We share workers: Chinese factories redeploy staff to weather pandemic blow

Darfon Electronics

27/08/2020 09:00

By Stella Qiu and Tony Munroe
    BEIJING, Aug 27 (Reuters) - When the government of the south
China city of Zhongshan heard that watchmaker Kam Yuen Group was
furloughing more than 100 workers, it brokered a deal to shift
the surplus staff to another manufacturer - a growing practice  
    The arrangement will see Guangdong Welland Technology Co,
which makes smart-watches and weighing scales, take on 140 Kam
Yuen workers over the next six months.
    Labour-sharing in China's export manufacturing heartland,
prompted by the coronavirus pandemic that by some estimates cost
up to 80 million Chinese jobs at its peak, forms part of a wider
effort by Beijing to encourage more flexible work - including
self-employment and part-time roles - to support jobs and
maintain social stability. 
    "It is better to go to work than being put on leave, even as
the hourly wages they receive could be somewhat lower than what
they got paid before," said Wang Yaokun, human resources
director at Hong Kong-based Kam Yuen, which had already lost
800-1,000 jobs in Zhongshan. 
    China's total workforce has shrunk slightly since 2017 to
around 775 million last year, with the export sector employing
about 180 million workers. 
    Chinese manufacturers have struggled in recent years to
attract employees as the workforce ages and younger people
eschew factory jobs. The pandemic has ravaged the economy and
exacerbated imbalances, boosting makers of medical equipment as
well as computers and mobiles for the many millions stuck at
home even as traditional labour-intensive sectors such as
textiles, toys and furniture see weak demand.
    Under the agreement between Kam Yuen and Welland, employees
seconded to Welland are still employed by Kam Yuen and will
return to the company after a six-month stint, when Kam Yuen
hopes business is better.
    "We do not expect the business to completely recover until
the end of year, as most of our orders are from the EU and
Switzerland," Wang told Reuters.
    Local governments across the export-focused provinces of
Guangdong, Jiangsu and Zhejiang have been facilitating similar
arrangements in recent months, with the central government
endorsing the approach in nationwide guidelines issued in July.
    In Dongguan, a major manufacturing hub, about 20,000 workers
from 750 manufacturers have signed up to such schemes since
February, according to Dongguan government.
    In the high-tech industrial development zone of Heyuan city,
home to over 300 industrial companies, more than 100 factories
scaled back operations after the pandemic hit orders. 
    Through an employee-sharing programme launched in late May,
over 3,000 workers have been redeployed, according to a local
official who requested anonymity.
    China forbids companies from earning a profit by leasing out
their workers. 
    "Firms were first worried about legal arrangements of work
injuries, staff poaching and the protection of commercial
secrets, but through government mediation, they managed to reach
an agreement," the official said. 
    These labour-sharing schemes are not unique to China. As the
pandemic wipes out millions of jobs worldwide, some global
corporations have redeployed surplus workers.  urn:newsml:reuters.com:*:nL4N2BB5MV
    
    BEYOND COVID
    In China, some industry and government officials say the 
schemes could outlast the pandemic shock.
    Boyang Xue, North Asia analyst at consultancy
DuckerFrontier, said ongoing risks of economic "decoupling"
between the United States and China, a shrinking labour force
and rising costs would drive more flexible work arrangements.
    Lisheng Wang, a Hong Kong-based economist at Nomura, said
workers' legal rights would need to be protected for such
arrangements to succeed. 
    "For some industries with a low-entry barrier but different
production cycles, employee-sharing could help increase labour
utilization, reduce average labour costs, improve productivity
and profitability, and increase workers' income," he said.
    For example, the production peak for the electronics sector
is usually in the fourth quarter, which differs from that of the
textile industry.
    Darfon Electronics Corp  8163.TW , a Taiwanese electronics
manufacturer which owns a factory in China's Huaian city, has
from March borrowed 200 workers from Jiangsu Canasin Weaving Co,
a supplier of hotel linen, said Su Bohan, an investor relations
official at Darfon. 
    "We have different production cycles, so we can share
labour," Su said.  

 (Reporting by Stella Qiu and Tony Munroe
Editing by Shri Navaratnam)
 ((yifan.qiu@thomsonreuters.com; 86-10-66271289;))