Last month’s la­bor strife at a shoe fac­tory in Dong­guan shocked Hong Kong own­ers of main­land fac­to­ries, as Wong Joon San re­ports.

China Daily (Canada) - - CHINA -

News of the strike, on April 5, at the Yue Yuen In­dus­trial Hold­ings Ltd shoe fac­tory in Dong­guan, south­ern China, passed al­most un­no­ticed in the be­gin­ning.

It was not long, how­ever, be­fore the la­bor dis­pute es­ca­lated to the point of set­ting off a full-scale alarm. Thou­sands more work­ers joined the walk­out. Me­dia picked up the story and soon, pub­lic at­ten­tion was riv­eted.

At the height of the dis­pute, some 40,000 work­ers at Yue Yuen In­dus­trial Hold­ings stopped work, ac­cus­ing their em­ployer of cheat­ing them on pay­ments to state-man­dated so­cial in­sur­ance and hous­ing prov­i­dent fund ac­counts. The prin­ci­pal de­mand was that the em­ployer makes up the un­paid amounts.

The fac­tory, which man­u­fac­tures ath­letic footwear, ath­letic-style leisure footwear, and ca­sual and out­door footwear for Nike Inc, Adi­das, and other in­ter­na­tional brands, has a mar­ket cap­i­tal­iza­tion of HK$37.37 bil­lion. Af­ter suf­fer­ing a two-week work stop­page, Yue Yuen es­ti­mated the strike had re­sulted in di­rect losses of around $27 mil­lion.

Fi­nally, the com­pany gave in to some of the work­ers’ core de­mands. The ma­jor­ity of its em­ploy­ees went back to work fol­low­ing me­di­a­tion by the Guang­dong Fed­er­a­tion of Trade Unions, a govern­ment-backed trade or­ga­ni­za­tion. Pro­duc­tion re­sumed.

An­a­lysts say the Dong­guan strike sent a clear warn­ing to com­pa­nies that pay their work­ers low wages and pro­vide min­i­mum wel­fare ben­e­fits. These are chang­ing times. The Chi­nese econ­omy is be­ing up­graded and there the la­bor code is be­ing up­dated to pro­tect work­ers from ex­ploita­tion.

Stan­ley Lau, chair­man of the Fed­er­a­tion of Hong Kong In­dus­tries (FHKI), in a tele­phone in­ter­view with China Daily, charged that “many black (mar­ket) lawyers had goaded the work­ers to claim the ben­e­fits and to de­mand com­pen­sa­tion, (leading to the strike)”.

These so-called black lawyers are ac­tive and ea­ger to drum up busi­ness wher­ever they can. Since Chi­nese courts al­low rep­re­sen­ta­tives to serve as ad­vo­cates in court cases (but they are not al­lowed to charge any fee), “black mar­ket” lawyers pro­mote their ser­vices among fac­tory work­ers, while de­mand­ing that they be paid un­der the ta­ble.

Ching Kwan-lee, au­thor of Against the Law, de­fined “black lawyers” as un­li­censed ad­vo­cates who pro­vide le­gal rep­re­sen­ta­tion in court for a fee.

Guangzhou toys fac­tory con­sul­tant Kevin Ger­hard, who is ac­quainted with some of the Yue Yuen work­ers, ver­i­fied Lau’s state­ment that black mar­ket lawyers per­suaded Yue Yuen work­ers to go on strike. These strikes, in­evitably, are fol­lowed by pe­ti­tions to the courts.

“Of course, many lawyers are in­ter­ested in the Yue Yuen case be­cause it is re­garded as a ‘big’ case, with so­cial im­pact,” said Ger­hard, who has lived on the main­land for 10 years. Law firms in­volved in the case would re­ceive pub­lic­ity, other­wise, law firms would shy away from la­bor cases most of the time. They con­sider them money-los­ing propo­si­tions, he added.

In one case that went to court, more than 200 work­ers paid a lawyer 30,000 yuan to take their grievances be­fore the court, Ger­hard re­counted, point­ing out that le­gal rep­re­sen­ta­tion on the main­land is ex­pen­sive.

In her book, Ching Kwan-lee, stated that in 2002, there were an es­ti­mated 1,700 reg­is­tered lawyers in Shen­zhen plus a few hun­dred “black mar­ket” le­gal ad­vo­cates.

Lau de­scribed the pre­vail­ing la­bor cli­mate as af­ter­shocks from the 2008 global eco­nomic re­ces­sion. He said the fi­nan­cial cri­sis left fac­tory own­ers hard pressed for cash.

Many couldn’t main­tain their le­gal obli­ga­tion to pay state-man­dated so­cial in­sur­ance pre­mi­ums, nor were they able to con­trib­ute to the hous­ing prov­i­dent fund on be­half of their work­ers. A large num­ber of the own­ers came up with a short­cut, pre­sent­ing work­ers with an op­tion of cash on the ta­ble, but pay­ing less than the law re­quired for so­cial in­sur­ance and hous­ing cov­er­age.

Young work­ers, who joined the la­bor force af­ter the 2008 eco­nomic cri­sis, thought this was okay, said Lau. They pre­ferred the “in­stant ben­e­fits” and didn’t care if con­tri­bu­tions to their old age se­cu­rity were cut back.

Older work­ers were not so happy. Em­ploy­ees who had worked all their lives and con­trib­uted to so­cial se­cu­rity were count­ing on hav­ing some mea­sure of se­cu­rity af­ter re­tire­ment and they were un­will­ing to ac­cept the em­ploy­ers’ cost-cut­ting.

Older work­ers re­sponded when urged by black mar­ket lawyers to de­mand their rights. These older work­ers, many il­lit­er­ate, were the lead­ers of the call to go on strike.

Yue Yuen has been es­tab­lished for more than 20 years. Those older work­ers who had been with the fac­tory for that du­ra­tion were most con­cerned about their re­tire­ment sav­ings, Lau ex­plained.

Lau noted that crit­i­cal changes in the la­bor cli­mate al­ways ap­pear in the Pearl River Delta (PRD) first. The PRD was China’s first in­dus­trial zone and is in the van­guard of the la­bor revo­lu­tion. “Take the case of the Wal­mart branch that re­struc­tured and pro­moted some of its work­ers to higher po­si­tions, with­out in­creas­ing their com­pen­sa­tion. In the end, Wal­mart had to close the oper­a­tion. If work­ers were paid prop­erly, they would have re­ceived sig­nif­i­cant con­tri­bu­tions to their so­cial se­cu­rity. “Since they ended up los­ing their in­come be­cause of the clo­sure, many lost what was due to them,” Lau said.

Lau warned Hong Kong own­ers of main­land fac­to­ries to be vig­i­lant about their la­bor prac­tices: to ad­here to the Chi­nese min­i­mum wage law. (See side bar). Em­ploy­ers also were urged to en­sure that their work­ers re­ceive all the ben­e­fits re­quired un­der Chi­nese law.

Work­ers at the Yue Yuen fac­tory were per­suaded by black-mar­ket lawyers that they had been cheated by their em­ployer on manda­tory in­sur­ance and hous­ing con­tri­bu­tions, Lau charged.

“There will be fac­tory strikes from time to time (over ben­e­fits and com­pen­sa­tion), so own­ers of fac­to­ries must be care­ful and watch out for such is­sues,” Lau warned, adding that the own­ers should also con­sider au­tomat­ing their man­u­fac­tur­ing pro­cesses to off­set ris­ing la­bor costs. Al­ter­na­tively, he sug­gested that own­ers con­sider re­lo­cat­ing their fac­to­ries to other lo­cales where land costs less to buy and the cheap la­bor ad­van­tage still pre­vails.

“This is not a new trend. It ac­tu­ally started three or four years ago when fac­tory own­ers in Guangzhou started fac­ing sharply ris­ing la­bor and op­er­at­ing costs,” Lau con­tended. “I be­lieve that in the next three to five years, the ex­ist­ing in­dus­tries on the main­land will shrink by at least 30 per­cent.”

Lau ex­plained that the ris­ing op­er­at­ing costs and la­bor costs, in­clud­ing changes in reg­u­la­tions, make it dif­fi­cult for fac­tory own­ers to con­tinue tra­di­tional man­u­fac­tur­ing op­er­a­tions in south­ern China.

About 40 per­cent of the man­u­fac­tur­ing businesses al­ready have been af­fected by worker strikes over ben­e­fits and com­pen­sa­tion. Some businesses have re­lo­cated to neigh­bor­ing coun­tries al­ready. Oth­ers have re­placed man­ual la­bor with au­to­ma­tion, he elab­o­rated. Still oth­ers have moved op­er­a­tions to the in­te­rior and western part of China to take ad­van­tage of cheaper la­bor and land.

With the cost of fi­nanc­ing in­creas­ing and ar­range­ments be­com­ing more com­plex, some older fac­tory own­ers wound up their op­er­a­tions.

Lau sum­ma­rized, say­ing that tra­di­tional man­u­fac­tur­ing op­er­a­tions have de­clined. The Hong Kong govern­ment and its agencies have ad­vised com­pa­nies to shift fo­cus by pro­duc­ing high-value brands of their own de­sign rather than con­tin­u­ing to man­u­fac­ture prod­ucts un­der con­tract to in­ter­na­tional brands.

Com­ment­ing on the Yue Yuen work­ers strike, Yau Tze-ken, a lec­turer at the Fac­ulty of So­cial Sci­ences, the Univer­sity of Hong Kong, said: “The prac­tice of vi­o­lat­ing so­cial in­sur­ance and other reg­u­la­tions is wide­spread on the main­land.” Con­tact the writer at joon­san@chi­nadai­lyhk.com

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