Friday, February 26, 2010

Labor Shortages in Chinese Manufacturing

From the China Daily:

Companies in the Pearl River Delta, the country's manufacturing heartland, are facing major labor shortages after workers are failing to return after the Spring Festival holiday.

Nearly one in 12 migrant workers is not expected to show up after the break in Guangdong province, home to some of the country's leading exporters, according to survey of leading employers.....

Workers are said to be disillusioned with poor pay and are now finding better job opportunities near their hometowns and villages, which are benefiting from economic regeneration as a result of the stimulus package.

The article also notes that, as wages rise, the low-end export industry in China has to move up the value chain through technological innovation.

A problem is that the stimulus, i.e. bank lending, mentioned in the article was probably temporary in nature. And if many companies are not ready move up the value chain, then China could find itself squeezed between an eroding export industry and a wave of bad loans.

It's a strong possibility that China will begin posting trade deficits this year, due to the collapse of trade to the 'developed world' and a surge of imports related to their stimulus measures. Some analysts think this might cause a so-called black swan of renminbi devaluation if the dollar continues strengthening.

1'China says it may swing to trade deficits in next six months' - Marketwatch, Oliver
2'Migrant workers stay home' - China Daily; Limin, Moody

No comments: