Capital divestment hitting China
Luxury goods retailers in Hong Kong’s Tsim Sha Tsui district were expecting “golden week holiday” travellers in late September. But not every visitor from the Chinese mainland was there to shop.
On 30 September, the day before China’s National Day, three workers from a handbag factory in Guangdong province, along with local labour activists, staged a protest in front of the Tommy Hilfiger flagship store on Nathan Road. They were demanding unpaid wages and severance pay.
The handbag factory had been a subsidiary of the Hong Kong-based SKS Manufacturing Company, which is a supplier of the international clothing brand.
Earlier this year, SKS shut down the factory during the Chinese New Year holiday, without giving notice to its workers. The workers sued the factory and a mainland court ordered the owners to pay out the 103 employees. However, after reportedly handing over only a fraction of what the court ordered, the bosses disappeared.
Eighty percent of SKS’s business was with Tommy Hilfiger, so labour activists in Hong Kong demanded that the latter take responsibility for the debt.
The SKS factory is only one example of a recent trend. According to Taiwan’s Wealth Magazine, from 2013 to 2015, more than 50 billion Taiwan dollars (A$2.1 billion) was withdrawn from the mainland by Taiwanese companies. These companies used to employ a great number of rural migrant workers. Now some are beginning to shift production out of the country.
For instance, Yue Yuen Industrial Limited, the world’s largest footwear manufacturer, at its peak employed 120,000 to 130,000 workers at its production base in Dongguan in the Pearl River Delta. Now only about 30,000 remain. South-East Asian countries such as Indonesia and Vietnam are now Yue Yuen’s favoured locations because wages are lower.
Another example is Hong Kong’s richest man, Li Ka-shing – best known in Australia as the owner of Hutchison Ports, which sacked almost half its workforce by text message in August. According to the Sina Finance website, in the past three years, Li cashed out more than 100 billion RMB (A$21 billion) by selling mainland estates and shifting the focus of his portfolio toward Europe and his business to the Cayman Islands.
The site said: “Li Ka-shing’s choices do appear particularly brazen. In the eyes of ordinary people, we shared comfort and prosperity together in the good times, but when the hard times come he abandons us”.
The Wall Street Journal labelled his move “prescient” and “good timing”. Li’s motivation is simple: investments in China are not as profitable as previously and current indicators point to a deteriorating situation.
According to China’s National Bureau of Statistics, economic growth in the third quarter of this year was 6.9 percent, which is the slowest since 2009. Data from the Ministry of Finance show that profits of state-owned enterprises decreased by 8.2 percent over the first three quarters of 2015, compared with last year.
Yet while capital freely runs away, workers face a tougher life.
Although the official unemployment rate of 5.2 percent doesn’t sound too bad, the International Labor Organisation estimates that the youth unemployment rate will reach 11.1 percent next year.
The state provides little financial assistance to unemployed youth, so most depend on their parents and eventually accept low-paid jobs. University graduates with white collar jobs don’t necessarily have higher salaries, and unpaid overtime is the norm. Also, companies often only offer short-term contracts to new recruits.
The older generations of migrant workers have no retirement security. In many cases, they have had to fight hard to force the bosses to contribute to the inadequate social security fund. But once the factories are shut down or relocated, workers have little chance to win their demands.
Ms Wang (pseudonym) is one of the three SKS workers who went to Hong Kong to protest. Due to her age, she couldn’t find another full time factory job and now has to work in a family-based workshop. Her shift is at night and the pay is 7.5 RMB (A$1.60) per hour, which is much less than her previous wage.
She and her co-workers recognise that there is only a slim chance that Tommy Hilfiger will accept responsibility for the owed money, but they won’t give up without a fight.
