Thursday, June 10, 2010

As wages rise in China, Taiwan firms to head elsewhere?

A flurry of stories about China and its Taiwan businesses this week. First, the Epoch Times detailed how the "Foxconn suicides" are neither, but look instead like a media construction to enable China to lever out firms that compete with its own national firms.

Foxconn responded to the negative publicity by raising wages, which inspired a number of articles. However, few of these articles noted that the raises were vapor. Why? Because, as Eastday chronicles, Foxconn wisely instituted a three month probation and review period for its Shenzhen workers. In other words, assuming anyone actually gets a raise, it will be months from now. "You didn't pass the review" is likely to be the new mantra over at Foxconn's HR unit for the next year or so.

In fact, while the local press has trumpeted Foxconn's announcement to move his factories back to Taiwan, this article at Taiwan Today claims Gou was working on that for the last months. All the Foxconn talk is just theatre. China attacks Foxconn with theatre, Foxconn replies with theatre. Not for nothing does "PRC" begin with "PR"....

That same article also says that wages for foreign workers in Taiwan are going to be lowered by adminstrative sleight of hand, which will help local firms return here and attract outside investment, which will mean greater demand for the taxis local workers are now all driving. Isn't that great?

Businessweek chronicled how rising wages, starting with the reforms of 2008 that note only pushed up wages but also ended certain export breaks, are putting pressure on Taiwan firms in China:

Recent wage hikes in China could force Taiwanese electronics firms operating there to relocate to other Asian countries, a Taiwanese industry leader has said.

Chairman Arthur Chiao of the Taiwan Electronics and Electrical Appliances Association said his group is assisting China-based Taiwanese companies to seek out new manufacturing sites in India, Indonesia and Vietnam in the wake of steadily rising labor costs on the mainland.

Another article noted that the Minister of Economics in Taiwan promised to put in place a set of policies to help Taiwan firms move south. The southward call was highly ironic, since diversification of investment to Vietnam and elsewhere was a staple of DPP policy (please, will somebody start looking at India?). Arthur Chao further said:
However, companies whose main markets are in the United States and Europe should consider relocating as soon as possible to places with better potential for development and profit making, Chiao said.
Meanwhile exports hit the largest percentage rise ever to reach the fifth highest monthly total ever. Looks like Taiwan's economy is on the rebound.

And back in China? The strikes at several foreign owned firms have apparently triggered other strikes, many at foreign owned factories, at least according to Epoch Times. Spreading strikes.... Looks like China has attempted to call up the demon of mass action and may now have great trouble getting it stuffed back into the bottle again.
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10 comments:

@taiwanews said...

I initially read "Police officer uses Geometry in policing" quickly realized that was far beyond any Taiwanese Police Officer.

Anonymous said...

head to Vietnam, Indonesia or India so that they can find some other people to enslave...

Anonymous said...

Anyone notice a conspicuous police presence on the streets? Gotta fight organized crime by pulling over scooters making illegal right turns.

les said...

It makes wonder what really happened to move the production of the iPad out of China. Was that on Apple's initiative or Foxconn's?

BTW, the really labor-intensive industry that serves as a barometer for others, the shoe industry, is on the move again. After all the moves from China to Vietnam starting in 2008, the big boys like Baocheng are now eying Laos and Cambodia...

jerome in vals said...

"Spreading strikes.... Looks like China has attempted to call up the demon of mass action and may now have great trouble getting it stuffed back into the bottle again."

At long last, a heart-lifting blurb confirming the original motive our angel-like investors trumpeted back when first "engaging" the Zhongnanhai Red Pavillon Madam.

Meanwhile, disgruntled Taiwanese Johns are on notice that their toufu is welcome in our oat gruel, here in struggling Northern Sarkolandia.

Anonymous said...

Michael, do you understand Taiwanese / read Mandarin? There's two episodes of Shinwin Wa Wa Wa that I think you'd be interested in.

The first is like a "show and tell" on Taiwanese plains aboriginals including a bit on the Siraya (obviously this is not a scholarly publication but interesting nevertheless): The Story of Taiwan's Plains Aboriginals

The second and super interesting talks about the Taichung police-gangster scandal and the general in-bed-ed-ness of the police, prosecutors, gangsters, and journalists (to warn you, heavy on Taiwanese, but well, well worth it): Police and Gangsters

Thomas said...

I think that the importance in the Foxconn wage rise is less in the implementation of the wage rise at Foxconn than in the example it offers to other workers. The Honda strike, followed by the Honda supplier strikes, followed by the strikes at a few other companies that have been in the news are significant in that they have been organized independently of the All China Federation of Trade Unions and are all happening at the same time. Protests at factories are not unknown, but actual strikes are rarer. The more of these things that happen at once, the better because that raises the potential for arriving at a tipping point.

Anonymous said...

Anonymous 11:02PM -- Maybe police have determined gangsters are more likely to make illegal right turns and this is the best way to catch them. :-D

Anonymous said...

So...

The day after Ma announces police reform we get a knock on the door and there is a policeman. He says he's going door to door to advise everyone to be careful about fraudulent phone calls, and also to take down the names and birthdates of the occupants.

Yeah--we thought at first this is some sort of scam, but he had a badge and ID, so we figured he was doing "reform" work by checking up on everyone. This may be the last we hear from him.

Anonymous said...

Yes, move south to Vietnam. The country where workers also strike at the drop of a hat, and get massive wage increases decreed by the communist government there. In one anecdote, the workers struck because the rice served in the cafeteria was "not white enough." The solution to this grievance was not better rice but increased salary - funny that.

Chinese workers are just following Vietnam's and once you find out that striking can bring you 20% wage increases at a time - guess what happens? Repeated strikes.

The increased wages will hit local firms too, eventually.

I doubt India, another country with a history of unions and political control over economy would be any better for Taiwanese companies.

While we might think that these are evil corporations that exploit workers, you do notice that living standards go up wherever they set up shop...even in countries ruled by enlightened vanguards of the proletariats...