Migrants
Exit Guangdong As China Powerhouse Turns Growth Laggard
The
region that drove China’s rise after market barriers started coming
down in 1978 is among the nation’s slowest- growing as faltering
demand cuts exports and workers exit for the central and western
areas powering the nation’s expansion.
3
August, 2012
Liao
Ping says it’s like winning the lottery when he convinces a worker
to accept a job offer for Luyang Shoes Co. at his roadside stand in
China’s southern Guangdong province. “Sometimes I get two in a
day, most times the result is zero.”
The
region that drove China’s rise after market barriers started coming
down in 1978 is among the nation’s slowest- growing as faltering
demand cuts exports and workers exit for the central and western
areas powering the nation’s expansion.
Job
seekers check work placement ads at a labor market in Dongguan,
Guangdong Province, China. Photographer: Nelson Ching/Bloomberg
Deserted
factories and worker dormitories litter the Guangdong manufacturing
hub of Dongguan, where walls are plastered with recruitment posters.
The province is set for the weakest full-year expansion since 1989 as
toy, shoe and textile industries move inland or abroad and a
transformation to higher- value production and services remains
unfinished.
“It’s
painful, and the process of economic upgrading is not smooth, but
it’s the only way of moving forward,” said Cheng Jiansan, a
researcher with the Guangdong Academy of Social Sciences who studies
Pearl River Delta economies and has advised provincial leaders over
the past decade. “The current slowdown in external demand may help
us in the long-run as low-end production will exit.”
The
province’s 7.4 percent growth in the first half compares with
full-year rates as high as 23 percent in the early 1990s when
investment was pouring in from Taiwan and Hong Kong and millions of
migrant workers were chasing jobs. The picture is bleaker now in some
pockets, with Dongguan’s expansion just 1.3 percent in the first
quarter.
Perks
for Workers
Local
numbers for gross domestic product can be overstated, according to Lu
Ting, a Hong Kong-based economist for Bank of America Corp. Added up,
they amount to more than the central government’s calculation of
the national total.
Wearing
plastic sandals in the tropical heat, Liao has time to talk as he
sits on a stool on the street in Chiling, part of Dongguan. A green
board leans against his desk advertising base salaries of 2,100 yuan
($330) a month, free food and accommodation, 10 days’ paid leave
from the second year, and library and entertainment facilities.
“The
factory is always short of hands, but there are not enough people,”
he says.
About
30 kilometers away, at a factory which formerly made door and window
frames, the workers’ basketball court stands idle and the
dormitories are empty. The compound is locked, windows and doors are
smashed and pages from the June 9, 2011, edition of the Guangzhou
Daily are plastered over the guardhouse windows. Hand-written posters
say “plant for rent.”
Dream
of Leaving
Hu
Zhijia, 35, a migrant worker, is cycling from one factory gate to
another, looking for a job that pays at least 3,200 yuan per month.
After 14 years in Guangdong, he says his ambition is like everyone
else’s: to make enough money to return home, in his case Hunan
province.
Guangdong
is betting its future on developments such as a 72-square-kilometer
“high-technology zone” at Songshan Lake, where Taiwan’s Wintek
Corp. (2384), a maker of liquid-crystal displays, is expanding even
as it uses Vietnam for labor-intensive work. Qianhai, a
15-square-kilometer zone on the west side of Shenzhen, is being
developed as a financial services center.
Another
prospective growth engine: becoming a services hub for southern China
and Southeast Asia, building on Guangdong’s existing base in
finance, says Ben Simpfendorfer, an economist and managing director
of Silk Road Associates in Hong Kong.
For
now, the province is suffering an expansion rate that was the
second-lowest of China’s provinces and municipalities in the first
half, with only Beijing and Shanghai weaker at 7.2 percent,
local-government data show.
Facing
Facts
Guangdong’s
growth compared with top-performer Tianjin’s 14.1 percent. The
national expansion was 7.8 percent.
“Guangdong
has to face the fact that, for now and the foreseeable future, growth
will be slower than the national average,” Cheng said, predicting
an annual 6 percent expansion over the next decade.
“The
year 2012 is particular severe with about one-third fewer migrant
workers than last year, and the labor shortage has become the No. 1
problem here,” says Chen Jian, a manager with the Lixiang Human
Resources, a labor agency in the downtown area of Dongguan’s Houjie
town. “Labor costs are rising sharply, and many small factories and
labor-intensive businesses are under huge pressure.”
Migrant
worker Guan Shiyou, 25, says his monthly base salary is 2,400 yuan,
more than triple what he earned in Guangdong a decade ago and comes
with free food, accommodation and overtime pay that he didn’t get
when he started. He’d go home to his village in Guangxi if he could
secure a 1,500 yuan per month job there, he says.
Nowhere
Worse
“You
can’t find a worse place to recruit labor than in Dongguan now,”
says Deng Bin, the sales manager for Weida Electronics Factory, a
maker of capacitors for electronic devices which shifted production
to Changzhou in Jiangsu province.
Companies
including Dell Inc. and Intel Corp. are investing in plants in inland
cities. Similarly, Foxconn Technology Group, the largest assembler of
devices for Apple Inc. and Hewlett- Packard Co., is expanding
factories in the provinces of Sichuan and Henan.
Emptying
the cage for new birds is the term used by Guangdong Communist Party
chief Wang Yang to describe replacing low-end producers with
manufacturers such as the Shenzhen-based telecommunications equipment
makers ZTE Corp. (763) and Huawei Technologies Co. For Wang, success
for the province would burnish his political career. He's a candidate
to join the Politburo Standing Committee, Hu Yifan, an economist at
Haitong International Securities Group, said this year.
Race
for Patents
Huawei
spent 23.7 billion yuan on research and development last year,
according to the company’s website, while ZTE ranked first in the
world for patent applications, according to the World Intellectual
Property Organization.
ZTE
and Huawei “are not Apple or Samsung for now, but maybe they can be
in the future,” said Cheng.
In
Houjie, the hotel receptionist with the cigarette tucked behind his
ear is the owner, Deng Ge: he says he can’t find anyone else to do
the 2,000 yuan per month job. Deng reminisces about the glory days in
2008 before the global financial crisis hit China.
“Friday
and Saturday nights were always fully booked as young men and women
left factory dormitories seeking privacy and romance,” says Deng,
who’s been trying to hire a receptionist for six months. “This
year, even on the best days, I still have 30 percent vacancy.”
Workers’
Views
The
notion that Guangdong’s growth model needs to be remade extends to
workers such as Gao Liwen, 43, who says he’s been here since the
early 1990s. He remembers days he was dizzy from processing as many
as 1,800 pairs of shoes on the production line.
“China
has to move up the value chain -- in my view, the price of a pair of
good-quality shoes should be at least 300 or 400 yuan to foreigners,
not a few dollars,” Gao says, adding that he plans to learn the
manufacturing process and then set up his own shoe factory in Hebei.
“Guangdong
is not a land for old people, and I have to think about the future,”
Gao says.
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