[Analytics] China’s migrant workers facing end of an era

Workers at a factory manufacturing air-conditioners in Huaibei, Anhui province, in China. The 11-page research report by China's Commerce Ministry notes how bilateral trade in goods has jumped 252 times to reach US$633.5 billion (S$864 billion) since both countries established diplomatic ties in 1979.PHOTO: REUTERS. Sketched by the Pan Pacific Agency.

After spending more than half her life working in factories in Guangdong, Rao Dequn’s 25 years as a migrant worker could be coming to an end within a month, with the coronavirus and US-China trade war leading to another factory closure in Dongguan’s withering export-oriented manufacturing industry. He Huifeng specially for the South China Morning Post.

Mother-of-two Rao, 43, and around 900 colleagues were informed by letter at the end of July that Dongguan Dingyi Shoes Company would be closing in five weeks as their “employment at the company, on top of all other agreements you may have with the company, will be terminated”.

“It will be very difficult to find another stable factory to work for … many nearby factories are closing down or laying off workers,” said Guizhou native Rao, who has been working at the shoe factory for the last 10 years.

Like many of China’s 290 million migrant workers, Rao’s working life has been spent on production lines to earn a better income than was possible in her rural hometown but not enough to allow her to settle down in a city.

“I am sad to leave this job and this factory. The boss is a good person, the pay is always on time, and income has always been stable. Many of the workers have been working here for over 20 years,” added Rao, who has been promised a redundancy package in line with the local labour laws.

Rao and her husband live in a 100 sq ft room with a shared bathroom, costing 250 yuan (US$40) per month. There are few decorations or furniture except a bunk bed, rice cooker, water heater and an electric fan. A tiny folding desk which also serves as a dinner table, a few plastic chairs and a small flat screen television hanging on one wall complete a far from luxurious lifestyle.

The couple keep three pairs of trainers and one pair of wedged women’s shoes on a small shelf at the door – a modest collection of footwear for a worker who had been in the business for over a quarter of a century.

Her husband, Liu Liang, is also a migrant worker but has rarely worked at the nearby furniture factory over the last few months.

“We may have to leave Dongguan because the jobs are now very unstable,” he said.

The Dingyi compound, one of the thousands of factories in Dongguan that supported China’s role as the world’s factory, is now largely quiet.

The footwear factory, funded by Taiwanese investors since 1990, imported materials and designs to be turned into finished products for overseas markets.

But with China now losing its low-cost advantages, and the coronavirus leading to the cancellation of export orders, the heyday for the once-successful business model now appears to be over.

Chinese authorities had hoped to phase out of labour-intensive manufacturing like Dingyi in hopes that higher value-added industries would take over to help the country move into a more lucrative position in global value chains.

But fears are growing that China may have underestimated the importance of factories like Dingyi in providing jobs and social stability.

The darkened job and income prospects for people like Rao, who has been feeding her labour into China’s manufacturing machine since she was a teenager, could also hinder Beijing’s new economic strategy of “dual circulation”, which relies more on the domestic market for economic growth, since there could be insufficient consumer spending.

Zhao Jian, the head of Atlantis Finance Research Institute, said this week that China’s choice of “dual circulation” was a response to the trend toward a reversal of globalisation, led by the decoupling between China and the United States, but the success of such an inward-looking strategy is far from certain in terms of employment, and even economic security.

“While China’s reliance on external demand, on the surface, has been falling in the last decade since the global financial crisis … the export sector is vital for Chinese employment,” he said. “Exporters are mainly private enterprises with numerous small and tiny businesses living on [global] value chains.”

According to China’s Ministry of Commerce, the export industry accounts for around 180 million jobs in China, or over a third of China’s total 530 million non-farm jobs.

China’s official data showed the country’s overall economic performance rebounded in the second quarter thanks to state-led investments and a recovery in industrial production following the historic 6.8 per cent contraction in the first three months of 2020.

The official employment data also painted a relatively stable picture, with the surveyed jobless rate falling to 5.7 per cent at the end of June from 5.9 per cent in May.

However, the nation’s army of migrant workers, who have been hit particularly hard by the impact of the trade war with the US and the coronavirus, are not included in the statistics.

Closures of factories like Dingyi also affect the local community – the small restaurants, hotels and numerous shops who rely on the workers for their own income – with property agent Li Gang going as far to say “the whole community will be idle or even dead”.

The closure is also a psychological shock for other production faculties in the Dongguan area, who are in similar precarious positions.

“Many of us [in the shoemaking business] are familiar with this factory. It has been in operation for 30 years and it has survived so many storms – the financial crisis, labour shortages, capital problems – what kinds of storms had it not experienced? It wouldn’t close unless it sees no future”, said Wang Jie, who runs a footwear production business in Dongguan.

Lay-offs and dwindling employment is so widespread in Dongguan that the local government has started to roll out a shared worker programme, in which the local authority acts as a centralised agency to shift surplus workers from an idle factory to one that needs temporary help.

As many as 13,000 workers have taken part in the programme since March. The workers are paid 500 yuan (US$72) per month by the local government to take part, while factories avoid official redundancies by offering workers to other factories on contracts of up to three months.

“Few factories are expanding … most factories are suffering insufficient orders. But it also costs a lot to close down a factory … so many factories just suspend production,” said a human resources manager at a factory in Dongguan, who labelled the shared worker programme as “at best a short-term remedy”.

Dongguan Chang An Mattel Toys, one of the world’s largest doll makers, is one of the few factories still actively recruiting. It used the shared worker programme to recruit 250 workers from another factory.

Dozens of young workers, mostly males in their 20s, some pulling luggage, lined up to apply for jobs with a starting salary of 1,950 yuan (US$281) per month. For working 11 hours a day, for 26 days a month, a worker can earn as much as 4,559 yuan (US$656) with overtime, with an extra 20 yuan per day offered for night shifts.

“The money is not superb, and a toy factory work is tiring,” said one jobseeker queuing at the recruitment office. “But it’s a big factory and has better job stability [than smaller factories].”

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