Do Strikes Signal End of China as Low-cost Manufacturing Base?

In the wake of walkouts at several Chinese manufacturing facilities over the past few months, I'm starting to wonder about China's future as a low-cost manufacturing base.

Most recently, the Toyoda Gosei plant, located just north of Beijing, was shut down by a one-day strike last Tuesday. Although short-lived, the work stoppage underscores growing employee discontent at the facility, and a strike resolution came only after managers agreed to discuss wage increases, Reuters reports.

A few days later, Honda Motor Co. was in the middle of a similar dilemma. The company had to re-negotiate wages to prevent a strike at Honda Lock (Guangdong) Co. in the Pearl River Delta and that wasn't the first time Honda has had to respond to employee demands for better pay. According to Bloomberg Businessweek, wage concessions by Honda after walkouts that shut down three parts factories in the past month may erode the company's net income by as much as five percent.

It doesn't look like these labor troubles are going to go away any time soon. Analysts expect the near future to continue to be bumpy as employees become increasingly assertive regarding wages.

And of course, pay isn't the only point of contention for workers in China. Over the past year, 13 Foxconn Technology workers have committed suicide or attempted to do so tragedies that labor activists attribute to the company's rigid management style, relentless assembly lines and overwork. As I have reported about before, conditions at other factories are deplorable, as well.

Global corporations are in a unique position to improve the status quo for workers in emerging economies not only in China, but throughout the world. It's going to be interesting to see how manufacturers respond to increasing employee demands for better wages and safe, rights-based working conditions. Obviously, "ignoring" these issues is no longer an option, and any company that does so is putting its supply chain and its reputation at risk.

TAGS: Finance
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