V for victory, the R is over

With export factories short of people, can there still be a recession?

V for victory, the R is over

Crisis over? It depends on how you spin it

Stories of factories struggling to find the workers to fill their new export orders sounds like good news for the rest of us.

At least, that is what devotees of the ‘V’-shaped recovery seem to think. If the bosses are complaining that their factory lines can’t keep pace in sticking the glittery eyes on Barbie, or painting Thomas the Tank Engine blue, exports must be recovering (or they are expected to shortly). That means that international consumers must be showing signs of life too.

But what if this is less about a V for recovery and more a case of China’s migrant workers showing the V-sign to their former bosses – in a not-so-polite refusal to return to their former jobs?

It’s true that the anecdotal evidence is suggesting some labour shortages, especially in the southern province of Guangdong, as well as in the east nearer Shanghai.

The Chinese press is beaming. The reports are of resurgent recruitment fairs and job offers being fly-posted on factory walls. State media says there are at least 250,000 vacancies in Zhejiang, in the eastern Yangtze River Delta.

In the city of Wenzhou (one of the most export-centric in the country) local companies are resorting to hitherto untested tactics to lure workers. Dongyi Shoes Company is a good example – with perks that include free meals (with fruit), a dormitory with air-conditioning (and TV), and decent holidays, reports the China Daily. “Factories in the city are thirsty for labourers,” says Wang Ouxiang, deputy secretary of the Employment Service Centre.

The export data is showing signs of improvement as well, says HSBC, with a slowdown in monthly declines (in year-on-year terms).

True, real growth remains absent – but it still looks like the worst might be over. Trade with Asian economies is recovering best – exports to ASEAN countries fell 12.7% year-on-year in August, compared to a 17.4% decline in July.

HSBC also notes that labour intensive industries (like textiles, shoes and toys) are leading the charge. This may be skewing some of the news on employee shortages. So too might a pick-up in demand as Christmas approaches. Exporters say that orders are arriving months later than normal, as retailers have waited until the last moment to commit. This means that production cycles are compressed – and that the additional workers are needed at even shorter notice.

What is less clear is how many will need to hang around after the Christmas peak. And suspicions about seasonality may also need to take to take a back seat to something else: a sea change in the attitude of the 20 million migrant workers who were laid off earlier in the year.

That level of redundancies could well be a conservative estimate. A new study from Stanford University and the Chinese Academy of Sciences (CAS) reckons that 45 million of those in ‘off-farm employment’ lost their jobs as the credit crunch hit home last autumn. Still, the majority managed to find new jobs relatively quickly in the aftermath of the mass layoffs. According to the National Bureau of Statistics, at least 14 million of the 20 million jobless migrants were back in work (usually in their home provinces) within a few months. That seems to suggest that the stimulus planners can pat themselves on the back.

Some expect these jobs to be dropped in favour of the ones lost less than 12 months ago.

But what if some migrants are not so keen to head back to the export zones, speculates the China Daily? Especially when the economic outlook is still so unclear, and when it would mean leaving their families all over again?

Jing Shuiming, writing in the Global Times, agrees that attitudes may be changing. Expect the current generation to be a lot pickier than its predecessors, he warns. Companies who don’t get this should expect to be short of people in future.

Jing is focusing less on what the shortages tell us about a recovery in exports and more on what they say about changes among the people who have assembled them.

Of course, it is too early to say if something significant is underway. Wages in the export zones have always been a little higher than migrants can earn closer to home. Pay may be improving in China’s interior but it still trails the rest of the country.

But if this differential was to narrow, or if workers were to believe that they deserve more to justify the upheavals of migratory life, one of the core planks in the exporters ‘workshop of the world’ model comes into question.

At the very least, this will put pressure on margins already thought to be thin ones. It may mean that new regions of China begin to emerge as export powerhouses. Most likely in the more immediate future, we’ll all have to start paying more for Chinese-made goods. The V-shaped recovery bites back, perhaps.

Yet for all the talk of the country’s economic miracle, millions of Chinese are still paid pitifully little.

The Stanford/CAS data also shows that pay has fallen this year for the ‘off-farm’ workers in its survey, from about Rmb850 a month ($125) last year to Rmb765 now.

For those stuck with such low wages, that doesn’t sound like much of a miracle at all. But it does make those extra few dollars a month – that exporters pay in their factories – look a lot more enticing. n

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