14,000 HK Owned Factories to Close Because Of Snow

Wednesday, February 20, 2008 1:46
Posted in category Uncategorized

In the article Factory fallout written by Bonnie Chen of The Standard, readers are invited to play a game of literary three card monty when Clement Chen Cheng-jen of the Federation of Hong Kong Industries is quoted as saying:

Up to 14,000 Hong Kong-owned factories in the Pearl River Delta may be forced to close over the next few months partly due to the snowstorms that have crippled the mainland’s infrastructure

er. Come again? 14,000 factories are going to close because of a snow storm that largely passed 10 days ago?

Sure, I can see that they may need to extend the holiday, but close? Well, according to Cheng-jen

more than 30 percent of the migrant workforce in the delta area may still not have returned from their Chinese New Year holidays when factories reopen today. The workers, he said, have opted to remain in their hometowns due to the travails they experienced after the snowstorms paralyzed railway networks.

As the article proceeds, the truth is set free, and the snow day theory melts:

Currently there are about 70,000 factories in the delta area run by Hong Kong businessmen, representing around 70 percent of the total number of factories there. Together, they employ around 9.6 million workers.

They make around 1,000 yuan (HK$1,084) a month in the Pearl River Delta and around 850 yuan at home. But, comparatively speaking, they need to spend more here in addition to buying tickets when they return home.”

Ah. So the real problem is the fact that they are actually underpaid, that they have other opportunities in other areas of the country that are not famous for historically poor working conditions, and that the migrant workers are exercising their right to find alternative employment when faced with poor salary and work conditions.

Interesting.

Once again, it looks like we have another fine example of where logic proves the simplest of HR management philosophies: If you are underpaying your staff, and are not nice to them. they will leave you to find other sources of employment.

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3 Responses to “14,000 HK Owned Factories to Close Because Of Snow”

  1. Chris Devonshire-Ellis says:

    February 22nd, 2008 at 10:13 pm

    They are closing because:

    1) China’s tax base increased and their margins are being squeezed;
    2) Guangdong authorities are increasingly cracking down on HR abuses (workers with no contracts, etc)
    3) Commercial property prices there have risen dramatically so the value of the real estate is worth more than the business.

    Guangdong businesses are either selling out to access the property gain or moving elsewhere (Guangxi, Yunnan) in China or overseas (Ho Chi Minh, Hanoi, Bangalore, Chennai etc) as taxes are lower and the regulatory environment less severe. See: http://www.china-briefing.com/blog/2008/02/22/dezan-shira-announce-new-offices-in-vietnam-and-india.html#more-801

  2. Rich says:

    February 24th, 2008 at 1:42 am

    Chris,

    I would agree with those reasons, however I am of the mind that many of these “closures” are also businesses that would have closed anyway due to size, M&A, or other business killer reasons.

    Here is an interesting complementary article on what manufacturers are having to do on the labor side of the equation China: Employers boost wages in bid to attract workers

  3. Rich says:

    February 24th, 2008 at 3:36 am

    Here is another article that just came out from CCTV – Chongqing attracts more workers

    Interesting quote from the Deputy Director of Employment Services:

    One reason is rising wages. People can now earn between 750 to 1000 yuan per month. There are also more types of jobs available now, besides traditional ones such as being a security guard or a shop server.

    Perhaps we are beginning to see signs of where the time and money Beijing has invested into “Go West” and “harmonious Society” are beginning to truly balance out the economy. I have always said that to really achieve balance, the growth in the east would have to slow.

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