Tough times in the Chinese labor market
Brian Schwarz of the China Challenges blog reports on the difficulties facing workers in China due to the financial crisis. Governments around the world are gearing up with various stimulus packages, but in the meantime prospects don't sound very good:
Today many firms are downsizing or considering closing up shop all together. Citing fast-climbing labor costs and pesky production quality problems, a growing number of German companies are doing an about face and pulling their manufacturing operations out of China. In August the Association of German Engineers (VDI) estimated that one in five of the approximately 1,600 German companies with presences in China were planning to pull out of the market...
...government officials have slashed interest rates and announced plans for a large fiscal stimulus to keep the job engine from stalling completely. McKinsey estimates that another 300 million rural residents must come to Chinese cities over the next seven years. Already, this year's 5 million university graduates are struggling to find white-collar jobs.
Clearly, very substantial declines in exports are having a serious effect on people's livelihoods.
(Hat tip: Oiwan Lam of Global Voice Online)
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The VDI data actually do not apply to China only. Research on German companies' FDI has found that in general many companies are unhappy with the results they got from FDI in Eastern Europe, Asia or elsewhere, in particular in those cases where they were chasing "cheap labour", and that around 20% of companies are in the process of relocating production back to Germany. The question, though, is what the other 80% are doing: Scaling down? Or perhaps expanding?
Posted by: Jorg Meyer-Stamer | Jan 10, 2009 8:49:13 AM