Archive for ‘Migrant workers’


U.S. Electronics Maker Knowles Adapts to a Changed China – Businessweek

If you’ve ever used a smartphone, phone, tablet, laptop, or camera, chances are you’ve used a Knowles Electronics product—and it may have come from Knowles’s factory in Suzhou, China. Based in Itasca, Ill., Knowles makes the tiny receivers and microphones that go into many products of Apple (AAPL), Samsung (005930:KS), BlackBerry (BBRY), and Huawei (002502:CH), among others.

Knowles, a subsidiary of manufacturing conglomerate Dover (DOV), is trying to figure out how to stay in China, which has changed beyond recognition since the company arrived in Suzhou in 1995. “When we came it was obvious that very low-cost labor was an important driver,” says Steven Lu, China managing director of Knowles, which also makes components for hearing aids. “Now wages for some positions have gone up five times and even more.” Rising land and raw materials prices and an appreciating yuan have further upended the business model.

Low-end producers of textiles, sneakers, and toys have been shutting their China operations and relocating to Vietnam, Cambodia, and India. That’s not an option for businesses that pack a lot of engineering knowhow into their products. “In the past 10 to 20 years, China has developed a very complete supply chain for us. The whole ecosystem is right here,” says Lu. “And all the major cell phones are now produced in China. Staying close to them is a major driving force” to stay put.

via U.S. Electronics Maker Knowles Adapts to a Changed China – Businessweek.


China’s New Migrant Workers Want More

BusinessWeek: “The red neon sign over the front door of a new entertainment complex in Beijing’s suburban Daxing district—a local garment manufacturing hub—reads simply “The Skating Rink.” Inside, Lady Gaga’s “Poker Face” crackles over loudspeakers, and a strobe light casts red and green pixels of light across a hardwood floor. The young migrant workers who toil in the garment factories nearby typically work on weekends, and have only two or three days off a month. So a crowd begins to form only in the evenings, after overtime shifts end around 9 or 10 p.m.

Twenty-one-year-old He XiaoJie (right) lives in a five-person dorm room within his factory

On a recent Sunday afternoon, the rink has just a handful of early skaters. Among them is a family of five. (Many migrant families manage to disregard China’s one-child policy.) Pudgy 3-year-old Zhefang, wearing a yellow sundress and short pigtails, tugs playfully on the laces of her 5-year-old brother’s skates. Her other brother, who is 9, races full speed around the rink. Juping and Xinfing, the parents, are both 29 and moved here from Jiangxi province seven years ago. Today is one of the precious few days all year that they are together as a family. Because the parents lack a Beijing hukou—or residence permit—they cannot enroll their children in local schools. The two boys now live with their grandparents back in Jiangxi. Xinfing says she “really wants our girl to stay with us” once Zhefang reaches school age, but knows it’s not likely. She scoops up the little girl in her arms and lovingly pats down stray hairs that have shaken loose of her pigtails.

China’s great modern migration from countryside to city began roughly 30 years ago. Starting in the 1980s, new factories in southeastern China began to churn out goods for export and lured workers who could make more on the assembly line than on the farm. In the 1980s and ’90s, most of those who left home were young single people, like the women described in Leslie Chang’s book, Factory Girls. A majority of migrants expected to work for a few years, save money, and eventually return to their hometowns. However, in recent years this pattern has notably shifted. Government planning documents refer to migrants born after 1980 as “new generation migrant workers,” and recent reports from China’s National Bureau of Statistics show how they differ from their predecessors. Just as Juping and Xinfing moved to Beijing as a married couple with a young child in tow, several studies show that a majority of migrant workers now move with at least one other family member.

Beijing’s Daxing district lies outside the Sixth Ring Road, a 90-minute drive from the city center. The local government has made a push to attract garment factories ranging in size from those with a few hundred employees to those with less than a dozen. The workers who come here are mostly in their late teens and twenties. Like previous generations, they have come to start a new life with little savings and a lot of gumption. But they are more tech-savvy, fashion-conscious, and educated than their parents. Most significant, they expect to integrate permanently into city life—putting more urgent pressure on the government to change China’s current system of allocating social services (including schooling and health care) only to those with difficult-to-obtain city residence permits.

In his recent book, China’s Urban Billion, analyst Tom Miller of GK Dragonomics writes, “Surveys show that the majority of the new generation of migrant workers [have] no intention of returning to the penury of rural life.” In explaining the attitudinal shift, he notes: “They are significantly better educated than their parents, and usually adapt far more quickly to urban ways. They hope to become fully fledged urban citizens and enjoy a modern consumer lifestyle.””

via China’s New Migrant Workers Want More – Businessweek.


China urbanization cost could top $106 billion a year: think-tank

Reuters: “The cost of settling China’s rural workers into city life in the government’s urbanization drive could be about 650 billion yuan ($106 billion) a year, the equivalent of 5.5 percent of fiscal revenue last year, a government think-tank said on Tuesday.

A man rides an escalator near Shanghai Tower (R, under construction), Jin Mao Tower (C) and the Shanghai World Financial Center (L) at the Pudong financial district in Shanghai July 4, 2013. REUTERS/Carlos Barria

The figure is based on the assumption that 25 million people a year settle in cities, with the government spending the money on making sure they enjoy the same benefits in healthcare, housing and schools that city residents have, the Chinese Academy of Social Sciences(CASS) said.

“I think the biggest obstacle for turning rural migrant workers into urban citizens is the cost issue,” Wei Houkai, a researcher at CASS, told a news conference, adding that to achieve equality of treatment could take until 2025.

Millions of migrant workers from the countryside and smaller towns work in China’s big cities, often in low-paid manual work, but lack access to education, health and other services tied to the country’s strict household registration – or hukou – system.

China sees the urbanization drive as pushing domestic consumption, which it wants to make the main engine of growth for the economy, replacing exports and manufacturing and investment.

Rural migrant laborers only earned an average 2,049 yuan a month in 2011, or 59 percent of average urban workers’ salary, CASS added.

But they need to pay about 18,000 yuan annually per capita to be able to live in cities and another 100,000 yuan on average for housing, it said.”

via China urbanization cost could top $106 billion a year: think-tank | Reuters.


China’s Smartphone Generation

BusinessWeek: “Every day at noon, workers spill out through the red gates of the Xue Fulan garment factory on the outskirts of Beijing to enjoy one precious hour of lunchtime freedom. They are mostly in their late teens or early 20s, living in no-frills dormitories within the factory complex. Most saunter out on a hot summer day with a water bottle in one hand and a smartphone in the other.

Commuters use their phones riding a Metro train in Shenzhen City, China

While personal computers are rare inside the factory, many of these young migrant workers—who are just climbing onto the lowest rung of the urban economic ladder—are now on the Internet daily. With 12-hour workdays, their free hours are scarce, but they still find time to use social media and dating apps, play video games, and read lifestyle and news sites, where they can catch a glimpse of the upscale urban life they aspire to.

Last week the government-affiliated China Internet Network Information Center reported that 591 million people in China now have Internet access; that’s 45 percent of the population. Just six years ago, only 16 percent of China’s population was online. Among the drivers of the steep rise in Internet penetration: the rapid adoption of Internet-enabled mobile devices, especially among groups that previously lacked regular connectivity, including China’s migrant workers. More than three-quarters of China’s netizens (464 million people) now use a mobile Internet device—instead of, or in addition to, a laptop or PC.

Kantar Media, a U.K.-based global consumer research and consulting firm, polled nearly 100,000 Chinese Internet users about their online habits and preferences in 2012 and just released its analysis of the study: 59 percent of respondents said that online chat and dating were their favorite uses of the mobile Internet, while 43 percent described themselves as “frequent” users of social media. Notably, the number of Chinese netizens who claimed they had visited a social media site in the past day was higher among mobile Internet users (32 percent) than among all netizens (26 percent). Weixin (“WeChat”), Tencent’s (700:HK) popular social-media app, is almost exclusively used on smartphones and tablets.

Megacity commutes are also correlated with more time online. In 2012, Chinese commuters who travelled more than one hour to work were three times as likely to go online daily as those whose commutes were under a half hour. As China’s large cities sprawl, traffic jams proliferate as well. Shen Ying, a general manager at CTR Media, Kantar Media’s joint-venture partner in China, believes that the “fragmentation of ‘social’ time created by longer commutes” goes hand in hand with the “desire for social networking.” Fortunately for China’s lonely subway passengers, Internet access on Beijing’s subway is more stable than on New York City’s.”

via China’s Smartphone Generation – Businessweek.


China Moves on Reforming Hukou?

BusinessWeek: “Is China finally ready to make some serious progress on reforming its restrictive household registration or hukou policy? That’s the decades-old residency system that gives all Chinese an official status as either urban or rural (as indicated in a small red passbook). On June 26, China’s powerful National Development and Reform Commission announced in a report on urbanization that “the government should gradually tear down household registration obstacles to facilitate the orderly migration of people from rural to urban areas,” according to the official Xinhua News Agency.

Residential buildings in Beijing

To date, the hukou system has not only discriminated against hundreds of millions of Chinese, making it difficult for them to live comfortable lives in cities, it has also been an obstacle to Beijing’s desire to reorient towards a more domestic consumption-driven economy. Even though China became a country with an urban majority in 2011, some 230 million of those now living in the cities still have a rural hukou. That means they do not have access to the same healthcare and education benefits as other urbanites, and often can’t purchase apartments or even get a driver’s license. As a result, most end up being big savers, in preparation for an eventual move back to the countryside—not the free-spending Chinese necessary for Beijing’s rebalancing policy to succeed.

The latest proposal by the NDRC is part of a larger package of policies now being drafted, aimed at pushing faster urbanization in China. The commission’s recommendation for hukou reform however appears fairly modest. Rather than allowing the free flow of people to all of China’s urban areas, it instead allows rural residents the right to first get residency in smaller cities. That is a good first step.”

via China Moves on Reforming Hukou? – Businessweek.

See also:


China’s Manufacturers Seek Ways to Cut Costs

Wage inflation and shortage of skilled labour is making outsourcing less easy to justify.

BusinessWeek: “In the southern Chinese city of Zhuhai, two hours by ferry and car from Hong Kong, there’s something new on the rooftop of the large factory complex owned by outsourcing specialist Flextronics International (FLEX): solar panels.

A worker on a communications equipment assembly line in Shenzhen, China

Flextronics first opened shop in Zhuhai in 1999, when the area was a backwater compared with Shenzhen and other industrial hot spots closer to Hong Kong. Today the company’s 50,000 Zhuhai workers produce Microsoft (MSFT) Xbox game consoles, Hewlett-Packard (HPQ) printers, Nike+ (NKE) FuelBands and other electronics. With wages rising quickly throughout Guangdong province along the coast, Flextronics managers must save money wherever they can. “Instead of paying the electric company, I’m able to generate my own electricity,” says Melinda Chong, general manager in charge of infrastructure operations.

A little savings here, a little there—that’s the new focus for multinationals that manufacture in the Pearl River Delta and other coastal export hubs. The country’s one-child policy is taking its toll. The number of working-age Chinese in 2012 fell by 3.45 million, to 937.27 million, according to the National Bureau of Statistics. While that’s just a small drop, it’s the first decline since record-keeping began and marks “the start of a trend expected to accelerate in the next two decades,” the Hong Kong-based China Labour Bulletin wrote in a June 11 report. “China no longer has an inexhaustible supply of young workers.”

China’s government is also mandating big raises: In 2012, 25 provinces increased the minimum wage by an average of 20.2 percent. The current five-year plan ending in 2015 calls for base wages to increase by an average 13 percent a year, part of a policy to address growing income inequality. Coping with mandated wage increases is “very tough,” says Carmen Lau, Asia vice president of human resources for Flextronics. Even when companies offer higher wages, they still find it difficult to hire workers since fewer young people are interested in toiling on factory floors. “We have a smaller and smaller pool” of potential recruits, Lau says.

Some of the biggest electronics manufacturers have relocated to other parts of China where workers are more plentiful and there’s space to grow. “They can’t get land in the Shenzhen area, so they have to be somewhere else,” says Cynthia Meng, an analyst in Hong Kong with Jefferies (JEF). Foxconn Technology (2354), the Taiwan-based maker of iPads and iPhones for Apple (AAPL), has expanded away from the coastal regions. There are 250,000 to 300,000 workers at a Foxconn plant in Zhengzhou in the central province of Henan, according to the company and Bloomberg Industries. Hiring in the interior has helped the manufacturer boost its workforce in China by 50 percent in two years, to 1.2 million.

Wages are going up in the interior, too. “The cost differential is merging very, very fast,” says Jitendra Waral, a Bloomberg Industries analyst in Hong Kong. “If you move inland, it’s not really saving you costs any which way.””

via China’s Manufacturers Seek Ways to Cut Costs – Businessweek.

See also:


China’s Lopsided Labor Force

BusinessWeek: “While a dwindling number of migrant laborers is helping drive up salaries in China’s assembly-line industries and other low-skilled employment categories, a surplus of college graduates for available white-collar jobs is eroding the bargaining power of those with university degrees.

Students preparing for the college entrance exam in China's Sichuan province

Wages have been steadily rising for China’s 260 million migrant workers—who take jobs in factories, on construction sites, in restaurants, and in other sectors with minimal entry requirements. According to the government-led All-China Federation of Trade Unions, the average monthly earnings of migrant workers across China rose 11 percent from 2011 to 2012, to 2,290 renminbi ($370). That exceeds the rate of China’s GDP growth.

Meanwhile, as central-government investment has allowed China to increase university enrollment and graduation rates massively, the demand for college graduates has not kept up. The number of university degrees awarded annually has risen fourfold in a decade, to about 8 million today.

Among those new graduates who did find employment last year, 69 percent had starting salaries that paid less than 2,000 renminbi per month—in other words, their jobs paid them less than they might have earned as migrant laborers, according to figures reported by a the 21st Century Business Herald newspaper on Tuesday.

Those grim numbers won’t, however, dent the hopes of millions of high-school seniors who will be taking China’s three-day college entrance exam the first week in June. The exam, called gaokao, is widely criticized for stressing rote-memorization skills over critical thinking. Critics have called for reforming the test for years, but for now, it’s still a key hurdle—the first of many—for students aspiring to steady jobs and a middle-class life.”

via China’s Lopsided Labor Force – Businessweek.

See also:


Urbanisation: Some are more equal than others

The Economist: “FOR many migrants who do not live in factory dormitories, life in the big city looks like the neighbourhood of Shangsha East Village: a maze of alleys framed by illegally constructed apartment buildings in the boomtown of Shenzhen, near Hong Kong. There are at least 200 buildings, many of them ten storeys tall (see picture). They are separated by only a metre or so, hence the name “handshake buildings”—residents of neighbouring blocks can reach out from their windows and high-five.

The buildings are China’s favelas: built illegally on collectively owned rural land. Rents are cheap. An eight-square-metre (86-square-foot) flat costs less than $100 a month. They symbolise both the success of the government’s urbanisation policy and also its chronic failures. China has managed a more orderly system of urbanisation than many developing nations. But it has done so on the cheap. Hundreds of millions of migrants flock to build China’s cities and manufacture the country’s exports. But the cities have done little to reward or welcome them, investing instead in public services and infrastructure for their native residents only. Rural migrants living in the handshake buildings are still second-class citizens, most of whom have no access to urban health care or to the city’s high schools. Their homes could be demolished at any time.

China’s new leaders now say this must change. But it is unclear whether they have the resolve to force through reforms, most of which are costly or opposed by powerful interests, or both. Li Keqiang, the new prime minister, is to host a national conference this year on urbanisation. The agenda may reveal how reformist he really is.

He will have no shortage of suggestions. An unusually public debate has unfolded in think-tanks, on microblogs and in state media about how China should improve the way it handles urbanisation. Some propose that migrants in cities should, as quickly as possible, be given the same rights to services as urban dwellers. Others insist that would-be migrants should first be given the right to sell their rural plot of land to give them a deposit for their new urban life. Still others say the government must allow more private and foreign competition in state-controlled sectors of the economy such as health care, which would expand urban services for all, including migrants. Most agree the central government must bear much more of the cost of public services and give more power to local governments to levy taxes.

Any combination of these options would be likely to raise the income of migrants, help them to integrate into city life and narrow the gap between the wealthy and the poor, which in China is among the widest in the world. Such reforms would also spur on a slowing economy by boosting domestic consumption.

Officials know, too, that the longer reforms are delayed the greater the chances of social unrest. “It is already a little too late,” Chen Xiwen, a senior rural policy official, said last year of providing urban services to migrants. “If we don’t deal with it now, the conflict will grow so great that we won’t be able to proceed.”

Yet Mr Li, the prime minister, would do well to dampen expectations. The problems of migrants and of income inequality are deeply entrenched in two pillars of discriminatory social policy that have stood since the 1950s and must be dealt with before real change can come: the household registration system, or hukou, and the collective ownership of rural land.”

via Urbanisation: Some are more equal than others | The Economist.

See also:


* Factory women: Girl power

The Economist: “SITTING around a restaurant table, six workers discuss the progress of their labour action. Five of them are women, as are most of their several hundred colleagues who have been occupying the toy factory since mid-April. They have been sleeping on floors, braving rats and mosquitoes, to stop the owner shutting down the factory without giving them fair compensation. Those at the table are all migrants from the countryside. A couple are tearful. All are angry and determined not to give way.

In Guangdong province, where nearly 30% of China’s exports are made, women usually far outnumber men on labour-intensive production lines such as those at the toy factory in the city of Shenzhen, next to Hong Kong. Rural women are hired for their supposed docility, nimble fingers and attention to mind-numbing detail.


But in recent years Guangdong’s workforce has changed. The supply of cheap unskilled labour, once seemingly limitless, has started to dry up. Factory bosses are now all but begging their female workers to remain. At the same time the women who have migrated to the factory towns have become better-educated and more aware of their rights. In labour-intensive factories, stereotypes of female passivity are beginning to break down.

Over the past three decades the migration of tens of millions of women from the countryside to factories in Guangdong and other coastal provinces has helped to transform the worldview of an especially downtrodden sector of Chinese society (the suicide rate among rural women is far higher than for rural men). Conditions in the factories have often been harsh—poor safety, illegally long working hours, cramped accommodation, few breaks and little leave—but for many it has also been liberating and empowering, both personally and financially. Leslie Chang, an American journalist, spent three years reporting on women workers in Dongguan, a city near Shenzhen. In her 2008 book “Factory Girls” Ms Chang wrote that, compared with men, the women she encountered were “more motivated to improve themselves and more likely to value migration for its life-changing possibilities.”

They are still not as well-educated as men (about a year less in school on average, with most having only primary- or junior secondary-school education). But the gap has been narrowing.

Crucially, China’s changing demography has been shifting in their favour. Labour shortages that began to hit low-skilled manufacturing in the second half of the past decade have driven up wages and forced factories to improve working conditions. Once all but unthinkable (for both sexes), strikes have become increasingly common. Anecdotally at least, women appear as likely to take part as men.

Strikes in 2010 affecting factories in Guangdong owned by Honda, a Japanese car firm, helped to galvanise labour activism. One of them occurred in the city of Zhongshan, where the workers were mostly female. The unrest there resulted in pay concessions and set a precedent for collective bargaining led by representatives chosen by the workers themselves, rather than government-controlled trade unions. At the Shenzhen toy factory, the workers have chosen five representatives to negotiate with management. Three of them are women. A male worker says the women are more aware of their rights.

China Labour Bulletin, a Hong Kong-based NGO, reported on March 19th that about a fifth of strikes in Guangdong since the beginning of the year had been in factories and other workplaces with largely female staff. It said that women were also “some of the most active workers posting information online about strikes and protests, and in seeking out legal assistance for problems at work.” The protesting toy-workers offer evidence of this. They have posted photographs on microblogs of protesting female workers clad in red jackets opposite lines of police. One of their slogans reads: “Bad boss—give us back our youth”.”

via Factory women: Girl power | The Economist.


* Right thing to do comes with a price tag

Now we know why the Chinese government has been hesitant about correcting the rights of its vast migrant worker population. If the public expenditure required to turn a rural migrant worker into an urban citizen is estimated to be around 80,000 yuan ($12,664) in China, then the total for the estimated 230m migrant workers to be fully urbanised will cost some 3 trillion US dollars. A cost even China will find too large to handle in one go.

The Times: “100,000 … yuan is the estimated cost of turning a rural resident into a fully registered urbanite and providing them with all the healthcare, education and social security rights denied to China’s vast migrant worker population when they move to the cities.

Workers weld a standing on the roof of a building at the Guanyinqiao Pedestrian Street in Chongqing Municipality, China

Dangerously belated reform of China’s household registration — hukou — system may or may not be unveiled by Beijing this year. Clearly there is the political will, but officials mutter that the reform package is snagged on the details.

If that £10,600 estimate proves even close to reality (it’s a government estimate, so don’t expect too much from it) and if the reforms were tested initially on a limited basis to affect only 10 per cent of China’s overall migrant worker population, that would still cost about two trillion yuan (£211 billion). If the Government shouldered only a third of that (splitting the financial burden three ways with companies and employees), China would be paying more on this first blush of hukou reform than it is spending on its entire military budget.

But, according to the CLSA economist Andy Rothman, it would be money well spent. Grant migrant workers an urban household registration and all sorts of good things would happen. They would become consumers, they would become a more highly skilled and better-educated slab of workforce. They would be a less consistent source of social unrest.

For Beijing, it is painfully clear that foot-dragging on hukou reform is really not an option any more. If the Government flinches at the cost, the very considerable social implications or the politics of reform, China’s great urbanisation story could lurch from nice to nasty in short order. Miss the chance to reform and, at best, the whole programme of switching China’s growth model towards consumption stalls because tens of millions of migrant workers are forced to remain precautionary savers. They would remain unwilling to think of more than a small percentage of their income as disposable because, without an urban hukou, they are condemned to live without the protection of a welfare system.

At worst, the migrants create a permanent underclass in each of the 150 Chinese cities with populations of more one million. As the administration in Beijing knows well, this is not an underclass that could be relied on to behave itself: without reform, it will only grow angrier.

The problem, as usual, is one of scale. China’s 234 million migrant workers are unambiguously the backbone of the economy. Somebody has had to constitute an unlimited supply of labour and be prepared to work at a subsistence wage for the Chinese “miracle” to work at all. The migrants are those people. Migrant workers keep China’s factories humming, they cook, they clean, they funnel money from the cities to the countryside and, most symbolically, they built the place as 90 per cent of the construction industry workforce.

And the problem is that they all have mobile phones and internet access. Much though China would like to test out a bit of hukou reform on a smallish initial batch of 20 million people (equivalent to the population of Romania), as soon as that process began the other 210 million migrant workers (equivalent to the population of Indonesia) would start asking why some were receiving the blessing of urban residency and not others.

It’s an all-or-nothing game, unfortunately for Beijing, and that calculation of 100,000 yuan per person suddenly implies a £1 trillion burden for the State.”

via China in numbers: right thing to do comes with a price tag | The Times.

Law of Unintended Consequences

continuously updated blog about China & India

ChiaHou's Book Reviews

continuously updated blog about China & India

What's wrong with the world; and its economy

continuously updated blog about China & India