Southern China Labor Shortage Worsens
Factories in southern China, especially Guangdong and
Fujian provinces, are suffering from a shortage of more
than two million factory workers. The crisis began earlier
this year, and has continued to worsen.
Guangdong and Fujian are home to many clothing, textile
and electronics manufacturers, many of which are from
Hong Kong and Taiwan. The scale of some of the manufacturers
are huge; in one instance, a shoe manufacturer employs
150,000 laborers, and providing food and dormitory facilities
to the workers. Traditionally, these laborers were usually
young unmarried women from Sichuan, Hubei and other rural
inland provinces who were paid about US$120 a month, which
was considerably more than they made on their farmland
homes. In almost all instances, they would send at least
30% of their income to their families.
But now farming incomes have gone up, and the long hours
in the factories are losing their appeal. The endless
supply of cheap labor has seemingly dried up, as the young
women prefer to seek less labor intensive work closer
to their homes.
Invostors have reacted by moving some of their newer
manufacturing operations north of the Yangzi River to
areas with more plentiful labor. A new investment region
has been the northeast
region, which suffers from heavy unemployment with
the closure of many heavy industrial factories. Others
who are staying will also have to raise their wages in
order to attract factory laborers.
Since Fujian and Guangdong are members of the 9+2
group, it is likely that they will discuss how to
drive new investments into the more rural and undeveloped
provinces which are members of the group.
Whatever the outcome, the trend suggests that inflation
will kick in the first half of 2005, which will in turn
lead to higher interest rates in China. As the prices
of manufacturing goods grow in China, leading buyers such
as WalMart will need to decide whether they will continue
buying from Chinese manufacturers, or look for alternative
cheaper sources. For Chinese
manufacturers, higher labor costs will mean that their
profits will be squeezed even further.
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