Thursday, October 30, 2008

An Interview: Benefits and Wage Payments To Chinese Laid Off Workers

The Crisis Hits China: Benefits and Payment of Laid Off Workers;
An Interview With Union Organizer in China

Mike Tolochko

This will be an Interview and report of the impact of the capitalist financial crisis on the Peoples¢ Republic of China and its workers. Hundreds of thousands of workers were abruptly thrown out of work, many owed back pay, as toy factories in China suddenly closed for lack of demand from the US and other capitalist countries.

Our interview is with Ellen David Friedman, a long-time organizer with Vermont Educational Association currently teaching in Guangzhou and working with the Guangzhou Federation of Trade Unions, ACFTU.

The ACFTU is the All-China Federation of Trade Unions, the largest union federation in the world. Its history pre-dates the Chinese Revolution of 1949.

Special thanks to Wadi¢h Halabi, member of the CPUSA Economics Commission and Board Member, Political Affairs for arranging this interview.

This is the first of a series on this subject.

PA Are these plants, toy plants mostly, unionized?
EDF Many of them will not have the union present, certainly not in any meaningful way. There had been a recent push from the ACFTU for local trade unions to organize in the migrant-dominated sectors, but the Dongguan region has a reputation for being strongly pro-capital. It seems that the rate of unionization is very low in these toy factories.

PA Do laid-off workers have any benefits?

EDF There are benefits for laid-off workers in the law, but they are very often ignored in practice. I assume that this -- along with unpaid wages -- is the motivation for the protests that are now erupting.

There are no unemployment benefits. There are benefits for improper lay-off, but these are voided if the employer shuts down due to bankruptcy.

If they have not been paid by firms that shut down abruptly, do they have any recourse?
No real recourse. If the pressure of the protest is sufficiently strong, it's possible that the government may try to go after some "run away" employers for partial compensation. There is no guarantee that this will happen.

I've learned that the government has now reimbursed the unpaid wages to the 6,000 workers affected by the shut-down of the very large Hong Kong owned toy factory. The government used its own resources, and will now go after the enterprise owners for reimbursement. (This is apparently caused quite a controversy among citizens!)

Between 900 - 1,000 toy factories have recently closed in the Dongguan region. The great majority are small and apparently paid out wages properly before closing. The news article on this situation follows the interview.

PA Are most of these plants in the "Zones"?
EDF I think that the special characteristics that once applied to the special economic zones are now quite generalized... but I don't really know the answer to this. I can try to find out.

The Straits Times

Oct 24, 2008

DONGGUAN (China) - AT LEAST 2.7 million factory workers
in southern China could lose their jobs as the global
economic crisis hits demand for electronics, toys and
clothes, according to industry estimates.

The region has seen massive export-driven expansion in
recent years by supplying the world with cheap consumer
goods, but rising production costs and falling US and
European demand have marked a swift end to the boom.

Now 9,000 of the 45,000 factories in the cities of
Guangzhou, Dongguan, and Shenzhen are expected to close
before the Chinese New Year in late January, the
Dongguan City Association of Enterprises with Foreign
Investment estimates.

By then, the association expects overseas demand for
products from the three manufacturing hubs to have
shrunk by 30 per cent, as the knock-on effects of the US
housing market collapse and credit crunch filter down to
Chinese workers.

'I am afraid it is not going to look good on the Chinese
government if the decline of the export-led industries
and the unemployment problem continue to worsen,' Mr
Eddie Leung, the association's president told AFP.

Mr Leung, also a member of the Chinese Manufacturers'
Association, said the estimate of 2.7 million job losses
was conservative, given that many of the larger
factories in Guangdong province employ thousands of

One of them, Hong Kong-listed Smart Union, a major toy
manufacturer in Dongguan supplying US giants Mattel and
Disney, closed its doors last week, leaving 7,000
workers out of work and with several weeks of back pay

Clement Chan, chairman of the Federation of Hong Kong
Industries, said a quarter of the 70,000 Hong Kong-owned
companies in southern China, 17,500 businesses, could go
to the wall by the end of January.

Describing the likelihood as a 'worst case scenario', he
said Hong Kong firms in the region employed a total of
10 million workers, but did not want to speculate on the
extent of possible job losses.

While small and medium-sized factories are especially
prone, the threat of lay offs looms just as large over
the region's manufacturing giants, further squeezed by
the appreciation of the yuan.

Mr Harry To's Mansfield Manufacturing is a classic
example of the spectacular growth in China's industrial
heartland over the last three decades.

To started a metal business from a small room in Hong
Kong in 1975. In 1991, he joined hundreds of other Hong
Kong entrepreneurs moving their production across the
border into China to take advantage of cheap labour and

He now employs 8,500 workers in 11 factories in China
and Europe. His six factories in Dongguan cover 140,000
square metres.

Mr To's company, which is now a subsidiary of
Singapore-listed InnoTek supplies metal components for
cars, plasma televisions, printers and other electrical
appliances to Japanese brands including Canon, Toshiba,
Epson, Minolta and Fuji-Xerox.

Business for the company, among the largest in its field
in China, has grown by 40 per cent annually in recent
years, but with credit being harder to come by, no
manufacturer is safe, he said.

'With banks being so tight on their lending policies
now, bringing down a factory overnight has now become
very easy.' All his expansion plans have had to be put
on hold.

'Some of our long-time Japanese and European clients
have asked us to stop producing for them in the next two
to three weeks,' he said.

'They said they did not want to have too much stock
piled up in their warehouse as demand continues to

Mr To recently started building a new 70,000 square
metre factory in Dongguan and was planning to hire 2,000
more workers later this year. But now, all work on the
unfinished factory has stopped until more orders roll

'No one would expand their business when the prospects
for the entire manufacturing industry look so grim,' he

Instead of hiring more workers, Mr To is looking at
cutting 1,000 employees across his operations.

But far from being downhearted, he is shifting part of
the company's export-led production to developing
energy-saving electrical appliances for the domestic
market, which he sees as weathering the current
financial turmoil.

'In the long run, I am confident that mainland Chinese
consumers' purchasing power will keep rising as their
Western counterparts continue to lose out.' -- AFP