Outlook on Light Manufacturing in China: January 2016

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The below is a sample of Cascade Asia Advisor’s monthly report on light manufacturing across emerging Asia, available for purchase through the Asia Briefing bookstore. The report is a 4-5 page executive-ready assessment and outlook designed to help companies anticipate labor risks and dynamics across key manufacturing countries in Asia. Countries of coverage include Cambodia, China, Indonesia and Vietnam.

Asia_Light_Manufacturing_Outlook_Cascade_Asia

With the approach of Chinese New Year on February 8, factories may experience a growing number of labor disputes, particularly relating to the payment of wages and year-end bonuses, and stricter labor inspections from local governments.

Factories in the Yangtze River Delta (YRD) and the Pearl River Delta (PRD) regions will face possible labor shortages, even temporary shutdown due to workers returning home for the Chinese New Year (CNY), beginning in early January and lasting until late February/early March. These regions may also experience higher wage costs before and after CNY, as factories are expected to provide incentives and wages attractive enough to retain workers.

The central government is mulling a new law that would regulate the activities of domestic and foreign non-government organizations (NGOs). This comes amidst the arrests of several high profile labor activists in December in Guangdong for “disrupting public order” and is likely the government’s response to the dramatic uptick in the number of protests and strikes in the province over the past five years. Such incidents are up 720% in Guangdong from 32 in 2011 to 262 in 20151. The drive to regulate NGOs is likely part of a package of security-related bills (e.g. the antiterrorism law) currently working their way through the National Assembly. A move to subdue worker rights groups at a time when discontent is at an all-time high and when all signs point to ever increasing competitive pressures from lower cost manufacturing centers in Southeast Asia may reduce the frequency of protests but, in our view, may ratchet up the intensity of incidents that do occur.

Guangdong: Authorities raided the offices of five labor rights organizations in the province last month, most in Panyu district. Each of the organizations are active across the PRD region. In many respects Guangdong is the frontlines of protests as well as crackdowns. It is conceivable that labor groups in the province will delay a full response to the recent arrests of three prominent labor activists in an effort to harness the zeal of the historically high level of post-CNY protests.

Zhejiang: Workers from the recently closed Tim Yu Shoe Company made a presence at local government offices to discuss wage issues which may provoke additional inspections pertaining to non-payment and late payment of wages under the provincial government’s campaign of ‘securing on-time and full payment for migrant workers’ before CNY.

Fujian: Nothing to report

On the Horizon
  • January to early February – Increased inspections in Zhejiang focused on timeliness of wage payments
  • February 8 – Chinese New Year
  • January to late February – Workers will return to their home towns for the Chinese New Year


About
Us

Cascade Asia Advisors is a boutique advisory firm focused on Southeast Asia. They help businesses anticipate risk and make better decisions using forward-looking, localized intelligence. For information about developments mentioned in this report, please contact them at info@cascadeasia.com.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email china@dezshira.com or visit www.dezshira.com.

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