FEATURE-Xmas orders bring labour shortages in China export hubs

Published: 09 Oct 2009 21:09:18 PST

DONGGUAN, China, Oct 1 - After a crisis that sparked mass layoffs in China's export hubs, factories in manufacturing heartlands such as the Pearl River Delta are on the hunt for migrant workers again as orders revive for Christmas.

In recent visits to three Pearl River Delta towns, a fragmented though consistent picture of labour shortages has emerged, with big job recruitment centres such as CHTONE in Changan experiencing a surge in activity.

"We're seeing more of that now," said Zhang Mingming, a bespectacled young manager at the job centre where a large red banner over the main entrance advertised 400 new jobs at an electronics factory.

Only a few months ago, such factories were laying off staff by the thousands and a mass reverse migration was taking place as millions of out-of-work workers streamed back to their villages in rural China to wait for the economy to pick up.

Now, with factories in China's Pearl River Delta ratcheting up production to meet Christmas orders for everything from Barbie dolls to iPhones, Plasma TV's and designer jeans, workers are in high demand in a region that produces around one third of China's total exports.

Yet finding those workers is another thing entirely as many of the millions of migrant workers who returned home have stayed there, unwilling to make a rash return to the fickle job market in China's "world factory", as the Pearl River Delta is known.

"For every ten people we look for, we can only find two or three," said Huang Zhilian, a manager at Vmart electronics, a firm that exports calculators, watches and DVD players to emerging markets such as Romania and Pakistan.

Slumped behind a recruitment booth at a job centre in Shenzhen's Longgang town, Huang said he'd only managed to hire six people in the past three days.

"We come here every day now, there's no choice," said Huang.

Jobs have become more plentiful and better paid in China's interior thanks to Beijing's 4 trillion yuan ($585 billion) stimulus package which included major spending in underdeveloped parts of the country so the country's job market would be less dependent on export hubs.

It's not just the Pearl River Delta that is scrambling to find workers. Other industrial belts are also facing labour shortages such as Zhejiang, in the eastern Yangtze River Delta, where state media says there is a shortage of 250,000 workers.

"We've had millions of pieces of reorders in the last two months. (In the) last two years there was nothing," Bruce Rockowitz, the president of export powerhouse Li & Fung that sources consumer goods extensively for the likes of Walmart, the world's biggest retailer, told Reuters.

The demand for workers is putting upward pressure on wages, potentially eating into the already wafer-thin factory margins.

"Wages had come way down and now they're starting to inch up again because a lot of the labor had migrated away," he added.

LABOUR MARKET CONSOLIDATES

While it remains to be seen whether China's migrant workers will stream back to the Delta, the recent labour strains underscore a growing need for the region to upgrade so as to reduce its reliance on low-end labour-intensive industries.

And while labour supply shortages aren't a new phenomenon, a demographic shift among China's 150 million migrant worker population, suggests more and more are now content to stay home, rather than provide the muscle to power coastal export hubs.

"During the financial crisis many people returned home and once home, they don't want to come out again," said Lu Kewang, a young migrant worker from Guizhou province working at the Group Sense electronics factory in Dongguan's Changan town.

While job centres are often teeming, workers are becoming more picky, preferring work at bigger factories and holding off for better pay, leading to creeping wage inflation in some parts.

Of the 20 million migrant workers out of work early this year, some 14 million or so across China had found work by June, according to a report by the National Bureau of Statistics.

While the report didn't give a regional breakdown, it said 66.7 percent of migrant workers took jobs in eastern coastal areas, while 32.9 percent found work in central and western China, suggesting a significant number were now staying in the interior, dissuaded from uprooting again.

"Before, China was poor, so this region was very attractive," said Liu Hong, the head of the Longguan job market in Shenzhen's Longgang district.

"Wages and benefits were many times higher than the inland but because of China's economic development, the difference is getting less and less, so fewer people are coming out here."

MIXED PICTURE

The improved situation on the ground accords with recent purchasing managers' index data suggesting orders are on the rise, but overall trade numbers remain weak suggesting the uptick isn't yet across the board, with Chinese exports in August falling a steep 23.4 percent year-on-year.

"The orders have become smaller, less frequent and with a shorter period of delivery .. the orders are not continuous like before," said Yifan Hu, the chief economist for Citic Securities.

"The recovery of exports will stabilize but not be very strong going forward," she added.

China's export sector now makes up roughly a third of its GDP and exports are vital in providing long-term employment for China's masses.

While the labour supply crunch has been a headache, some experts say it may only have a limited impact, with larger, better capitalised firms able to adapt and engage in stop-gap outsourcing of production to smaller factories.

"For capable suppliers, who are responsive to buyers and can adjust as requirements change -- whether its payment terms or order quantity -- things are looking very good indeed and can even improve year on year," said Craig Pepples, the Chief Operating Officer of trade intermediary Global Sources.

With Western demand still frail however, the stream of orders could naturally subside after the Christmas peak.

"There won't be any serious labour problem over the short and medium term," said Daniel Poon, a senior economist for Hong Kong's Trade Development Council.

Meanwhile, many of the Delta's masses of small factories are still scrambling from one order to the next. Instead large firms seem to be gleaning the lion's share of business and mopping up most surplus labour.

For minnows like the Yuang Kang toy factory in Dongguan which makes stuffed dolls including podgy Santa Clauses and grinning snowmen, there's not much to cheer about this Christmas.

"Things are just ok," said Zhang Guopin, a sales manager for the firm. "We haven't seen much improvement in our business."