June 2010

Chinese workers on strike

The thematic ‚deliveries from China’ and especially the prices have already been sometimes a matter of our editorial. There was several times a reason to look with some concern on the Chinese market. From the press we could read recently, that there are strong strikes and protests of Chinese workers. The supplier Foxconn of Apple had 10 suicides and a lot of strikes. In the car makers factory Honda all workers are also on strike since 2 months. Also Ricoh people are on strike and there are surely more strikes as we have read in our newspapers. Strike in China? Normally not thinkable for us. But it is the truth that at 110 Euro (equivalent to RMB) monthly, a worker can no more live because of the increased food costs. Also the workers have to work overtime, free of charge, so that they have to work between 50 and 60 hours per week, but 7 days a week. And then, if you consider the bad salary, bad social situation, bad sleeping rooms for the workers, workers came to work from the west provinces, 1000 km far from the east cost. Also the fluctuation of workers is unbelievable high. We know companies, who have 20 % fluctuation of the workers within 1 month and they change only to a factory in the neighbourhood, because they pay some cents more per hour. And this is no seldom situation.
The reason is easy to understand: In the last years have grown up a small middle class, which was welcomed by the government as an incentive for all Chinese. And these people want to live better and want to show there ‘wealthy’ to everybody. But the majority has still such small salaries, that they can not live from and sometimes big families have to live only from on member of the family. The result is a very curious situation, that there is a shortage of labourers in the coast provinces, because the workers simply run away from the factories and stay at home.
Another item is the Chinese New Year festival. When in January the factories close down for 2 weeks, there is only a hope of the management, the people may come back. But normally there is a quota of 20~30%, who does not return to their working place.

It’s nice that we can buy here in Europe cheap priced products. Additionally we have a low inflation rate and therefore could buy more goods as it normally would be possible. Furniture chains, consumer electronics and cloth chains make only business because they buy on low prices in Far East. But to be honest, we live so cheap only on the cost of the poor workers. But we don’t think about that. The consequence of the big companies is now, to move the factories to Vietnam, Malaysia or Bangladesh in order to make high profits because of the low labour costs. Also India is very much in the focus of these companies. And as soon as in these countries will be the same situation as in China, the industry caravan will move into other countries, might be to Africa or to the Fiji Islands, to any place of this globe, where there are weak labour laws, and not an existing social security like health insurance. We just have seen at the example of the United States, when president Obama had extreme problems to introduce legally a government health insurance for more than 30 million not insured workers.
Because of this, a lot of companies in China, coming from all branches, will have a lot of trouble after good years of an intensive ‘cheap strategy’. A very interesting aspect is also the Internet, because through Internet the workers can exchange their opinions and experiences very fast. Because of this the social dissatisfaction increased very much in the last years. 30 years ago, all people of China were poor. But now, the workers look on the small minority of a middle class, who is driving with the cars around and therefore they also want to get the same living standard. But as long as a good quality coat costs more than a monthly salary of a worker, the reaction is very much understandable. Besides, that daily the workers are forced to work overtime they have to start maybe 30 minutes earlier, of course not paid, and if the daily quantity is not fulfilled, they have to work in the evening also for unpaid overtime. It is for me not understandable, that actually in the press many wise analysts claim heavily about the actual situation in the EU and refuse the targets of the European governments to save costs. But they forget, that we are living much better than hundreds of millions of people in Far East and that we have lived much beyond our economic possibilities. And this was not been reconsidered. Only partially we hear now from Greece, which social benefits some groups of people have received from the government in times of elections. The human wish for more and more is understandable if it is related to the minimum living standard. But also the people are used very fast to the benefits, which they got from the politicians in times of elections. But we can not live on tick and speculations for a long time. This has been experienced now by some countries in the EU.

But back to China. We have received already several requests for price increase from Chinese manufacturers and it will be difficult for us, to find a compromise with the customers who were used for all the years for price reduction. The dream of cheap products “made in China” is finished! At semi conductors everybody knows that the prices are going up and down, and if there is a shortage and allocation, the people talk only about delivery time and no more about the price. But now also we have to make the same experience in passive and mechanical and acoustical products.

The Chinese government tried in the last century to bring more and more investors into their country because of excellent conditions. But now the government finally found, that it is necessary also to listen to the big majority of workers and therefore they fully support the requests of the workers. Western companies, who are producing in China, have very good reasons now to increase the salaries over the general standards in order to avoid strikes and other problems.

The consequences from this situation in China would be the fact, that companies have to consider, if it is really reasonable to produce still in Far East, but except if the production is for the local market, or if it would be better in future to start a fully automation of the production and come back into the home country. Besides there are risks of transport and high transport costs, which actually caused by the ash clouds and the shortage of the transportation facilities which can be avoided definitely by inland production.

Best regards,
W. ENDRICH