Stay West, young man

Since China’s economic boom began in the 1980s, the period immediately after the Lunar New Year has been a time of massive movement by migrant workers from western and central China back to manufacturing plants on the coast after their holiday in their home village. This year things are different, and provide the first significant evidence that the relocation of labour inland is a real phenomenon.

As analysed in our report last autumn, a double, interlinked process is at work involving both the development of central and western China and the movement of manufacturers and assembly centres inland under the impact of higher wages in Guangdong and the Yangtze Delta around Shanghai. The signs of this are clear in cities such as Chongqing, where local companies have set up booths at railway stations to catch migrant workers before they take the train south-east and try to persuade them to stay closer to home. The city’s Labour Office has posted an appeal on its website offering low-cost rental accommodation and help with children’s education.

Sichuan, traditionally the major source of migrant labour, is at the core of this process. But reports from Hubei, Hunan, Anhui, Hebei and Henan also tell of declining numbers of migrants returning to the coast. In Henan around a million workers have decided to stay in the province rather than to move back to the coast.

The Labour Office in Chongqing said that by the end of last week, around 15 per cent of workers who went to the region for the holiday period had decided to stay on there rather than return to the coast. This is probably only the start of the process in view of the municipal government’s drive to recruit labour for its ambitious high-tech industrial scheme involving multinationals. The wages in Chongqing are lower than in Guangdong but its proximity to the home village is a powerful attraction. This enables migrants to return and see their family more often and to benefit from the health and education rights which they have in their rural hukou jurisdiction but which are denied to them in urban areas.

Chongqing attracted US$6.3 billion in foreign direct investment last year while Chengdu, Sichuan’s capital, received US$6.4 billion, according to China Business News. The Labour Office says Chongqing’s Xiyong microelectronics industrial park alone will require 400,000 workers by 2015. (My colleague Bo Zhuang will publish a full research report in the coming weeks on the development of central and western China.)

The fall in the overall migrant work force, estimated at 20 million in the past three years, or 15–10 per cent down from the 2007 peak, is leading to stiff competition for workers. For example firms in Shanghai have sent 400 buses to Anhui, Henan and Hubei to bring in workers. The boss of a toy company in eastern Shanghai said that only a quarter of the workers he employed before the holiday had come back. In some cases coastal companies are offering loyalty bonuses to migrants who make the return trip this month.

Guangdong estimates that it risks a shortfall of one to two million workers this year, and it is recruiting in the poor neighbouring regions of Guizhou and Guangxi. The growing attraction of employment in inland China and the coming shift in demographics as the effects of the one-child policy are felt in the number of young people coming into the labour force will encourage the province to seek higher productivity and thus to boost investment in labour-saving machinery.

A temporary drop in migrant labour in coastal regions has been seen before, notably in 2003. But western and central China were less developed then and were not linked to the global supply chain, as they will be by improved logistics along the Yangtze River.