Chindia Alert: You’ll be Living in their World Very Soon
aims to alert you to the threats and opportunities that China and India present. China and India require serious attention; case of ‘hidden dragon and crouching tiger’.
Without this attention, governments, businesses and, indeed, individuals may find themselves at a great disadvantage sooner rather than later.
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Pou Chen makes footwear for the likes of Nike and Adidas, but says it has suffered from a lack of orders as global value chains strain under the impact from the virus
Chinese workers moved to Vietnam to help set-up new factories as the company expand its production, but have now become expendable
With the likes of Nike and Adidas closing retail stores around the world to comply with social distancing requirements, analysts also said orders plummeted 50 per cent in the second quarter, although the company declined to comment on the media reports. Photo: Bloomberg
A group of 150 Chinese workers believe the world’s largest maker of trainers used the coronavirus as an excuse to fire them, having helped Taiwanese firm Pou Chen successfully expand its production into Vietnam for more than a decade.
Pou Chen, which makes footwear for the likes of Nike and Adidas, informed the group in late April that they would no longer be needed as they were unable to return to
from their hometowns in China due to the coronavirus lockdowns.
“We believe we contributed greatly to the firm’s relocation process, copying the production line management experience and successful model of China’s factories to Vietnamese factories,” said Dave Zhang, who started working for Pou Chen in Vietnam in 2003.
“Now, when the factories over there have matured, and there is a higher automation level in production, our value has faded in the management’s eyes and we got laid off, in the name of the automation level.”
Rush hour chaos returns to Vietnam’s streets as coronavirus lockdown lifted
The group claims the firm began to fire Chinese employees several years ago, with the total number dropping from over 1,000 at its peak to around 400 last year.
“We 150 employees were the first batch of Chinese employees to be laid off this year. We are all pessimistic and expect more will be cut,” added Zhang.
In its email on April 27, Pou Chen said it was forced to terminate the contracts of the Chinese employees across five of its factories due to an unprecedented decline in orders and financial losses.
The Chinese employees, many of whom have been working for the shoemaker for decades, said the compensation offered was unfair and below the levels required by labour law in both Vietnam and China.
In a further statement to the South China Morning Post, Pou Chen stood by the move as the coronavirus pandemic had reduced demand for footwear products and so required an “adjustment of manpower.”
“[The dismissals were] in accordance with the relevant labour laws of the country of employment … and employee labour contracts,” added the statement from Pou Chen, which employs around 350,000 people worldwide.
Company data showed Pou Chen’s first quarter revenues tumbled 22.4 per cent year-on-year to NT$59.46 billion (US$1.99 billion), the weakest in six years.
With the likes of Nike and Adidas closing retail stores around the world to comply with social distancing requirements, analysts also said orders plummeted 50 per cent in the second quarter, although the company declined to comment on the media reports.
Last month, the company was also mulling pay cuts and furloughs that would affect 3,000 employees in Taiwan and officials based in its overseas factories, according to the Taipei Times.
Andy Zeng, who had worked for the firm since 1995, said the group were “very upset” when they received the news last month as the impact of the coronavirus pandemic began to reverberate around the world, disrupting global value chains.
“Most of us joined Pou Chen in the 1990s when we were in our late teens or early 20s, when the Taiwan-invested company started investing and setting up factories in mainland China. Now more than two decades have passed,” he said.
Zeng was among the first generation of skilled workers in China as Pou Chen developed rapidly, enjoying the benefits of cheap labour, although the workers themselves were rewarded with regular pay rises.
The company needed a group of skilled Chinese workers to go to its new factories in Vietnam. I said yes because I thought it was a good opportunity to see the outside world – Andy Zeng
“I worked at the Dongguan branch of Pou Chen for 11 years from 1995.” Zeng added “In the 1990s and early 2000s, the company expanded rapidly in Dongguan with a growing number of large orders, and every worker had to work hard around the clock. I remember I earned 300 yuan (US$42) a month in 1995, and my monthly salary rose to 1,000 yuan (US$141) in 1998.”
Zeng’s salary eventually rose to over 3,000 yuan in 2005 as China’s economy boomed, leading Pou Chen to seek alternative production sites in Vietnam and Indonesia where labour and land were even cheaper. However, in the early 2000s, the new locations lacked skilled shoe manufacturing workers like Zeng.
“The company needed a group of skilled Chinese workers to go to its new factories in Vietnam. I said yes because I thought it was a good opportunity to see the outside world and the offer of US$700 per month was not bad.” Zeng said.
“We actively cooperated with their plans. Over the past decade, we have been away from our families and hometowns, and followed the company’s strategy to work hard in Vietnam.
With no deaths and cases limited to the hundreds, Vietnam’s Covid-19 response appears to be working
“In 2005, the company sent me to its newly-built factory in Vietnam. This year was my 14th year in Dong Nai in Vietnam. I have witnessed the company’s production capacity in Vietnam become larger and larger. When I arrived, there were only a few production lines, and now there are at least dozens of them, employing more than 10,000 workers in each factory.”
According to a report in the Taipei Times on April 14, citing both Reuters and Bloomberg, Pou Chen was ordered to temporarily shut down one of its units in Vietnam over coronavirus concerns, according to Vietnamese state media.
The company was forced to suspend production for two days after failing to meet local rules on social distancing, Tuoi Tre newspaper reported.
“We Chinese employees actually were pathfinders for the company’s relocation from China to Vietnam,” said Zhang, who was in charge of a 1,700-worker factory producing 1.7 million shoe soles per month.
What our Chinese employees have done in Vietnam for more than a decade can be said to be very simple but very difficult – Dave Zhang
“We were sent to resolve any ‘bottlenecks’ in the production lines that were slowing down the rest of the plant, because during the launch of every new production line, Vietnamese workers would strike and get into disputes. As far as I know, there were over a thousand Chinese employees managing various aspects of the production lines in the company’s Vietnamese factories.
“In fact, what our Chinese employees have done in Vietnam for more than a decade can be said to be very simple but very difficult. That is to teach Vietnamese workers our experience of working on a production line, improve the productivity of the Vietnamese workers, and help the factories become localised.”
Overall, Pou Chen says it produces more than 300 million pairs of shoes per year, accounting for around 20 per cent of the combined wholesale value of the global branded athletic and casual footwear market.
“Because of cultural shock and great pressure to expedite orders, Vietnamese workers were not used to the management style of Taiwan factories,” Zhang added.
“Many of our Chinese employees were beaten by Vietnamese workers [due to cultural differences about work]. During anti-China protests in Vietnam, we were still under great pressure to keep the local production lines operating.”
BEIJING (Reuters) – Tang Yue, a 27-year-old teacher from the city of Guilin in southwest China, steam-presses a blue dress and takes dozens of photographs before picking one to clinch her 200th online sale.
For a growing number of Chinese like Tang, hit by job losses, furloughs and salary cuts, the consumer economy has begun to spin in reverse. They are no longer buying – they are selling.
Instead of emerging from the coronavirus epidemic and returning to the shopping habits that helped drive the world’s second-largest economy, many young people are offloading possessions and embracing a new-found ethic for hard times: less is more.
With Tang’s monthly salary of about 7,000 yuan ($988), the self-described shopaholic said she has bought everything from Chanel lipsticks to Apple’s (AAPL.O) latest iPad in the past three years.
But the adrenaline rush that comes with binge-shopping is gone, said Tang, whose wages have been slashed with the suspension of all the classes on tourism management she usually teaches.
“The coronavirus outbreak was a wake-up call,” she said. “When I saw the collapse of so many industries, I realised I had no financial buffer should something unfortunate happen to me.”
There is no guarantee that the nascent minimalist trend will continue once the coronavirus crisis is fully over, but if it does, it could seriously damage China’s consumer sector and hurt thousands of businesses from big retailers to street-corner restaurants, gyms and beauty salons.
To be sure, there are signs that pent-up demand will drive a rush of spending as authorities reopen malls, leisure venues and tourist spots. In South Korea, the first major economy outside of China to be hit by the virus, people thronged malls this weekend to go “revenge shopping” to make up for time lost in lockdown.,
There are some signs that a similar trend will take hold in China, where some upscale malls are starting to get busy, although luxury firm Kering SA (PRTP.PA) – which owns Gucci, Balenciaga and other fashion brands – has said it is hard to predict how or when sales in China might come back.
A recent McKinsey & Co survey showed that between 20% and 30% of respondents in China said they would continue to be cautious, either consuming slightly less or, in a few cases, a lot less.
“The lockdown provided consumers with a lot of time and reasons to reflect and consider what is important to them,” said Mark Tanner, managing director at Shanghai-based research and marketing consultancy China Skinny.
“With much more of their days spent in their homes, consumers also have more time and reasons to sort through things they don’t feel they need – so they’re not living around clutter that is common in many apartments.”
#DITCHYOURSTUFF
Tang made a spreadsheet to keep track of her nearly 200 cosmetic products and hundreds of pieces of clothing. She then marked a few essentials in red that she wanted to keep. In the past two months, she has sold items worth nearly 5,000 yuan on second-hand marketplaces online.
Bargain-hunting online has become a new habit for some Chinese as the stigma that once hung over second-hand goods has begun to fade.
Idle Fish, China’s biggest online site for used goods, hit a record daily transaction volume in March, its parent company Alibaba (BABA.N) told Reuters.
Government researchers predict that transactions for used goods in China may top 1 trillion yuan ($141 billion) this year.
Posts with the hashtag #ditchyourstuff have trended on Chinese social media in recent weeks, garnering more than 140 million views.
Jiang Zhuoyue, 31, who works as an accountant at a traditional Chinese medicine company in Beijing – one of the few industries that may benefit from the health crisis – has also decided to turn to a simpler life.
“I used to shop too much and could be easily lured by discounts,” said Jiang. “One time Sephora offered 20% off for all goods, I then bought a lot of cosmetics because I feel I’m losing money if I don’t.”
Jiang, the mother of a 9-month-old baby, said she recently sold nearly 50 pieces of used clothing as the lockdown gave her the opportunity to clear things out. “It also offered me a chance to rethink what’s essential to me, and the importance of doing financial planning,” she said.
Eleven Li, a 23-year-old flight attendant, said she used to spend her money on all manner of celebrity-endorsed facial masks, snacks, concert tickets and social media activity, but now has no way to fund her spending.
“I just found a new job late last year, then COVID-19 came along, and I haven’t been able to fly once since I joined, and I’ve gotten no salary at all,” said Li, who said she was trying to sell her Kindle.
Some are even selling their pets, as they consider leaving big cities like Beijing and Shanghai where the high cost of living is finally catching up with them.
NO RETURN TO OLD WAYS?
As the coronavirus comes under control in China, the government is gradually releasing cities from lockdown, easing transport restrictions and encouraging consumers to venture back into malls and restaurants by giving out billions-worth of cash vouchers, worth between 10 yuan and 100 yuan.
But many people say they are still worried about job security and potential wage cuts because of the struggling economy. Nationwide retail sales have plunged every month so far this year.
Xu Chi, a Shanghai-based senior strategic analyst with Zhongtai Securities, said some Chinese consumers may prove the ‘21 Day Habit Theory,’ a popular scientific proposition that it only takes that long to establish new habits.
“We believe people’s spending patterns follow the well-known theory, which means most people in China, having been cooped-up at home for more than a month and not having binge-shopped, may break the habit and not return to their old ways,” Xu said.
Jiang said she was determined not to return to her free-spending ways and planned to cook more at home.
“I’ll turn to cheaper goods for some luxury brands,” she said. “I’ll choose Huawei’s smartphone, because (Apple’s) iPhone has too much brand premium.”
Tang, who has recently used 100 yuan of shopping coupons to stock up on food, is going to hold the purse strings even tighter.
“I’ve set my monthly budget at 1,000 yuan,” she said. “Including one – and just one – bottle of bubble tea.”
CHINDIA ALERT: You'll be living in their world, very soon 
Coronavirus: Chinese workers in Vietnam cry foul after being fired by Taiwanese firm making shoes for Nike, Adidas
A group of 150 Chinese workers believe the world’s largest maker of trainers used the coronavirus as an excuse to fire them, having helped Taiwanese firm Pou Chen successfully expand its production into Vietnam for more than a decade.
Pou Chen, which makes footwear for the likes of Nike and Adidas, informed the group in late April that they would no longer be needed as they were unable to return to
from their hometowns in China due to the coronavirus lockdowns.
“We 150 employees were the first batch of Chinese employees to be laid off this year. We are all pessimistic and expect more will be cut,” added Zhang.
In its email on April 27, Pou Chen said it was forced to terminate the contracts of the Chinese employees across five of its factories due to an unprecedented decline in orders and financial losses.
The Chinese employees, many of whom have been working for the shoemaker for decades, said the compensation offered was unfair and below the levels required by labour law in both Vietnam and China.
“[The dismissals were] in accordance with the relevant labour laws of the country of employment … and employee labour contracts,” added the statement from Pou Chen, which employs around 350,000 people worldwide.
Company data showed Pou Chen’s first quarter revenues tumbled 22.4 per cent year-on-year to NT$59.46 billion (US$1.99 billion), the weakest in six years.
With the likes of Nike and Adidas closing retail stores around the world to comply with social distancing requirements, analysts also said orders plummeted 50 per cent in the second quarter, although the company declined to comment on the media reports.
Andy Zeng, who had worked for the firm since 1995, said the group were “very upset” when they received the news last month as the impact of the coronavirus pandemic began to reverberate around the world, disrupting global value chains.
“Most of us joined Pou Chen in the 1990s when we were in our late teens or early 20s, when the Taiwan-invested company started investing and setting up factories in mainland China. Now more than two decades have passed,” he said.
Zeng was among the first generation of skilled workers in China as Pou Chen developed rapidly, enjoying the benefits of cheap labour, although the workers themselves were rewarded with regular pay rises.
The company needed a group of skilled Chinese workers to go to its new factories in Vietnam. I said yes because I thought it was a good opportunity to see the outside world – Andy Zeng
What our Chinese employees have done in Vietnam for more than a decade can be said to be very simple but very difficult – Dave Zhang
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