China Labour Migration
For the last few years, there has been an extensive exchange about labour shortages in China, primarily relating to east coast economic provinces where there is a sustained production demand but where migrant workers look for work closer to home several hundred kilometres from the manufacturing unit. The labour shift has resulted in some manufacturers relocating or opening satellite operations inland, closer to the labour source to maintain price and capacity. Some operations are looking to labour even further afield.
Overall business and order confidence in China is showing steady growth with the index of both staying above 50. The manufacturing PMI averaged 49.35 from 2011 until 2016, reaching an all-time high of 52.30 in January of 2013, a record low of 47.20 in September of 2015, and 48.6% June 2016, showing manufacturing demand decline admit a healthy economy.
But still, there are labour shortages amid improving business confidence and declining manufacturing demand while the order index shows confidence.
Bottom-line, I do see a lot of production units with redundant machinery and space either due to a lack of orders or labour, and this tends to be on the increase, with most factories saying they are challenged by both. But that is not all facilities; there are still factories that are extremely busy and experiencing growth.
A company I was using in Xiamen, whose product and price was market competitive were nearly always running at 60-70% capacity due to what I was told, was from a lack of orders and workers. The factory owner said that they had 40-50% steady business, but other business was spasmodic, when they had workers they couldn’t hold them as there wasn’t enough overtime, so the workers went elsewhere to increase their monthly pay pack.
Looking for labour that is cheap and adaptable, factories have been looking to unskilled minority immigrant workers imported from central Chinese provinces. Many of these workers do not want social issuance as they do not wish to make the compulsory employee contribution, are suspicious and naive about the labour agreement process, and do not want to sign a contract, making the labour process illegal, but offering great flexibility and control to the factory.
The Xiamen factory exploring minority workers as a staffing option ran into new challenges. The challenge been the workers come from an entirely different cultural environment, example, employees didn’t understand the use of daily conveniences such as toilets, toilet water was used for cleaning cooking and eat utensils, and building walls were used for depositing human waste. The worker’s attention span and ability to learn was limited, and absenteeism was low making efficiency extremely low. It is a move that was untenable.
China, with a reported unemployment rate of 4.05%, staffing options starts to become limited due to people availability, affecting skill available versus skills needed.
The Xiamen vendor owner unperturbed from their previous experience continued looking for new ways to meet his organisation’s labour demand. The company outsourced the workforce need to a labour company who bought in non-Chinese speaking Vietnamese workers lead by team leaders who could speak Chinese. The factory owner said the Vietnamese were well presented, worked hard, diligent and efficient, the owner was very pleased with the Vietnamese teams. A solution to the factories labour challenge was found that was both price, flexible and demand competitive.
I commonly hear about labour and cost challenges from eastern China vendors, and I hear equally frequently about the quality of employee due to work attitude and truancy. Attitude and truancy have caused some manufacturers who transferred their operation west to abandon their plan and look else were to relocate production. Step by step this will see a further manufacturing diversification throughout Asia to fulfil production demand.
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