Sunday, 28 February 2010

Chinese labour shortages and demand hots up

Apologies for the lack of posts on Chinaeconomicsblog. I hope to catch up soon. The real academic job is taking its toll on my posting frequency.

I will get up to speed with more simple links. Ironically post frequency falls when I am in China to the great fire wall of China.

There is much to talk about. The whole financial crisis leads to more questions than answers. I am not convinced by the Chinese recovery although there is no doubt things could have been worse. The problems now are asset bubbles and bad loans that will cause their own problems sooner rather than later.

One thing I would not have expected would be labour shortages given the massive layoffs over the last two years. The FT reports.

The impact of the massively overdone fiscal stimulus package is still being felt.

Labour shortage hits China export recovery [FT]

An export recovery in the world’s most populous country is running up against an unexpected constraint – manpower.

With Chinese exports back to their early 2008 levels, factory owners are worried about their ability to service a surge in orders now that a new manufacturing cycle has begun after the lunar new year holidays.

The problem is particularly acute in southern Guangdong province and its Pearl river delta manufacturing heartland near Hong Kong, the region known as “the workshop of the world”.

Guangdong accounts for a third of China’s exports and would rank as one of the world’s 10 largest exporters if it were a country in its own right. But the province’s ability to attract and retain migrant labour from China’s vast interior is slipping.

“Labour availability is tight right now in Guangdong compared to other regions,” said Paul Hussey, chief executive of Strix. The Isle of Man company, which dominates the global market for thermostatic controls on electric kettles, maintains most of its manufacturing operations in the provincial capital, Guangzhou.

Quantifying labour shortages is extremely difficult given large variances by region, industry and skill level. Recruiters for Galanz, the world’s largest manufacturer of microwave ovens, were this week offering production line workers a relatively robust monthly base wage of Rmb1,700 ($250). Skilled technicians in much greater demand were commanding 65 per cent more.

In Dongguan, a manufacturing centre near Guangzhou, the local government estimates that there is now just one worker for every two jobs. At the height of the crisis, which for Chinese manufacturers came last spring, local officials calculated there were four workers competing for every three jobs.

Beijing’s successful economic stimulus programme has contributed to a coastal scramble for labour, by increasing investment and employment opportunities elsewhere.

“Fiscal stimulus has spurred jobs growth in the interior provinces,” Ben Simpfendorfer, Royal Bank of Scotland economist in Hong Kong, said.

In December, China unveiled the world’s fastest passenger train service between Guangzhou and the central city of Wuhan, covering 1,100km in just three hours. The Harmony Express line has reduced travel time between Guangzhou and Shaoguan, an industrial backwater in Guangdong’s remote mountain region, to just 40 minutes, anchoring local workers closer to home.


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