Labour Supply After Chinese New Year

China, Company Strategy, Economics, Europe, Polyolefins, US

Chinese job seekers at a recruitment fair

Chinarecruitment.jpg

Imaginechina/Rex Features

 

By John Richardson

As petrochemicals markets begin to slow down ahead of the Chinese New Year, which this year falls on 10 February, a lot of attention is, as always, being focused on the likely strength of demand after the holidays.

The hope is that a recovering US economy, a Eurozone that looks a little more stable and stronger domestic growth in China will combine to result in another surge in buying activity.

But to what extent might shortages in labour supply once again limit the ability of petrochemicals end-users to ramp-up production post-Chinese New Year?

Last year, we were told by a polyolefins industry source that what he had been anticipating for three years finally came true: Labour markets going beyond the tipping point as tens of thousands of migrant workers failed to return to their jobs in the big export-focused manufacturing plants in eastern and southern China. This was the result of a long-running central government policy of narrowing the income gap between rural and urban China.

Numerous statements have been made by China’s new leadership about the need for more balanced economic growth, including boosting rural incomes. 

Even if new measures haven’t already been put in place to further narrow the income gap between China’s country and its big cities and towns, the perception amongst migrant workers and their families must surely have strengthened that things are about to change for the better.

As holidays are a time for reflection, the migrant workers who do return to their jobs in the export-focused factories might also carry back with them demands for better pay and working conditions, as they know that supply and demand is on their side.

In 2012, the number of working-age people in China decreased by 3.45 million to 937.27 million, Ma Jiantang, director of the National Bureau of Statistics (NBS) said last week.

The decline in China’s “demographic dividend” – the growth in its working-age population – is the result of the country’s one-child policy.

Government policy has already greatly improved pay and conditions in eastern and southern coastal factories, perhaps adding to the sense of entitlement.

For example:

*”Pay and benefits for the average Chinese factory worker rose by 10% a year between 2000 and 2005 and speeded up to 19% a year between 2005 and 2010, according to the Boston Consulting Group,” writes The Economist in this article.

*”A new labour law introduced in 2008 brought in more protection for workers, including the right to a permanent contract after a year of employment.

The workers who do return from the countryside might be even more prepared to down tools.

“Strikes are becoming more frequent, and when they happen, says one executive, the government often tells the plant manager to meet workers’ demands immediately,” adds The Economist.

“Following labour unrest, wages at some factories have gone up steeply. Honda, a Japanese carmaker, gave its Chinese workers a 47% pay rise after strikes in 2010,” adds the magazine. 

“Foxconn Technology Group, a subsidiary of Hon Hai Precision Industries, a Taiwanese firm that does a lot of manufacturing for Apple and other big technology firms, doubled pay at its factory complex in Shenzhen after a series of suicides. Its labour troubles are still continuing.

“One consultant jokes that it is getting as hard to fire people in China as in France.”

If labour costs go up post-Chinese New Year, more coastal factories could close down, increasing the pace of migration of low-value manufacturing to inland China, or to other countries such as Vietnam and Bangladesh.

Quality issues, resulting from the tight labour markets, might further damage of the viability of China’s coastal manufacturers.

“China’s labour market is so overstretched that all the high-quality labour has been exhausted, you have to hire people with lesser qualifications, and then quality becomes a problem,” Alain Deurwaerder, who until recently ran a factory in Thailand for Ducati, an Italian motorbike-maker, told The Economist in the same article

Another European chief executive complained about the long-running problem of the flightiness of his Chinese workforce, the magazine added.

“If someone on the other side of the road offers 5% more pay, they go,” said the chief executive.

PREVIOUS POST

Ponzi Scheme Economics

18/01/2013

Chinese job seekers at a recruitment fair Imaginechina/Rex Features   By Jo...

Learn more
NEXT POST

Ten Solutions For The Global Economy

21/01/2013

Chinese job seekers at a recruitment fair Imaginechina/Rex Features   By Jo...

Learn more
More posts
India’s pollution crisis threatens chemicals industry approach to growth
18/01/2019

By John Richardson THE ten most polluted cities in the world are all in Northern India. It is theref...

Read
China full-year lending decline confirms that Fed pause is a sideshow
15/01/2019

By John Richardson CHINA’S full-year 2018 lending figures are out and they underline what I’d be...

Read
Oil prices to be buoyed by new shipping fuel rules, despite economic slowdown
13/01/2019

Guest blogger today is Ajay Parmar. He is a chemical engineering professional with 5 years of indust...

Read
Turkey PE demand could be 8% lower as economic problems continue
11/01/2019

By John Richardson TURKEY’S apparent demand for PE may have fallen by 8% in 2018 to around 2m ...

Read
Flood of US LLDPE begins to disrupt markets with worse to follow
09/01/2019

By John Richardson THE ABOVE table illustrates the 2018 impact on smaller LLDPE markets of the arriv...

Read
US/China trade deal in March would likely quickly unravel
07/01/2019

By John Richardson YOU CAN bet on a rally in equity markets and in oil prices if some kind of deal i...

Read
China slowdown: After Apple, next wake-up call will be from auto markets
04/01/2019

By John Richardson THE NEXT big wake-up fall for global financial markets and the chemicals industry...

Read
The world in 2019: Social unrest, populist politics, trade barriers and global recession
02/01/2019

By John Richardson I PREDICTED in 2011 that the world would by a decade later be less globalised as ...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more