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China labor shortage? Not this year, say suppliers and experts

The labor situation post-Chinese New Year 2013 is reportedly more relaxed than past years as factories continue to improve pay and perks.

Nonreturning factory workers have become as traditional in China as the lavish celebrations characterizing Chinese New Year. The year of the snake, however, is shaping up to be a little different.

In the weeks immediately after Chinese New Year, also known as the Spring Festival, many factories reported a higher return rate among workers who left for celebrations in their home province. Other makers, meanwhile, said finding employees to replace those who did not come back to their jobs has so far been easier.

The hiring freeze by Foxconn soon after the festival indicates lower attrition, according to RBC Capital Markets analyst Amit Daryanani. In a Reuters article, Daryanani estimated the worker return rate this Chinese New Year at the China factories that RBC monitors is at nearly 90 percent, compared with 70 to 80 percent in previous years.

To quote a related This email address is being protected from spambots. You need JavaScript enabled to view it.&source=mail" target="externalwin">RBC report, "Our checks at multiple other supply chain companies suggest that the return rate of employees in China post-Chinese New Year has been much higher this year vs. historical averages. This may logically be a reason for Foxconn to implement a hiring freeze post-CNY."

Cornelius Mueller of Shenzhen-based Sinoland Worldwide Ltd has the same observation. "The general worker situation in electronics plants now is much more relaxed when compared with the past five to 10 years."

Mueller is referring specifically to plants in the Pearl River Delta, adding that he has not noticed any significant shortage in labor this year among Sinoland's partner factories. "Previously, some plants had to replace between 50 and 70 percent of workers. This year, the same factories face just 20 percent of personnel not returning." Sinoland provides sourcing, engineering and quality inspection services mainly for midsize European companies.

Manufacturers will, of course, have a clearer picture of worker requirements as operations normalize in the weeks ahead. The PRD situation, so far, is "not markedly worse," said Renaud Anjoran of Sofeast Quality Control, which helps importers improve and secure product quality in China. Anjoran further described the current worker deficit as the same or a little better than last year.

With most of its workers returning after Chinese New Year, Oneleaf (HK) Ltd's Shenzhen factory has a labor pool deep enough to fulfill its current list of manufacturing commitments.

The same goes for Shenzhen Gao Su Da Technology Co. Ltd, a supplier of adapters, power banks and accessories for iDevices.

While annual labor shortages have been reported in China for the past decade, the Rural-Urban Migration in China and Indonesia project found that a large percentage of the rural labor force has not yet migrated to cities. They are deterred by the "hukou" system that restricts migrant access to social welfare and other benefits.

"Many economists believe that China has run out of cheap surplus rural laborers," RUMiCI project leader Xin Meng said in an interview with The Wall Street Journal. "However, in our data we find that only about 25 percent of the rural hukou labor force has migrated to cities in 2010. They often stay in cities for a relatively short time, about seven to nine years."


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Note: This article "China labor shortage? Not this year, say suppliers and expertswas originally published by Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through e-magazines and trade shows.

All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.

Disclaimer: All product images are provided by the companies interviewed and are for reference purposes only. Those product images featuring products with trademarks, brand names or logos are not intended for sale. We, our affiliates, and our affiliates' respective directors, officers, employees, representatives, agents or contractors, do not accept and will not have any responsibility or liability for product images (or any part thereof) which infringe on any intellectual property or other rights of a third party.

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