China's Factories Face Surprising Labor Shortage

During the first half of this year, Yang Zongfu’s blue jean factory had few customers. Now, as his business picks up, he can’t find enough workers.

Clutching a chalkboard with a long list of job openings, Yang joined about 30 other factory owners who have been spending their mornings at a street employment fair in the southern town of Xintang, the jean-manufacturing hub of China.

“I’ve been out here for two days and haven’t found anyone,” said Yang, as the scorching late morning sun beamed down on his sweaty, bald head.

The dearth of workers is a surprising turn in an economy where millions were laid off just months ago, and the government worried the jobless would riot. Back then, it was the workers roaming the streets looking for jobs.

The labor crunch is another sign that the Chinese economy — the world’s third largest — is bouncing back from the global downturn, invigorated by government stimulus spending and a flood of cheap bank loans.

But experts say the shortage is also the result of a wariness among migrant workers — whom the government discouraged from traveling to cities when jobs were scarce — of returning before they are sure the economy has fully recovered.

China’s economy has certainly begun to heat up, contributing to the increased demand for labor. The nation’s economic growth hit 7.9 percent in the second quarter, up from 6.1 percent the previous quarter, the government said. Exports, retail sales and factory output also improved in July, according to official statistics.

In Xintang, Yang said his business started improving in August when domestic buyers started placing orders. His factory — which has received few overseas orders — is now ramping back up to its pre-slowdown headcount of 100 from around 60 earlier this year, he said.

His chalkboard help-wanted sign advertises for one worker who can sew belt loops and another who can stitch pockets. He also needed a fabric-stretcher, a pants-hemmer and a zipper-stitcher. Other factory bosses along the street displayed signs made out of red poster board or scraps of brown cardboard looking for textile workers.

Some economists and industry executives, however, said that the recovery is still anemic and may prove short-lived — signals that may discourage people from leaving the farms to return to the factories. Andy Xie, an independent economist based in Shanghai, said that while factory orders are rising, they are still sharply lower compared to pre-downturn figures.

“What I see is that the retailers in the U.S. and elsewhere, in response to the rising cost of money last year, ran their inventories down to zero, so Chinese factories had no orders in October, November and December last year,” Xie said.

“That was not a normal situation,” he added. “Now with the credit costs pretty low again, you have restocking going on.”

Although business has picked up, the orders are small in quantity, said Danny Lau Tat-pong, chairman of the Hong Kong Small and Medium Enterprises Association, whose members run many of the factories in the Pearl River Delta.

Many workers are savvy enough to understand these business trends and are cautious about who they work for because they might get axed again. For many who returned home once they were laid off, forking out the cash for a job search in a faraway province can be a big investment. Many don’t want to risk it now if the prospects aren’t solid.

In Xintang, migrant laborer Rui Deji scanned the help-wanted signs in the job fair as he clutched his lunch — a head of cabbage in a red plastic bag. The 20-something migrant with spiky hair, brown slacks and sandals said he has spent the past six years in textile factories in Xintang.

Rui said he has been unemployed for a month and would be willing to work for the average wage of 2,000 yuan ($293) a month. But he doubted that any of the factories at the fair would pay him that much for long.

“The problem is that business is unstable,” Rui said. “You can’t be sure the work will last for long. And you also need to worry about whether the boss will pay you on time or even at all. That’s why so many migrants aren’t leaving their villages to come back here to work.”

When the global downturn hit China last year, 30 million migrants lost their jobs, many of them in the Pearl River Delta, called the “world’s factory floor” because its China’s export manufacturing base. Xintang (pronounced SHIN-tahng) is about an hour’s drive from downtown Guangzhou, the provincial capital at the center of delta.

Fears that those angry unemployed workers would roam the streets of industrial zones committing crimes or foment unrest in their home villages in the countryside caused Beijing to put in place policies to head off trouble. Villages started job training programs and offered micro-loans to help migrants start small businesses at home.

Officials from Guangzhou asked local government to tell migrants not to head to the Pearl River Delta, said Zhang Baoying, director of the Guangzhou Human Resource Market Service Center.

“We held meetings and advised the local employment authorities that the employment situation was going to worsen in Guangzhou,” Zhang said. “As a result, many of the workers, after learning about the situation through local officials, did not come back.”

Now, officials are trying to turn the tap of migrant labor back on, traveling to far-flung provinces to recruit workers, said Wang Ouxiang, deputy secretary of the human resources and social security bureau in the city of Wenzhou, a city on the east coast that is also a key manufacturing center. Wenzhou factories have more than 10,000 openings, he said.

Last week, Wenzhou held a job fair offering 2,000 positions, Wang said. “Only 700 workers showed up,” he said, “even though we advertised the event on television a week before.”

Wang said that China’s 4 trillion yuan ($586 billion) stimulus plan has helped create work closer to home for migrants in the interior provinces. “If it’s easy to work from your hometown, why not?” he said.

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Associated Press researchers Zhao Liang in Beijing and Ji Chen in Shanghai contributed to this report.

8/31/2009 1:46 PM WILLIAM FOREMAN, Associated Press Writer XINTANG, China