HONG KONG - A labor shortage that has helped to drive up wages in China's burgeoning eastern provinces has widened to inland and southern areas following moves there by many companies, often with encouragement from a central government concerned at the country's large urban-rural earnings divide.
"Initially we needed 8,000 people, but at this moment we've only got little more than 1,000 employees," said Zhang Yuanheng, manager of human resources of footwear company Taiwan Max Group, which started production in Nanning, capital of Guangxi Zhuang autonomous region, last April.
Guangxi, with a population of nearly 49 million people, lies at the
western end of China's coastline, next to prosperous Guangdong, the province which served as the springboard for the country's economic modernization. Until recently, China's three-decade rush to prosperity had largely passed Guangxi by, but with the move of factories to the region by companies seeking to cut costs Guangxi's television, newspapers and Internet sites are awash with recruitment advertisements.
Nanning ASEAN Industrial Park, helped by regional cooperation programs involving western China and Guangdong's industrial centers such as Guangzhou, Shenzhen and Dongguan, is attracting big-name enterprises such as Max Group, which produces women's shoes for the European, American and Asian markets, and leading mobile gadget maker Foxconn, also based in Taiwan.
"In order to attract job seekers, we provide as many benefits as those given by the state-owned enterprises in the 1980s," said Zhang, referring to company facilities that range from a supermarket, clinics and a kindergarten to a library, and volleyball and basketball courts.
Such facilities are not available to Max Group's 5,000 employees working at its Dongguan factory, he said.
Other industrial parks have been set up in western China's Yunnan province, and central Hunan and Hubei in recent years, where they attract Taiwanese and Hong Kong enterprises seeking lower costs than they can get in Guangdong, Fujian or other coastal areas. In Guangxi alone, investments from Hong Kong, Macau and Taiwan rose 31% to more than 8 billion yuan (US$1.2 billion) in the first six months last year compared with the year-earlier period, according to the provincial statistics bureau.
Zhang, however, expressed disillusionment at the move, and questioned how the region's industrial development "could face labor shortages immediately after starting its work? How can its economy grow without foundation?"
The company's decision to move of part of its capacity to Guangxi was in part to avoid labor shortages in the southern and eastern provinces, he said.
"We thought labor shortages were only confined to coastal regions like East China's Shanghai and Shandong province, where we also have plants. Then we realized it is a national problem."
Zhang's worry is valid. His company will need a total of 15,000 workers when its 560 million yuan plant at Nanning ASEAN Industrial Park is completed this year.
To entice workers, the Max Group has to pay workers about 2,000 yuan a month including insurance that compensates for the lack of a social security system. "We tell our workers, they will earn between 3,000 and 4,000 yuan after gaining two years' experience, which would be better than that offered to staff in Dongguan," Zhang said. "We thought moving to inland China could cut labor costs. That hope is now dashed."
Higher prices of many agricultural products since 2009 have boosted farmers' incomes in the region, helping to support the preference of many for farm rather than factory work, while a local construction boom is also driving up pay levels, according to Zhang Rongjian, deputy director of the management association of the Nanning industrial park.
"Given the soaring property prices, construction workers in Nanning and surrounding areas can get 3,000 yuan a month, which some of the low-end product manufacturers transferring to inland China can hardly afford," director Zhang told Asia Times Online.
To help enterprises find their workers, the industrial zone is paying millions of yuan for recruitment ads and is building public housing while also improving medical and health services.
Stanley Lau, deputy chairman of the Federation of Hong Kong Industries, said many of the association's 3,000 members had been addressing labor shortages for the past year.
"Many Hong Kong enterprises finding it more and more difficult to do business in China, with the combined issues of labor shortages, increasing raw material costs, appreciation of the yuan and price-conscious buyers," he told Asia Times Online. While many had transferred to inland China, they faced similar problems there and the 5-10% salary gap of labor between inland and coastal areas is narrowing, he said.
Lau expects as much as 30% of the 70,000 Hong Kong enterprises in the mainland to be eliminated in three to five years if such issues cannot be resolved.
In Guangdong, next door to Hong Kong, minimum wages are to be raised an average 18% to 1,300 a month - the country's highest - from February. While many manufacturers at present pay about 2,000 yuan per month to general workers, the increase "will have a psychological impact on workers, who may expect a similar increase on top of their current salaries," Lau said. The rise is consistent with the central government's called for minimum pay to be increase by at least 15% annually until 2015.
Adding to employers' woes is the annual home visit by migrant workers from central and west China for the Chinese Lunar New Year, the most important holiday in China for family reunions, which this year falls on February 3. Many don't return to work after the break, a problem that particularly affects small businesses which may offer little in the way of prospects.
The head of a mould-making factory in Dongguan that employs 30 people gives a one-month bonus to every worker who returns after the spring holiday, "not to mention that the average salary of my workers is about 2,300 yuan a month plus food and accommodation". Even then, some workers leave the factory in March after getting the bonus, she said.
China's coastal region is short of an estimated 10 million workers, with the Pearl River Delta region needing between 2 million to 3 million, according to latest estimates from the research center for labor and social security at the Chinese Academy of Social Sciences (CASS).
Zhang Yi, deputy director of the CASS' research center for labor and social security, said the problem of labor shortages is mainly due to the country's family planning policy, which has been running for 30 years, has resulted in decreasing numbers born in 1980s and 1990s.
The labor shortage may be giving workers more bargaining power. After several rounds of negotiation with its employees, the auto-parts factory of Japanese auto maker Honda in Foshan, Guangdong province, in June agreed to increase monthly salaries by about 35% to 1,620 yuan.
Labor strikes at the Shenzhen complex of Taiwan-based Foxconn Technology, which makes Apple iPhones, led to monthly salaries for its 400,000 employees being increased twice last year from 900 yuan to 2,000 yuan, following a string of worker suicides.
Olivia Chung is a senior Asia Times Online reporter.
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