China hit by labour unrest as global slowdown bites

China's manufacturing heartland has been hit by large-scale strikes in recent weeks, as an increasingly demanding workforce faces off with employers struggling with high costs and falling exports. Thousands of workers in factories in the southern province of Guangdong have gone on strike in recent days, protesting over low salaries, wage cuts or tough conditions, and triggering a strong police response and some clashes. The unrest comes as China's exports and manufacturing activity weakens, hit by falling demand due to economic woes in Europe and the United States -- both crucial markets for the export-driven economy. "When orders and profits decline and costs of business increase for manufacturers... their first instinct is to pass those costs on to the workers," said Geoffrey Crothall, editor of the China Labour Bulletin. He said many factories in Guangdong were cutting back on lucrative overtime, bonuses and benefits for their workers, even as living costs remain high. "That's why we are seeing workers much more willing to go out on strike and protest," he told AFP, adding that the recent bout of unrest was the most intense since a series of strikes in the summer of 2010. Earlier this month, more than 7,000 workers went on strike at a factory in Guangdong making New Balance, Adidas and Nike shoes, clashing with police in a protest over layoffs and wage cuts. In Shenzhen, the manufacturing metropolis that borders Hong Kong, more than 400 female workers at a bra factory downed tools to demand higher wages. Alistair Thornton, China analyst at IHS Global Insight, said Guangdong's huge army of factory staff -- many of them migrant workers -- would go on feeling the effects of the global slowdown. "There's a lot more upward pressure from the labour force as it demands higher wages, but at the same time, it increasingly looks like there's less room in the global economy for the Chinese exporter. There's a conflict there," he said. Ji Shao, a Beijing-based labour expert at Capital University of Economics and Business, said she had just come back from Shenzhen, and painted a pessimistic picture. She added that a huge number of small enterprises could be forced to shut their doors, pressured by high costs, difficulty accessing loans and the global downturn. Vice Premier Wang Qishan, China's top finance official, warned just over a week ago that the global recession was here to stay and would affect the world's second largest economy. Other countries in Asia are also bracing for a rough ride. Bank of Japan Governor Masaaki Shirakawa said Thursday that Tokyo should prepare for potential major shocks from Europe. Manufacturing is a key driver of growth and employment in China. A fall in month-on-month exports in October -- triggered in part by the deepening eurozone debt crisis -- fuelled fears for the sector. Mark Williams, China economist at Capital Economics, said the level of exports in the country had remained essentially flat from one month to the next since the first quarter of the year. "The outlook is not at all positive, so a lot of employers will be extremely concerned about the position they will be in in three to six months," he added. A survey conducted by banking giant HSBC showed that China's manufacturing activity -- which has largely been contracting in recent months -- slumped to its lowest level in 32 months in November. Analysts say any more negative economic readings will force the government to undergo a significant policy turnaround as leaders, fearing mass unrest, seek to avoid a repeat of the huge job losses during the 2008 global crisis. Until recently, the government had been focused on fighting soaring inflation and rolled out a series of measures to ease price rises, such as hiking interest rates or curbing the amount of money banks can lend. These appear to have worked, as inflation slowed sharply in October, with the consumer price index rising 5.5 percent year-on-year, the slowest pace since May. But it is still too high for the government's liking, with food prices recording double-digit growth. "Inflation disproportionately affects the poor, and workers in low-cost exporters tend to be the poorer set of the population," said Thornton. In his comments a week ago, Vice Premier Wang said it was better to have an "unbalanced recovery" than a "balanced recession". "This perfectly encapsulates the shift in mentality that's gone on at the senior leadership level -- the whole of this year, they have been focused on calming the property market and controlling inflation," said Thornton. "But now, that has been slightly put to one side. The bigger priority is now going to be maintaining growth." But analysts say the large-scale unemployment that hit China in 2008 -- when 20 million migrant workers lost their jobs -- is unlikely to recur under current circumstances. "It depends on how bad the global downturn is. It's clear how vulnerable the export sector is to external developments. Should the eurozone deteriorate to the extent we saw in 2008, the same thing would happen again," said Thornton. "But at the moment, it doesn't look like it's going to be as bad as 2008-9."