06/18/2010, 00.00
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Strikes to affect China’s competitiveness

Labour demands and work stoppages will affect foreign investments, which now might seek sunnier locations like India, Bangladesh and Vietnam. However, analysts believe higher wages will stimulated the domestic market, something that Beijing desperately needs.
Beijing (AsiaNews) – The wave of strikes that recently hit China will bite into its international competitiveness. Other countries in the region, like India, Bangladesh and Vietnam, will become more attractive for foreign investors. According to international analysts, the latter are very much concerned with the demands of striking migrant workers who after three weeks of industrial action achieved their goals.

Countries in South-East Asia can offer the same cheap labour as China does, but the mainland has had such a large labour pool with workers willing to put up with long hours and almost inhuman working conditions. Now, strikes are a sign that this is bound to change. For example, workers in Toyota’s Tianjin plant won a 24 per cent wage hike after a strike of just a few hours.

For Toyota, this has also meant a 2 per cent loss in Tokyo trading. But for many other investors, it means wondering whether China is still a profitable market for their capital.

“In the short term, a rise in wages is negative, but it’s positive in the medium- and long-term,” said Hideo Arimura, analyst at the Mizuho Asset Management Co in Tokyo. “If wages rise, people will spend more, benefiting the companies eventually.”

Indeed, China’s domestic market is largely untapped. Chinese authorities have always focused on foreign markets, which absorb about 80 per cent of domestic output. If Chinese consumers were encouraged to spend, China might even wean itself from the US market.

According to David Abrahamson, project manager at the China Center for Labor and Environment, higher investment and improved wages in western China are deterring workers from migrating, this is pushing up pay in more industrialised regions like Guangdong in the south.

Still, the authorities have called on police to keep a close tab on social unrest, indirectly signalling concern over the activities of the labour movement.

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