China’s Lunar New Year Exodus Threatens More Factory Disruption

Date: Thursday, January 19, 2023
Source: Bloomberg

When Liu Junde was told by his boss he couldn’t take 20 days of leave from his factory job in Yiwu city in China, he promptly quit.

Like hundreds of millions of workers across China, it’s the first time in three years that Liu, 48, will be able to travel to his hometown during the upcoming Lunar New Year holidays. Having endured three years of Covid travel restrictions, which had made the journey home complicated and costly, he says he has no regrets leaving his job at a solar panel parts factory, where he was a warehouse worker.

“I feel great now because I’m going home,” Liu said outside the crowded train station in Yiwu, where he stood smiling next to his large woven plastic bag and grey suitcase. He will spend 28 hours changing between trains and buses to reach his hometown in rural Gansu province. “I just really want to spend some good time with my family,” said Liu. “I will start to look for jobs when the holiday is over.”

With China’s 296 million migrant workers on the move this year, factories and local governments are bracing for disruptions during a longer-than-usual holiday period. China has seven days of public holidays for the Lunar New Year — which runs this year from Jan. 21-27 — but many workers don’t plan to return until after Feb. 5, the day of the traditional Lantern Festival.

In the manufacturing powerhouse province of Zhejiang — where Yiwu city is based — factories have stopped production one to two weeks earlier than normal this year. With Covid infections starting to surge in December and travel restrictions suddenly dropped, many workers began journeying home from late last month already, according to interviews with over two dozen employers and workers last week.

Businesses and local governments are now kicking into gear to minimize the disruptions. They are doling out cash, arranging recruiting trips for employers and organizing job fairs to make sure workers return in early February.

Empty Markets

Yiwu is a hub for the global trade of small consumer goods — everything from jewelry to home furnishings, toys and electronic equipment. Before the pandemic, the city would be bustling with thousands of buyers from across the world flocking to its massive wholesale trade market.

During a visit to the market last week, most shops were closed and staff at the few ones still open were busy sorting their inventories and making last-minute sales to workers returning home.

Official data already shows some damage to the labor market as workers leave their jobs. The labor participation rate declined by 1.1 percentage point in December, according to data released by the National Bureau of Statistics this week.

Labor shortages were a major problem for many factories in 2020, when China locked down most of the country starting from the Lunar New Year break and then reopened in the following months. Urban employment and average hours took about three months to recover, according to a study published by the Reserve Bank of Australia.

And even when the labor market recovered in June 2020, a small proportion of migrant workers didn’t return to their jobs once they’d left.

The difference now is that workers no longer have to go through quarantines in order to return to their place of work. That makes employers optimistic they won’t run into labor shortages, and workers like Liu upbeat about finding employment once the holidays are over.

Li Chongqing, chairman of Yiwu Chuangju Craftwork Co., is offering an extra month’s wage to employees who will return before Feb. 5. The company employs some 70 employees and makes plastic products like food containers in the eastern city.

“2023 will probably be a better year than 2022,” said Li, whose company’s revenue plunged by more than 20% last year from the year before, mainly due to greater competition in the domestic market. “As long as people start to go out again, there will be more spending.

Wu Jijiao, general manager of Yiwu Hongsheng Toy Co., said the company is reimbursing returning workers’ travel expenses. He has resorted to hiring temporary day workers since Jan. 1 as many full-time employees left to go home. The local district government is rewarding factories as much as 20,000 yuan ($2,960) if they resume production by Jan. 31, according to Wu.

A number of local governments have announced plans to secure workers and help factories resume operations after the holidays. Economic Daily, a newspaper affiliated with the State Council, China’s cabinet, urged local governments to take early steps to prevent a labor shortage around the holiday.

Taizhou, another city in Zhejiang province, is offering subsidies worth 2,000 yuan to newly employed workers at manufacturing firms, and paying half the expenses for companies to hire buses for returning workers.

The southern province of Guangdong, which has China’s biggest regional economy, organized for companies to visit Guangxi province, a major exporter of migrant workers, in December to recruit workers, with 4,500 jobs offered.

To be sure, workers can’t risk staying out of a job for too long in China, where social welfare is limited and the government has refrained from giving cash handouts to the population during the pandemic. A sharp slowdown in income growth and relatively high unemployment means lower-wage employees have few options but to look for work.

Wei Guofu, 35, is thinking of switching jobs after the Lunar New Year. The fashion accessories factory Wei worked at was shut for two months last year due to a lack of orders, forcing him to find temporary work as a courier and doing odd jobs at other factories in Yiwu. His income plunged by half to just over 30,000 yuan in 2022 from the previous year.

“I considered buying a ticket for the high-speed train, but decided to get the slower train in the end so I can save 300 yuan and buy my son a present,” said Wei, who’s spending 25 hours traveling home to Guizhou province. “I will probably look for a better job when I’m back.”

Consumer Demand

Aside from possible labor and production problems, factories are also having to contend with falling demand for their goods. For business owners like Li and Wu, who are in the labor-intensive consumer products industry, the question on everyone’s mind is how much consumers will loosen their purse strings this year.

Li said he doubts there will be “revenge spending” by consumers like in many other countries after they reopened, which fueled growth in those economies.

“Chinese people always like to save up and now they have a sense of crisis” after a tumultuous three years of the pandemic, said Li.

There’s still hope that a return of foreign clients now that China has opened up its borders may help boost exports and make business easier.

Nie Xingquan, owner of Italy Elsina Group Co., which produces hand-made leather shoes in Wenzhou city, is hoping his clients in Japan and the Philippines will return in a few months for the first time in three years. His business took a beating last year, with revenue plunging by half and the company posting a loss after two years of earning profits. He’s also been forced to cut his workforce to about 30 from more than 80 before the pandemic.

The streets in Wenzhou, which is located 200 kilometers from Yiwu and famous for its shoe industry, were empty last week and factory gates were shut at a major shoe-making district. Yet Nie was optimistic about prospects and a return of his workers.

“We might resume production earlier than scheduled if business turns out to be good,” he said.


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