Labor disputes signal end of China as cheap labor source

  • Published : Jun 18, 2010 - 16:57
  • Updated : Jun 18, 2010 - 16:57

Rising labor disputes in China are prompting Korean manufacturers to reconsider their strategies that capitalize on cheap labor and industrial peace.
Following a string of suicides at its plant in China, the Taiwanese electronics maker Foxconn recently doubled salaries of the lowest paid workers.

A supplier of Honda Motor Co. has suffered production stoppages due to workers striking for higher pay, and continues to negotiate to stop further disruptions. Workers at a Toyota Motor Corp. supplier are also waging a partial walkout.

The escalating demand for higher compensation is posing a new challenge to multinational firms.

“China’s days of low wages are over,” Lee Pyeong-bok, an advisor to the state-run Korea Trade-Investment Promotion Agency, told a forum with domestic businesses.

“China’s one-family, one-child policy has caused labor shortages and as a new generation of workers are entering the labor market, their awareness of labor rights is heightening,” he said. 
Employees at a Honda supply plant in Foshan gather near the factory gate during a strike in south China’s Guangdong province.
AP-Yonhap News

According to a U.S. Census Bureau analysis, the number of 15 to 24 year olds joining the work force will drop by 29 percent over the next 10 years.

As the Chinese government switches from an export-oriented economic development model to one focusing on domestic demand, a number of policies to induce wage increases have been drawn up, he noted.

Korean firms operating in China are grappling with rising labor disputes.

Most recently, workers at the car parts maker Sungwoo Hitech’s plant in China staged a strike on May 28 causing production to halt at Hyundai Motor Co.’s plant in Beijing for three days.

Sungwoo Hitech is a Busan-based firm that specializes in metal structural components such as bumpers and door frames.

Sungwoo Hitech, Hyundai and other suppliers whose operations were halted due to the strike were resumed on May 30 after the company agreed to raise wages by 15 percent.

In addition to workers demanding higher pay, some regional governments in China are raising minimum wages.

Experts expect the dissipation of China’s cheap labor force to pick up pace.

KOTRA warned that Korean firms looking to operate in China must come up with new strategies. It suggested automation of production processes, moving Chinese facilities inland or to Southeast Asia, where wages are lower, and investing in products that are less labor intensive as possible solutions.

By Choi He-suk  (