Saturday 24 March 2018

Uber protests and worker strikes - a sign of deeper fault lines in China's economic story

File shot of workers protesting during a strike at a factory in Dongguan, Guangdong province, in 2014. Photo: Reuters
File shot of workers protesting during a strike at a factory in Dongguan, Guangdong province, in 2014. Photo: Reuters

David Fickling

If you think strikes by Chinese coal miners are a big deal, consider this: the country saw more protests by taxi drivers over unlicensed cabs and ride-sharing apps during 2015 than by disgruntled mine workers.

That's not to play down the significance of protests at major state-owned mines. It's to emphasise that China's economy is changing, and the nature of industrial unrest is changing too.

In Hangzhou, a provincial capital an hour's drive southwest of Shanghai, hundreds of Uber drivers blocked roads and protested against entrapment by police earlier this month.

In Nanchang, an inland city considered one of the birthplaces of the Chinese Communist revolution, thousands of taxi drivers went on strike in January to protest high fees and competition from ride-sharing apps. In December, taxi drivers in the northeastern port of Weihai blocked roads to interrupt the wedding of a manager for Didi Kuaidi, which runs the ride-app joint venture between Tencent and Alibaba. Look at the economy as a whole and you get an even clearer picture of the fault-lines. Construction accounted for about 40pc of industrial action recorded since the start of 2015, or about 1,402 separate protests. Manufacturing, a key area for foreign companies investing in China, was another 30pc, with transportation accounting for 9.4pc. Mining, at 4.4pc, barely registers.

Going on strike is no small matter in China. The country bans independent unions, and it's not unusual for industrial action to result in prison terms.

In that context, the spike in industrial action picked up by Hong Kong-based advocacy group China Labour Bulletin toward the end of last year is a telling sign of the strains playing out across the economy.

While Chinese workers have seen rapidly rising earnings from the opening of the economy over the past decade - in contrast with US employees who've seen their real incomes stagnate since 1973 - their ability to capture the gains from rising productivity has been falling behind. Uber isn't the only overseas employer in China that should pay heed to this. Foreign companies in recent years have done much of the heavy lifting in terms of increasing worker incomes, typically paying about 20pc above the national average wage, according to an annual report by the German Chamber of Commerce in China.

That's getting harder to justify as alternative locations in Southeast Asia, India and parts of Africa become more attractive for the sorts of low-wage assembly work in which China specialised through the 2000s.

The nation just isn't that cheap any more as a manufacturing destination: adjusted for productivity, labour costs are now only 4pc lower than in the US, according to Enda Curran of Bloomberg News.

Measured in dollars, the value of the country's exports has been falling for a year. With China's economy slowing, companies operating there have been hoping this dynamic will start to correct.

German employers in the country expect to increase their salaries just 7.1pc in 2016, the slowest pace in five years, according to the German Chamber's survey.

Investors may have to moderate those expectations. Consumer prices rose at the fastest pace in 19 months in February, and cost-of-living pressures such as social security contributions that can eat up more than one-third of income are also squeezing take-home pay.

China's labour problem isn't predominantly in the resources sector, but the increase in industrial action can be taken as a canary in the coal mine for the pressures facing the economy. (Bloomberg View)

Irish Independent

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