Hit the door

When the dining hall of Dongguan Fuan Textiles Limited opened at 8 am on March 3, thousands of workers rushed desperately into the room. They weren't going to eat as usual but to take the forms needed for workers' compensation.

About half an hour later, Zhang Huxing (not his real name), one of the nearly 3,400 discharged workers, received his forms. According to company regulations, he had to finish his paperwork and leave the factory on March 6.

On February 29, the Hong Kong-based Fountain Set (Holdings) Limited, which holds 51 percent of Fuan's stake, announced it "decided to reduce its production capacity after careful consideration and to implement arrangements for the laying off and streamlining of the work force".

All manufacturing facilities and orders would be moved from Guangdong province to new factories in other cities, including Yancheng, in East China's Jiangsu province.

Striving for survival

The shutdown of the Dongguan factory reflects the fate of many textile companies, which prospered in the Pearl River Delta in recent decades.

Many of them have to make a choice to move in order to lower costs, to climb the industrial chain or to close down due to the yuan's appreciation, cost increases in labor and materials, loss or reduction of tax rebates and the government's stricter regulations on environmental protection.

Zhang received his pink slip on the morning of March 1. Together with him, up to 3,395 fellow employees were laid off in the factory that employed 4,000 to 5,000 workers.

The company had published a plan for compensation, but employees were not satisfied with it.

The plan said Fuan Textile would compensate workers, who had served the company for more than 10 years, in line with the country's Labor Law. They will receive one-month's salary for each year of service as severance compensation, with the maximum payment being 12-month's salary, with the total payments under this category amounting to approximately HK$22 million.

It angered those who had worked in the factory for less than 10 years.

A statement released by Fountain on March 15 said all the affected workers had accepted the compensation packages offered by Fuan mill following "further explanations of the basis of compensation as well as the statutory requirements under the law".

And Zhang was quoted by China Business as saying the company also expected to get rid of all workers who had stayed in the factory for more than five years.

The minimum salary for workers in the Pearl River Delta has continued to decline in recent years.

China's new Labor Law that took effect at the beginning of this year also raised the costs of many textile makers and other light industrial businesses.

By signing new labor contracts with employees, manufacturing firms in the Pearl River Delta saw their costs increase by 20 to 40 percent.

Besides salaries, firms must pay pension insurance, employment injury insurance and medical insurance for workers - that 200 yuan per month on average for each person means a factory employing 10,000 people has to spend an extra 24 million yuan a year.

Moving to Southeast Asia?

Many textile makers in the Pearl River Delta, in particular those at the low end of the industrial chain, have also been seeking to move their factories to some Southeast Asian countries.

"I have inspected the investment environment in Vietnam," says Zhou Dongliang, the owner of a middle-scale garment factory in Dongguan.

He says labor costs there are quite low but the country is "lack of skilled workers" and materials means that many of the materials have to be shipped there from Donghuan.

The average salary in Vietnam is about 8-10 yuan per day, roughly equal to the standard in Dongguan two decades ago.

"So I'm still hesitating," Zhou says.

Fountain attributed the lay-offsto "the company's mounting loss triggered by the slowdown in the global economy, the appreciation of the yuan, depression in the market and cost increases in energies". But Zhang and his fellow staff believed pressures from environmental protection agencies was a major reason for the factory's decision to move.

The textile industry in Dongguan experienced fast development a couple of years ago with little awareness of environmental protection.

Nearly at the same time, the central government was attaching increasing significance to energy-saving and environmental protection. The country called for restrictions on high-pollution, high-energy consuming and resource-intensive industries. The Fuan mill was among the "high-polluting" ones.

In 2006, the factory produced at least 47,000 tons of wastewater while it could deal with only 20,000 tons.

In June, the State Environmental Protection Administration punished it for illegally discharging a high concentration of wastewater. Environmental protection institutions strengthened supervision at the Fuan mill after that - up to several times a week.

By not increasing its capability to treat wastewater, Fuan Textile was forced to limit its production. Zhang had also noticed that an official of the Zhang'an town, where Fuan was located, said last year that "the Fuan mill must move out of the town by 2013" when he was talking about environmental protection issues on TV.

Although workers were encouraged to move to Yancheng with the factory, most of them declined out of concern of where the factory might go for its next step.

CBW News

(China Daily 05/12/2008 page3)