Part 2: When China Sneezes the Toy Industry Gets a Cold; the impact of social networking and a smaller labor force

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Weixin  (WeChat in English); China's biggest social network

This is part 2 of an article about recent events in China that will have an impact on the rest of the global toy economy.  In part 1 I wrote about the decline in the value of the Chinese currency and its impact on Chinese toy exports and imports.  In part 2, I want to look at the impact that the combination of social networking and the diminishing size of the Chinese labor force is having on labor stability.

Take time to read a New York Times article by Dan Levin entitled: “Plying Social Media, Chinese Workers Grow Bolder in Exerting Clout.”  Levin writes about a grassroots strike in Dongguan China staged by workers in a plant making Nike and Adidas shoes.  The Taiwanese company that owns the factories had failed to pay adequately into the workers’ social security funds and refused to make amends.  As a result, the workers went on strike and forced concessions.

That may sound like an ordinary circumstance in Europe or the U.S. but in China it was extraordinary.  There is simply no powerful labor organizing structure in place.  So, what changed?

Two things:

1.      Due to the Chinese one child policy, introduced in 1979, there are far fewer workers living in China.  The law that each family produce only one child resulted in a healthy population correction in a country already burdened with a population of over 1 billion people but it also assured that younger workers would not be sufficient to replace those who retired.  The result is a smaller work force to fill Chinese factory jobs and this gives labor a far greater influence on factories desperate to fill jobs.

2.      No labor leaders called the strike.  It was a bottom up event that had no leader as it was fueled by workers sharing information via social networks like Weixin (WeChat) which has over 300 million Chinese users. 

Here is how Levin puts it:  “…the mass walkout illustrates the growing might of Chinese workers amid a shrinking labor pool, a slowing economy and the Communist Party’s fears of social unrest. The strike also highlights the increasing potency of social media despite the government’s best efforts to limit news and information that might inspire workers to stand up to employers who can fire troublemakers at will — or call on the police to jail labor organizers.”

The impact of a smaller work force coupled with social networking could lead to disruptions in supply and upward pressure on wages and costs for benefits.  This  makes the Chinese decisions to allow the Renminbi to slide in value all the more interesting. 

Why use a currency devaluation to create more exports and therefore more jobs if you don’t have a sufficient labor force as it is?  Why increase the costs of consumer goods from other countries when it is those goods that Chinese consuming workers most value?

China is no more immune to social unrest and macro-economic conditions than the rest of the world.  It’s just that China is exponentially more important to the toy economy than any one other country.  And that is why they bear watching.

 

 

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