distributed. Some natives are lazier than others – check out my coconut theory.

    The poor countries are fighting for the jobs from richer countries. All love to to be exploited. China provides the reasons for them to outsource the factory jobs besides low wages: good infrastructure, hard-working/disciplined/educated work force, stable political environment, internal market, tax incentives… When China gets richer (moving to more profitable mid tech industries), it will lose its advantages. It is part of the process of moving to a developed country like Japan and Korea.

  6. pug_ster Says:


    I would disagree with you as this has nothing to do with worker’s rights at all, it is merely increasing the wages as the result of supply and demand. As for the case of Honda:


    The 2 “strike leaders” got fired for ‘unrelated reasons.’

    In the exports business in China and someone tells me that they got the 30/30/30 rule. It takes 30 days to procure the raw materials, 30 days to produce the product, and 30 days to ship the via a container to the US. Depending on the type of business that you have, the time varies. I guess if Foreign companies move their production away from the coastal China, the time will increase a little. At least it will entice workers that used to be migrant workers because they are working closer to home. Talking about migrant workers I think that this might be the start of the decline of migrant workers as Foreign companies set up shop where the people are so these workers will go home to their families after work instead to their dorms. Perhaps that will be a good thing.

  7. pug_ster Says:


    Interesting article about Foxconn abandoning its ‘factory town’ model.

  8. Legalist Says:

    Foxconn has the right idea. It’s workers need to find their own place of living. The company just pays wages. All else should be taken care of by workers themselves or local governments.

  9. TonyP4 Says:

    Sorry, beg to differ. ‘Factory Town’ model is the most efficient for both the workers and employers. Without it, the workers have to pay more for living space plus the transportation cost (and saving all the pollution from commuting to work). The medical care and entertainment are provided as the minimal cost but far better and cost less if the worker seeks them himself.

    Within the factory area, there are supporting factories providing components like memory chip, power supply for the iPod. For Nokia, most supporting factories are not owned by Nokia. Foxconn could be different as the company is the largest in the world.

    I bet the suicide rate per capita is not out of range from the factory and the general population in China. The workers do jobs better than the robot and most could be younger, migrants workers.

    It is a classical case of labor dispute. Hope they will get better compensated and at the same time do not lose jobs to other countries like Vietnam and Mexico.

  10. pug_ster Says:


    These factory towns are efficient, too efficient. But I doubt that it would be the mainstay within China for long. Most people who work in these factories are mostly young, unmarried people whom are willing to travel thousands of miles out of their hometowns to work. I doubt that would last forever. I think eventually, many companies doing business in China will have to set up shops near where the people live and hire older workers. I think it would be only be a matter of time.

  11. TonyP4 Says:

    pug_ster, Yes, i hope to agree with you. Hong Kong was like that at one time and changed to what you described. The problem is when the living standard is improved, so is the labor cost, and so are more jobs lost to other countries. I bet China will develop the home market faster and more higher tech products with larger margins so they do not have to depend on the export that much. It will happen gradually but slowly from my prediction.

    Chinese major cities still depend on the young migrant workers from the rural area. If they find good employment from their village, they will not move. Most married migrant workers have children raised by their grand parents in the village. That’s why the returning home during New Year holiday is so important to them and HSR has been doing a great job for some to return home. It happens in many other places in the world but not the same scale as in China.

    To make the factory efficient, there are many factories built close to it to supply components. The primary location choice of these factories is closer to the main factory like IPod factory. When Nokia built the factory, the city planner allocated space for their suppliers to build factories close by and basically it formed a factory city.

  12. pug_ster Says:


    Looks like Foxconn is opening up a factory in Hebei.

  13. TonyP4 Says:

    It seems more advantages than disadvantages to have another factory city in NE. The workers are not migrant workers and more plentiful.

    The local province or city must have given a lot of tax advantage and/or incentives. If they do not have new orders, they have to move some jobs from the current factory. The wages in South China are getting too expensive. The North East is not the same as most other special economical zones. They need to update the infrastructure (electricity and transportation) for such a factory city.

    They have considered opening factories in Vietnam. I do not think the Vietnamese want to work under Chinese. Vietnam is like China 20 or so years ago and full of willing young workers.

  14. r v Says:

    Lot of companies have considered opening factories in Vietnam and India, only to scale back plans. Vietnam and India do have plentiful workers, like China 20 or so years ago, but Companies are demanding different things than 20 years ago.

    Foreign companies want educated young workers, but also huge scale of production. (well, because now even Chinese businesses can set up some small to medium scale factories and crank out products for export, the profit margin required huge scales of production.)

    Some of the new factories in China are just unbelievably massive. Intel’s Mega-fab in Dalian has 20,000 Sq. M of enclosed area. That’s approximately 5 acres of indoor space. In comparison, Intel’s Oregon fab was only 16,258-sq.-m in area, and it included R&D areas, not just manufacturing.

    1 problem with India is its dismal literacy rate.
    The problem with Vietnam is lack of infrastructure that are required for the new huge scale production facilities. (for that, the Chinese government is a selling point for China, because the Chinese government has a long history of proven ability to set up the necessary infrastructures within a very short amount of time.)

    NE China has a lot of unused space, and the local wages are still very low. more selling points.

  15. pug_ster Says:

    Looks like Foxconn is setting up shop in Chengdu.


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