Recently, China’s government of the south China city of Zhongshan heard that local watchmaker Kam Yuen Group was in the process of furloughing more than 100 workers. Their response was to broker a deal with the company in order to shift the surplus employees to another manufacturer to ensure they remained employed. This is becoming a popular practice in China.
The arrangement will see Guangdong Welland Technology Co, which makes smart-watches and weighing scales, take on 140 Kam Yuen workers over the next six months.
Worker-sharing in China’s export manufacturing heartland, prompted by the coronavirus pandemic that by some estimates cost up to 80 million Chinese jobs at its peak, forms part of a wider effort by Beijing to encourage more flexible work, including self-employment and part-time roles, to support jobs and maintain social stability.
“It is better to go to work than being put on leave, even as the hourly wages they receive could be somewhat lower than what they got paid before,” said Wang Yaokun, human resources director at Hong Kong-based Kam Yuen, which had already lost 800-1,000 jobs in Zhongshan.
China’s total workforce has shrunk slightly since 2017 to around 775 million last year, with the export sector employing about 180 million workers.
In recent years, China has been finding it harder to attract employees towards manufacturing related jobs. This is due to an aging workforce, combined with younger and more educated workers shunning factory positions. The pandemic has ravaged the economy and exacerbated imbalances, boosting makers of medical equipment as well as computers and mobiles for the many millions stuck at home even as traditional physical-intensive sectors such as textiles, toys and furniture see weak demand.
Under the agreement between Kam Yuen and Welland, employees that are being seconded to Welland shall officially remain under the employment of Kam Yuen and are set to return to the company after a six-month stint. Hopefully, business would have improved by then to warrant Kam Yuen to retain their employees instead of furloughing them.
“We do not expect the business to completely recover until the end of year, as most of our orders are from the EU and Switzerland,” Wang told Reuters.
Over the past few months, export-focused provinces such as Guangdong, Jiangsu, and Zhejiang have been facilitating similar arrangements. China’s government have both acknowledged and endorsed this approach in a nationwide guideline issued in July.
In China, some industry and government officials say the schemes could outlast the pandemic shock.
Boyang Xue, North Asia analyst at consultancy DuckerFrontier, said ongoing risks of economic “decoupling” between the United States and China, a shrinking workforce and rising costs would drive more flexible work arrangements.
Lisheng Wang, a Hong Kong-based economist at Nomura, said workers’ legal rights would need to be protected for such arrangements to succeed.
“For some industries with a low-entry barrier but different production cycles, employee-sharing could help increase labour utilisation, reduce average employment costs, improve productivity and profitability, and increase workers’ income,” he said.