Chinese New Year Celebrations Are Over – Now What?

Hello from Shanghai and Happy Year of the Horse!  The next 12 months of the Wood Horse year are expected to be high-energy and fast moving. So let’s get going again with Chinese factory production…or should we?
I am in Shanghai this week and the city is back to its normal hustle and bustle after the New Year / Spring Festival celebrations are over. But if you expect it to be business as usual for Chinese manufacturers, you are mistaken.

Enterprises in the Yangtze River Delta around Shanghai and the Pearl River Delta in southern China around Guangzhou and Shenzhen are scrambling to find fresh workers for a 20% higher paycheck than last year, according to the Chinese-language Guangzhou Daily. It is common for workers returning to the migration cities after the holiday, to seek a new job where they can earn more. It is not surprising to see 40% personnel turn-over in most factories after the New Year.

Numerous manufacturing enterprises in Guangdong province, often called the “factory of the world,” have wasted no time in staging labor recruitment events, offering pay hikes on top of a variety of fringe benefits. This is a yearly ritual following the Chinese New Year holidays as many workers take their year-end bonus and quit their previous jobs. In addition, many migrant workers are finding employment closer to home as manufacturers such as Foxconn open new factories in the inland cities of Chongqing and Chengdu. Labor shortages have become an increasingly serious problem for factories in the Pearl River Delta. For example, the city of Foshan expects to experience a shortfall of 70,000-80,000 workers out of a total workforce of 280,000 for the season.

Beyond labor shortages and rising wages, you must be cognizant of quality issues. As I have written in previous blogs, it is very important to pay attention to quality before and after the New Year. Before the New Year, workers are likely to cut corners on quality in order to meet production levels and shipping schedules. After the New Year, with a potential of 40% turn over in workers, production quality is likely to suffer as new workers climb the learning curve. You must be very diligent in monitoring the quality of your products year around, but especially the months before and after the New Year celebrations.
So even though things in China have settled back into the normal frenetic pace, it will be a few weeks before its business as usual again.

SC
MR