Economy, Talking Point

Port in a storm

Does a strike by Shanghai truck drivers signal inflation crisis?

Port in a storm

In a jam: Shanghai’s port was blockaded last week by protesting truckers

In April 1956, the Ideal-X set sail for Houston from Newark. It was a landmark journey, the first voyage of what we now think of as a ‘container’ ship – those huge vessels that have transformed world trade by vastly reducing the cost of moving goods around the globe.

The history of the shipping container is eloquently recounted in The Box by Marc Levinson. He recounts an anecdote from the container’s pioneer, Malcom McLean, on how he came up with the original idea. McLean, a former trucker, said his eureka moment came after spending hours in late 1937 queuing at a Jersey City pier to unload his truck. “He realised it would be quicker simply to hoist the entire truck body on board,” writes Levinson.

The image of a backed-up queue of frustrated truck drivers, clogging up a port will have resonated with China’s leaders last week. More troubling for the authorities, the truckers who have barricaded Shanghai’s docks this week look to have some revolutionary ideas of their own…

What is going on?

The New York Times reports that on April 20 around 2,000 “angry truckers blockaded some cargo facilities and tried to overturn police cars”. The wildcat strike effectively shut the world’s busiest port, meaning goods could not get in or out of Shanghai. Reuters reported that drivers who tried break the picket line and unload their containers were pelted with rocks by the strikers.

Riot police were sent in to break up the blockade, and a domestic media blackout was ordered to prevent copycat strikes breaking out elsewhere. However, the truckers were still blocking Shanghai’s Baoshan Port three days later, long enough for the Financial Times to run a headline claiming the strike had ‘rattled’ Beijing.

Government officials clearly feared an escalation that might see disgruntled truckers barricading ports elsewhere. That could throttle much of China’s trade with the rest of the world.

It was serious: one local logistics firm estimated that 60% of containers in Shanghai were stuck at the docks as a result of the industrial action. That had a knock-on effect right through the supply chain. “In Wuxi one wire factory reported that its shipments would be delayed,” wrote the FT.

Why were they striking?

One driver told the Wall Street Journal that the truckers were furious about the recent rise in fuel prices, and its impact on their earnings. Another trucker told the newspaper that logistics companies pay a daily haulage rate of Rmb1,200 – a per diem that hasn’t risen in a decade. But with the increase in costs, he could only take home Rmb200 a day. (An investigative journalist that accompanied a trucker from Chengdu to Beijing found the driver carried 37 tonnes for 37 hours and lost Rmb110 on the journey.)

The complaint is not only that diesel prices have been increased twice already this year but also that port fees are up too, including a charge of Rmb135 to unload a container. Drivers said this crane fee cost half that a year ago.

The truckers called on the government to lower dock fees and other costs they faced to help boost their dwindling incomes.

A sensitive time?

Beijing has been sensitive to any form of protest in recent months – with the wider context of unrest in the Middle East, as well as the ongoing struggle to contain inflation at home. Nor is it lost on Party leaders (keen history students) that 2011 also marks the centenary of the 1911 Revolution that ended the rule of the Qing Emperors. That revolt started in Wuhan and spread across China.

As WiC reported in issue 100, the central government has become wary of any local incident that might trigger wider dissent. Last month in Nanjing, residents used weibo (a Chinese version of Twitter) to take photos of much-loved wutong trees that the local government was chopping down to make way for subway lines. Soon large crowds had gathered to object, tying green ribbons around the trees. Rather than see these protests continue, Beijing ordered local bureaucrats to halt and launch a public consultation process.

The big issue is inflation…

But the root cause of the government’s nervousness – and why the truckers are on strike – is inflation. This is a topic that WiC has mentioned repeatedly since issue 86, when the price of a basket of vegetables surged 62% in the first 10 days of November on the prior year. Interest rates have been raised in response, and a series of administrative measures introduced to control prices. However, in March the consumer price index rose to a 32 month high of 5.4%. Food costs rose at more than twice that rate.

In an unusual measure Xinhua released a transcript of Premier Wen Jiabao’s candid comments at a State Council meeting. He said the economic environment was “complex” but reiterated the government would do whatever it could to curb inflation, which he called the top priority this year.

The worry is that price rises hit ordinary folk hardest, especially for basic items like food. Perhaps that’s why in Gallup’s recent global wellbeing survey, 71% of Chinese respondents described themselves as “struggling”, reports the Shanghai Daily. A further 17% said they were “suffering” and only 12% claimed to be “thriving”. If Gallup’s sample is an accurate representation of the overall mood, it suggests rising prices are hurting sentiment.

And those stats reveal the potential for instability. “Chinese officials have warned that soaring prices and rampant official corruption pose the greatest threat to Communist Party rule,” observes the FT. Hence Beijing’s determination to see the truckers end their strike – and quickly.

But Chang Kai, a labour expert at Renmin University, told the Wall Street Journal the government had made a mistake in raising fuel prices so fast.

“Truck drivers are at the lowest level of society,” Chang said. If the strike “is handled poorly, it will intensify conflict in the whole economy and society, and also be a model for other industries.”

Did the truckers win?

The drivers, most of whom are independent operators from outside Shanghai, were demanding an increase in their flat-fee haulage payment to offset rising costs, reports the China Labour Bulletin.

But a compromise was reached. On Saturday, Shanghai’s Municipal Transport and Port Authority repealed a fuel surcharge imposed on trucks using the port and cut a surcharge on containers from Rmb50 to Rmb20.

That was enough for the protest to “ebb”, reported the New York Times.

Saturday also marked the first time the state media began reporting on events. While the newly- agreed port charges ‘helping truckers’ were announced, no mention was made of the protests that had led up to them.

In spite of the news blackout, many Chinese had heard of the strike due to comments made via weibo. The censors did their best to remove these too. An example of one of the more caustic posts to be deleted: “In order to celebrate the rise in petrol prices, the truckers decided to take a day off. In order to protect them, thousands of police also turned up.”

The government will hope the truckers’ strike remains a one-off. Likewise it will be hoping that HSBC is correct in its forecast on inflation: the bank thinks that it will “slow meaningfully” in the second half and full year CPI will drop to 3.9%.

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