IBM factory strike shows shifting China labor landscape

IBM factory strike shows shifting China labor landscape

1:23am EST

By John Ruwitch

SHANGHAI (Reuters) – A wildcat strike at an IBM factory in southern China illustrates how tectonic shifts under way in the country’s labor market are emboldening workers to take matters into their own hands, raising risks for multinationals.

More than 1,000 workers walked off the job last week at the factory in Shenzhen, bordering Hong Kong, after managers on March 3 announced the terms of their transfer to new ownership under Chinese PC maker Lenovo Group Ltd.

Lenovo agreed in January to pay $2.3 billion for International Business Machine’s low-end server business.

The strike, which continued into Sunday, fits a growing pattern of industrial activism that has emerged as China’s economy has slowed. A worsening labor shortage has shifted the balance of power in labor relations, while smartphones and social media have helped workers organize and made them more aware than ever of the changing environment, experts say.

“Chinese workers, after being exploited for so long, are now more and more aware of their rights and united. They have more of an idea of collective action,” said labor lawyer Duan Yi.

A report by the advocacy group China Labour Bulletin last month said it had talled 1,171 strikes and protests from the beginning of June 2011 to the end of December 2013.

Many worker protests during that time in Guangdong province, a manufacturing hub where the IBM server factory is situated, were sparked by the closure, merger or relocation of factories.

In November, hundreds of employees stopped work at a Nokia factory in Dongguan, near Shenzhen, complaining of changes following Nokia’s sale of its mobile phone business to U.S. software giant Microsoft Corp.

Lawyer Duan is seeking arbitration for a group of 70 Nokia workers who were laid off at the time.

Last August, 5,000 workers in eastern Shandong Province went on strike to protest Apollo Tyres Ltd’s proposed $2.5 billion acquisition of U.S.-based Cooper Tire & Rubber Co. The deal was eventually scuttled and Cooper reported this month that the work stoppage in China had cut operating profit by $29 million in the third quarter.

The labor shortage has pushed up wages, impelled employers to cast a wide net to find employees and enhance benefits to retain staff. Workers have gained leverage.

“Workers know they have greater power,” said Geoffrey Crothall, a China labor expert with China Labour Bulletin.

IBM said last week the terms offered to the workers at the International System Technology Company factory in Shenzhen were “comparable in aggregate to what they currently are receiving” and severance packages would be “equitable”.

Lenovo has declined to comment.

TECHNOLOGY UNITING WORKERS

Technology has helped China’s workers.

When the Nokia factory employees took to the street, they organized through the online chat system QQ and other social media, one worker told Reuters by telephone from Dongguan.

In the IBM case, the workers had all read about prior strikes, including Nokia’s, and suspected ahead of time that they might have to make a similar stand, said a 28-year-old worker surnamed Chen who has worked there for three years.

“We were basically prepared and expected in advance there wouldn’t be a good deal,” he said by telephone from Shenzhen. He declined to allow his full name to be published out of concern he might face repercussions.

In both cases – and many others, experts say – the impetus for a strike was underpinned by the fact that the factory branch of the state-backed union was seen as a farce.

Independent unions are banned in China. The state-backed All-China Federation of Trade Unions and its affiliates have a reputation for being ineffectual and often siding with management.

“Because there’s no real channel of communication at these workplaces just about the only thing the workers can do is go out on strike and demand that management address their grievances,” Crothall said.

“In most cases the union plays no positive role and sometimes it’s even a negative role,” he said.

Chen, a striking IBM factory worker, had stronger words.

“The union exists in name only. It’s useless,” he said.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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