Economy

Wrong step?

The shoe factory looking for 47,500 workers

“Should I have caught that bus?”

This year, Hubei-native Gou Ximei had more choices than usual. Her annual trip to her hometown was almost over, and she had already bought a bus ticket back to Zhongshan, an industrial town in Guangdong, where she had worked in a shoe factory for nearly 10 years. The dilemma, she told Southern Weekend, was whether she should get on the bus back to Zhongshan, or stay put and get a job in the giant shoe factory nearby.

Her decision suggests that there’s no place like home: after hours of deliberation, she had her ticket refunded.

One major development may make Gou regret her choice; the Guangdong government raised the province’s minimum wage last week by an average of more than 20%. This means that the millions of workers slogging away in China’s main manufacturing province will be able to take a little bit more home at the end of the month: the minimum monthly wage in Guangzhou, the provincial capital, will be Rmb1,030 ($150). The new wage in Dongguan will be Rmb920, and those working in the smaller towns will get between Rmb660 and Rmb810 a month. The pay rise will come into effect, appropriately enough, on Labour Day, May 1.

Labour shortages are becoming increasingly serious in China’s coastal manufacturing centres (see WiC50), and the pay rise is intended to help factories attract and retain workers. It follows a similar measure by Jiangsu province, which last month increased its own minimum wage by 13%, to Rmb960.

While the lowest-paid workers will welcome the extra cash, business owners are not so happy, since it adds costs in an industry where margins are often as low as 3%.

“Factory owners around here certainly did not expect the government to suddenly pull up wages by so much,” a Dongguan factory owner told the Financial Times. “This is crazy. How can we compete for orders when our rivals in Cambodia are offering much lower prices?” He also said that factories are moving inland to take advantage of cheaper wages and lower taxes.

But one shouldn’t assume that businesses that leave the coast have an easy time. Take, for example, the factory that Gou Ximei decided to stay and work for: it is owned by Taiwan’s Pou Chen Group, the world’s largest shoemaker, and its attempts to establish a manufacturing centre in Hubei are still facing labour shortages.

Part of the problem might be that Pou Chen is being a little ambitious, as it intends to hire 50,000 people in Yangxin, a county with a population of just under one million. Even with a government-backed campaign to attract workers, the total number of hires is around 2,500, according to a report in Southern Weekend earlier this month. Most of the employees are local women that want to take care of their families. Many of the new workers were unskilled, and they had to be sent by train to Dongguan for training.

Young single workers, don’t see as much attraction in working close to home. One reason is the money: 22-year-old Chen Jianghai earns Rmb2,500 a month in a garment factory in Hangzhou, which is more than double the Rmb900 to Rmb1,200 he would earn if he stayed in Yangxin. He admits that his salary in the big city doesn’t really allow him to save much, but earning half in his hometown is simply unacceptable. Another factor is that going away broadens his horizons: “The world in my home town is too small.”

His younger sister also wants to escape rural Yangxin. Why? “It’s no fun at all.” Indeed, as Leslie Chang points out in her book Factory Girls, one of the chief attractions of migrating is to escape conservative parents and enjoy greater independence. “Home is good, but you can only stay a few days,” is how one female migrant worker summed it up for the author.


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.