Economy, Talking Point

The great migration

China’s manufacturing base is facing a massive people shortage

The great migration

Clocking off: many migrants workers this year are going home for good

On January 24, 1984 a train pulled into Guangzhou Railway Station. From it exited China’s paramount leader, Deng Xiaoping. Without exchanging pleasantries, he told local officials: “I proposed the establishment of the special economic zones. I came here because I want to know if my idea worked or not.”

Shenzhen was China’s first special economic zone, and hence the first stop on his itinerary. According to Li Lianqing – who accompanied Deng on his trip and later became a vice premier – Shenzhen’s mayor informed his eminent visitors that the city’s GDP had doubled the previous year, and was now 10 times greater than in 1978 – when the idea for an economic zone was floated.

Deng was delighted. His idea had worked. In fact, were he still alive today he’d be even more awestruck by an inspection tour of Shenzhen. The place was a sleepy backwater in 1978 – with an industrial output of just Rmb72 million. Three decades later its GDP had exploded to Rmb780 billion.

Economists can point to several reasons why the city’s economy got 10,000 times bigger (and in about the same time it took Boston to finish its Big Dig). But one of the most important was an influx of cheap and hard working labour from China’s inland provinces. Migrant workers gravitated to China’s ultimate migrant city.

Shenzhen led the way, the rest of Guangdong followed. A mass migration of workers found jobs not only in the province’s 400,000 factories but likewise building roads and skyscrapers. The province’s ‘floating’ population of non-resident workers was never easy to measure. But government population statistics estimated it at 31 million as recently as 2005.

However, there are signs that the migrant population could be in rapid decline. Over the past fortnight trains have been pulling out of Guangzhou Railway Station, taking migrant workers back home to celebrate the Lunar New Year with their families. The fear is that 20% of them won’t come back…

Why not?

According to a survey by the Southern Metropolis Daily over one in five workers won’t return to the giant manufacturing city of Dongguan. In Leslie Chang’s excellent book about Dongguan – Factory Girls – she estimates there are as many as 10 million migrants employed in its factories. These legions of workers have made Dongguan the fourth largest exporting city in China.

However, the survey by the Guangzhou-based newspaper indicates that 21% of those migrant workers polled won’t return after the long Chinese New Year break i.e. this coming week. The major reasons were “unsound employment conditions” and low salaries – factories pay a minimum wage of Rmb770 per month ($112). Most of that gets depleted by the city’s high living expenses, meaning migrants are unable to send much money home, says the newspaper.

The China Daily concurs that Dongguan faces a serious labour problem. It interviewed Yang Fushou, a general manager at a factory making toys and a member of the local government’s advisory body. He said he now found it difficult to hire qualified workers and he’d even conducted his own survey of the Pearl River Delta’s migrant population to find out why. His conclusion: if it is to attract migrants the local government must raise the city’s minimum wage to Rmb1,000.

One factory owner that WiC spoke to estimated that in certain industries – notably textiles – as many as 40% of workers might not return to Guangdong. The People’s Daily reports that the province’s toy industry faces a labour shortage of over 50%.

How different to five years ago…

Yes, those with reasonable memories will recall that China’s coastal factories were blessed with seemingly infinite supplies of surplus labour. Books like Alexandra Harney’s The China Price described to terrified European and American executives how this cheap labour had made the nation the ‘factory of the world’. Western buyers flocked to the Canton Fair to buy products that cost “half or even a fifth of what it would cost in America” wrote Harney. All thanks to those migrants.

Back then the factories could afford to be picky too. Chang’s Factory Girls describes a typical job listing: “Lathe worker. 18-22 years-old male. Experience at foreign factory. Nearsighted. No skin sensitivity.” Another specified that a candidate should be able to “eat bitterness and endure hardship”.

Such ads are less common today. The South China Morning Post reports that factory bosses are so worried by the labour shortages that they’re offering “perks” to get staff to return after the Lunar New Year: “Labour shortages in the Pearl River Delta are prompting Hong Kong factory owners to offer perks such as films, better food, air conditioning and even bonuses to retain migrant workers and lure new employees.”

The SCMP also notes that as “exports begin to recover” factory bosses like Tommy Lam – who makes jacket – is offering a Rmb300 bonus to any migrant who brings a worker to join the factory. “It is very difficult to hire workers,” says Lam, who wants to add 200 workers to his existing 800.

“Labour shortages are a big headache,” says Stanley Lau, deputy chairman of the Hong Kong Federation of Industries. “Many factories dare not take new orders because of insufficient workers.”

Sounds bad. Is it?

It’s not great if you are a factory owner. Likewise if you are a buyer for a firm like Walmart, you might be concerned. If the shortages persist, the price Western consumers pay for ‘Made in China’ products at the checkout may have to go up.

But there is a plus side: according to Li Jing, an employment expert with the Chinese Academy of Social Sciences, migrant workers now have more employment choices closer to home due to the rapid development of the central and western regions where many were born.

For example, China Radio International interviewed a worker named Hu from an electronics factory in Dongguan, who said there were now many factories in his hometown in Gansu. “The work may be harder, but I can save more money, so I will probably not come back after the festival,” he said.

The success of the government’s $586 billion stimulus package has also created big demands for labour. An infrastructure construction boom is seeing rapid urbanisation and development of the interior.

It may be disastrous for Dongguan, but paradoxically it points to a more balanced picture of economic development. China’s GDP growth – long driven by the exports of the coastal provinces – is moving inland. For those who want China to move from an export-led model to one based on growing domestic consumption, this is a positive. And if Dongguan does raise salaries to attract workers, that is no bad thing either – once again, it should rebalance the economy towards consumption. (See Economy, page 5).

Reversing the ‘great migration’ could provide social benefits too. It is estimated that four in 10 juvenile delinquents are the kids of migrant workers. Left behind, these children have missed out on parental discipline and love; a large number have turned to petty crime. They are the collateral damage of China’s migrant-driven economic revolution. So if fewer parents need to leave home to find work, it could be a victory for the nuclear family. That might lead to less delinquent behaviour, less crime and greater social stability in those provinces that have traditionally been the biggest exporters of labour.

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