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Check Out Line: End of “cheap” labor in China?

June 10, 2010

foxconn1Check out workers in China angling for a bigger slice of the economic pie.

The labor unrest that began in China’s richer areas among foreign firms is now spreading to poorer, interior regions, as a new generation of workers seek a bigger portion of the nation’s growing wealth. What impact could that have on companies that have flocked over the decades to China, drawn by the low manufacturing and labor costs, as well as one of the world’s biggest and fastest growing economies?

Japanese automaker Honda and iPhone maker Foxconn International have dealt with high-profile strikes recently, and now a Taiwanese sports goods supplier and a Japanese sewing machine maker, both some distance from China’s wealthier regions around Hong Kong and Shanghai, have seen worker strikes.┬áResolutions of strikes at Honda and Foxxconn resulted in pay raises of 66 percent and 20 percent, respectively.

The burst of strikes and work actions is a worry for China’s ruling Communist Party, which has long discouraged worker action and punished protesters. However, a senior China trade official said the country’s rising labor costs would not deter foreign investors because policies to boost domestic consumption offer a new reason for them to seek profits.

Honda wants to restart its auto production in China, while Foxconn hopes to raise prices to offset higher wages. That could affect the consumer if prices of the final products rise in step.

Foreign investors have been lulled into a false sense of security about China’s labor force and is learning otherwise now, some analysts have said. Others argue labor unrest is good for China and ultimately the world.

Also in the basket:

Smart to test electric cars in some U.S. cities

Tesco commercial head optimistic on UK consumer

(Reuters photo of workers at Foxxconn plant in China)

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