China, Vietnam urge workers to hunker down over Lunar New Year

Date: Tuesday, January 25, 2022
Source: Nikkei Asia

HO CHI MINH CITY/HONG KONG/TAIPEI -- China and Vietnam are urging millions of workers to forgo trips home during the upcoming Lunar New Year holiday due to fears mass travel will spark COVID-19 outbreaks and shutter factories in two of the world's key manufacturing powerhouses.

The Spring Festival, as it is also known, has been called the biggest annual human migration season, with workers in China making more than a billion trips in normal years. While the scale is smaller in Vietnam, where the holiday is known as Tet, the rush is no less disruptive. Each year, thousands of workers who go home for the break fail to come back once it is over.

The resurgence of the coronavirus and the emergence of the highly transmissible omicron variant have led governments and companies in both countries to press workers to stay put over the holiday, which lasts from Jan. 31 to Feb. 6, though the travel season starts earlier and ends later.

China has already taken strict measures, including in one extreme example threatening travelers who "maliciously return home" with quarantine and detention. More generally, local governments are responding with requirements such as 14-day quarantines, seven days of self-isolation and multiple PCR tests. Beijing, which is gearing up for the Winter Olympics, has banned arrivals from provinces with even one locally-transmitted case.

Vietnam has taken less heavy-handed action so far, but like its bigger neighbor, it has imposed some of the strictest COVID-related measures in the world, according to the COVID-19 stringency index calculated by the University of Oxford. The Southeast Asian nation went to great lengths to keep factories running during its deadliest COVID wave last year, including housing workers on site.

Such tough measures mean that manufacturers serving everyone from Apple and Samsung Electronics to Gap and Adidas are desperate to keep their sprawling factories COVID-free, and to avoid the disruption of lengthy quarantines for workers traveling between provinces. Failure to do so risks not only disrupting global supply chains but also exacerbating the ongoing chip and component shortage, spurring inflation and hampering the two economies' recoveries.

In Vietnam, a linchpin in the global supply chain and a key manufacturing base for Samsung and Intel, local governments are likewise eager for workers to avoid the holiday rush.

Official attempts to encourage workers to sit tight, however, have sparked controversy and some confusion. Recent strikes over New Year bonuses have added to the challenge of stabilizing the country's vital export sector.

This year marks the first holiday season after the deadliest COVID wave hit Vietnam, which had suffered very few fatalities until last July.

Some local governments tried to head off the mass travel that fueled past fatalities by sending letters asking people not to come for the holiday. Labor officials also weighed in. For example, a union branch in Dong Nai, a key southern industrial province, will not arrange buses home for workers as it used to, according to a Dec. 28 post on its website.

The health ministry, however, responded on Jan. 8 by posting a warning against setting up checkpoints or other obstacles to travel between provinces, a bid to reassure the public there wouldn't be a repeat of the summer checkpoints that kneecapped transport of people and supplies.

Companies in both countries say they are particularly worried about post-holiday labor shortages.

"We are giving out red envelopes [with cash] to workers to stay at the factory for the holidays, but based on what we surveyed, we will lose more than 50% of workers by the end of this month," a manager at a Lenovo component supplier in the Chinese city of Dongguan told Nikkei Asia. "On top of the strict COVID prevention measures, it will be a big headache for us to recruit sufficient workers after the holidays."

Money placed in red envelopes is a traditional gift given to celebrate the Lunar New Year.

An executive at an iPhone assembler whose manufacturing complexes house tens of thousands workers told Nikkei Asia that a constrained labor force is "inevitable" after the holiday. "How many people we can retain and recruit during this time depends on local governments' quarantine and travel policies. There isn't too much we can do."

The executive said, on the positive side, the local government has been efficient in guiding the supplier to conduct routine PCR tests and set up COVID prevention measures, adding, "it really helps in terms of maintaining the complex free from the virus."

Companies in Vietnam have the added challenge of bouncing back from last summer's shutdown.

Yacht maker Corsair Marine is attempting to make up for the lost time by having half its 400-strong staff work one week during the break, which usually lasts two weeks.

"Everyone's running overtime to try to catch up," general manager Mike Rees told Nikkei in a video call.

Forecasts vary widely among companies predicting how many Vietnamese workers will stay in town during Tet, from 30% at one furniture maker to 90% at a solar panel company.

But manufacturers there are starting from a deficit: More than 2 million Vietnamese took part in an urban-to-rural exodus in 2021 because of the pandemic, according to the General Statistics Office, leaving many factories scrambling for staff even before the holiday.

In both countries a major factor that will determine who goes home is money. In Vietnam, lower Tet bonuses could keep workers in cities, as they can't afford the cost of travel and gifts. In the business hub of Ho Chi Minh City, for example, most bonuses have been flat or reduced compared with 2021, while bonuses for the Western New Year decreased, according to the labor ministry.

"They [blue-collar workers] are always the most vulnerable group," said Hien Dong, project manager at WageIndicator Foundation, a labor institute that boasts the world's biggest database of living wages. She echoed a concern of many companies, saying workers may not return after Tet because of either COVID fears or mobility restrictions, further disrupting supply chains.

In China, on the other hand, less generous financial incentives could convince migrants to go home despite the logistical hurdles.

Last year, many local governments and manufacturers, such as Apple suppliers Foxconn, Pegatron and Luxshare, rolled out incentives for employees who chose not to travel for the Lunar New Year. The aggressive approach brought the number of holiday trips down to 840 million in 2021.

It is a more mixed picture this year, with less generous perks but stronger demands by companies to stay. The latest estimate is that 1.18 billion trips will be made during this New Year, up more than 35% from 2021, though still 60% lower than the pre-pandemic level of 2019, according to China's Ministry of Transport.

Though incentives are reduced this year, quarantine rules in China and Vietnam are nonetheless discouraging travel.

"My friend's schedule to return to Taiwan for New Year was suddenly pushed back because the building she lives in was suddenly put under lockdown for 48 hours and she's been told to stay put in Shanghai for another 12 days after the lockdown is lifted, just because there were five confirmed cases in the neighborhood," a manager at a financial service company in Shanghai told Nikkei Asia.

"You could get notice in the morning that all of the people in the neighborhood need to conduct a PCR test before noon," a Beijing resident told Nikkei Asia. "Otherwise your green health code -- the key passport for you to travel anywhere -- will automatically become invalid."

Some workers who are choosing to take incentives this year say they are doing so reluctantly.

Foxconn's Zhengzhou facility in Henan, the world's largest iPhone assembly hub, is offering workers 1,600 yuan ($250) if they take only three days off from Jan. 30 to Feb. 1, and 900 yuan if they take five days, according to an internal notice.

A worker surnamed Tang told Nikkei that his team leader urged him to sign an agreement on Thursday to promise he would stay, despite the leader telling him two days ago that he could take 12 days off for the Spring Festival.

"I couldn't go home anyway due to the outbreak, so I signed the statement. Earning 1,600 yuan is not bad, but I'll be very tired," he said.

Foxconn declined to comment for this story.


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