Page last updated at 22:13 GMT, Monday, 23 January 2006

'Made in China' no longer cheap

By Charlotte Windle
BBC News business reporter in Beijing

Migrant workers
Many workers will not return after going home for Chinese New Year
Twenty-year-old Huang Xin Xu lives with seven other girls in a dormitory in the Jiading district of Shanghai.

She came to Shanghai almost two years ago from her home in central China's Hunan province.

Ms Huang works 54 hours a week for less than $150 a month in a factory owned by Singaporean electronics company, Flextronics.

But when Ms Huang returns home at the end of this month to celebrate the Chinese New Year holiday she will not be coming back.

"Living in Shanghai costs a lot more than living in my home town, so the company would have to pay higher wages to keep me here for longer," she says.

"The company should also provide better accommodation as no-one wants to live indefinitely in a (government owned) dormitory and it's too expensive to rent something independently nearby."

"While these dormitories are not properties of the multinational companies located in the Jiading district, companies like Flextronics specifically conduct monthly audits on these dormitories to ensure proper living conditions," according to Flextronics.

Going home

Ms Huang's case is fairly typical.

The majority of workers employed in factories on China's industrialised east coast are from provinces further inland where employment opportunities are limited.

Migrant workers
Many workers are going home to build houses and families

Most of them work for a couple of years before returning home.

Consequently, each year, Chinese factories lose between 5% and 50% of their workforces.

At Flextronics where Ms Huang works, there are 4,000 workers, 92% of whom are from out of town.

The company will not specify exactly how many workers leave at Chinese New Year, but the average worker stays with the company for just three years.

Put another way, they are forced to replace a third of the workforce each year.

Boring and expensive

Two hours along the coast in the city of Suzhou the situation is worse.

At the Finnish company Alteams, which provides components for Nokia and Erickson mobile phones, it takes a full year to teach someone how to operate the heavy machinery.

Factory worker
Companies say it takes a long time to train factory workers

The average employee stays for less than two years.

The company offers its employees an annual salary increase of 8% to persuade them to stay longer, but according to vice general manager Ted Hornbein, retention rates are still "horrible".

Mr Hornbein would like to see the local government do more to encourage migrant workers to settle down in the areas where they work.

"Outside of work in Suzhou New District, there isn't a lot to do," he says.

"You don't have a lot of football fields, there aren't many swimming pools, and if you do go to those places it's quite expensive so it segments those who can enjoy them.

"Likewise with housing, many employees have to rent rooms from farmers."

Offer more money

But not everyone agrees that living conditions are top of migrant workers concerns.

The Head of the Population Institute at East China's Normal University, Professor Ding Jin Hong, has conducted a survey of 800,000 migrant workers in Shanghai.

"Most migrant workers, when they first arrive in Shanghai, work in factories," he says.

"When they have made enough money, they will either take that money home to build a house, get married and return to farming or they will set up their own small businesses here in the city because it pays better.

"If the factories want to keep this second group of people they will have to offer them more money."

The problem is that factories cannot afford to keep increasing wages.

Chinese workers are already paid one third more than workers in neighbouring Vietnam.

Many are beginning to realise that China's legendary low cost labour is not as low cost as it appears.

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