A wave of factory closures in Pearl River Delta
and the absence of the ACFTU

Yau Tze-Ken
Instructor of Department of Applied Social Sciences, the Hong Kong Polytechnic University

 

In the last year, strikes and workers' struggles have been breaking out successively in the Pearl Rive Delta (PRD), due to factory closures and relocation. Local labour organizations have noticed that numerous Hong Kong and Taiwanese-owned small and medium enterprises (SMEs) are closing down or moving away from Shenzhen, Dongguan and other cities nearby. The employers tend to treat workers as “disposables”, ignoring their contributions to the plants and for the profits they have helped their employers accumulate over the past decades, and refusing to compensate workers as required by laws. Workers often organize strikes themselves, safeguard the properties inside the factories collectively, or launch road blockages to draw attention from the local authority and the society, as a way to demand their lawful rights, when they learn that their factories are about to shut down. According to the labour organizations' observation, over the past few years, nearly 50% of the strikes and labour actions in the PRD were triggered by factory closures and relocation. Every month, news of two to three such kind of labour actions would be circulated on the internet.

 

Most of the local authorities deal with the workers' struggles in an unappropriated manner. Historically, without migrant workers, the economic miracle of the past three decades would not happen in the PRD. Yet, the local government fails to protect workers' rights to employment when divestment takes place. It even sends riot police to crack down workers' actions, detain workers' organizers and force workers to accept compensation which is substantially lower than the legal requirement. The recent protest at Diweixin Product Factory of Shenzhen city, illustrates that how the local police was working along with the employer in repressing workers, so that the employer could attempt to offer only 10% to 20% of the legal compensation to silence the workers. Therefore, there is a need for us to understand the roles played by the local government under this wave of factory closures.

 

The official statistics show that in all locations, the demand for technical workers is still higher than their supply.(1) For many technical posts, the so-called “labour shortage” as reported by the media, is due to the low wages the enterprises are offering. As observed, orders from the European and American market have not declined significantly and enterprises in the neighbouring cities of the PRD are indeed recruiting in a massive scale. For example, the Hong Kong-owned Biel Crystal Manufacturing Ltd in Huizhou City has increased its workforce from 20,000 to 40,000 within a year.

 

The factory closures in Dongguan and Shenzhen, could also be read as a consequence of the PRD government's policy of “vacating cage for new birds”. (2)Many of the low end processing and assembly factory businesses (PAFB), have been demanded to shut down. Yet, many of them refuse to transform into legal entities of limited liabilities, which are subject to value-added tax and could result in a decrease in profit. (3)Instead, they shut down their production line or relocate. Aid by the government's connivance, the divesting enterprises are escaping their responsibility to compensate workers. It is the core reason for the recent outbreak of strikes and labour actions in the PRD.

 

Most of the factories in the PRD do not have trade unions, and those with unions are often controlled by the management. Once in danger of factory closures, workers could only organize a wildcat strike without enough time to elect genuine representatives. Therefore, most of the actions are poorly organized and inefficient to safeguard their rights. To improve their situation, it is necessary that democratic unions, whose officials are directly elected by workers, are to be built in factories, in order to strengthen their collective power when bargaining with employers and the government. With the support of unions, workers who are facing factory closures, could organize more efficiently to bargain with the government and to lobby for more social support.

 

Appendix

1. “Labour market analysis from the public employment service agencies of some cities, 2nd quarter of 2013”, accessed from http://www.mohrss.gov.cn/gkml/xxgk/201307/t20130704_106814.htm.


2. In 2011, the statement of the “Ten priorities in accelerating industrial upgrade” released by the Shenzhen City, has stated, “to strengthen industrial transfer mechanisms. In principle, no specific fund should be allocated to help transferring enterprises which are lack of development potentials. They would not be entitled to the benefits of off-peak power consumption as well. Led by the city's Science, Industry, Trade and Information Technology Commission, and together with Human Settlements and Environment Commission, Human Resources and Social Security Bureau, Market Supervision Administration, Public Security Bureau, District Goverments, Administrative Committees of the New Districts, Shenzhen Power Supply Bureau, should enforce labour inspection, environment inspection, work safety check-ups in these factories in accordance with laws, to promote their relocation.” Accessed from http://www.szjmxxw.gov.cn/szcyzy/cyzy_a11.html


3. In the beginning of China's economic reform, a vast majority of Hong Kong and Taiwanese-owned investment registered as “processing and assembly factory businesses (PAFB)” in the PRD. They made use of the cheap labour, tax incentives, export tax rebate and subsidy in China, to make huge profit. Yet, such a business registration does not allow them to become independent legal entities, and they do not have the rights to land use. They neither are entitled to the trademarks nor patents, their products would only be exported and no domestic sales is allowed. In recent years, the Guangdong Provincial Government has been removing these low-end, highly polluting PAFB and converting the plants or land for service-oriented, high-tech and high-value-added industries, which is known as a policy of “vacating the cage for new birds”. Foreign enterprises are required to switch their business registration to foreign invested enterprises (equity joint venture, cooperative joint venture and wholly foreign owned enterprise), with independent legal entities. The newly registered foreign invested enterprises might not be given tax incentives and some would have to pay value-added taxes.