Outlook on Light Manufacturing in China: February 2016

February 3, 2016 Posted by China Briefing Reading Time: 4 minutes

The below is a sample of Cascade Asia Advisor’s monthly report on light manufacturing across emerging Asia, available for purchase through the Asia Briefing bookstore. The report is a 4-5 page executive-ready assessment and outlook designed to help companies anticipate labor risks and dynamics across key manufacturing countries in Asia. Countries of coverage include Cambodia, China, Indonesia and Vietnam.

Though the official Chinese New Year (CNY) dates run from February 7-15, many workers will have already left for home with more to follow over the next few days. Office and sales staff will likely be off for about two weeks but other than that points of contact with the factories will be active in most cases. They will continue to take new orders however they will not hit the production line until workers return. Brands should be aware that workers do not typically return to work at the same time but do so in waves. The first wave will usually return after the Lantern festival (February 22) while the second wave will return around the first week of March.

Post-CNY turnover and retention is a reality that your supplier will experience however factories with good working conditions and who treat their workers well often have higher retention rates and have an easier time recruiting. In such an environment it is a worker’s market with workers, especially experienced ones, being in a very good negotiating position for higher wage levels and welfare packages. Either way there will be turnover which means that factories will be training new or less experienced workers to ensure production quality is up to standard.

Raw material bottlenecks at factories with their own suppliers and a backlog of orders may also cause further delays. In the end, production, quality standards and delivery times may not be back to pre-CNY levels until April though top-tier suppliers will be able to mitigate many of these issues.

Guangdong: Nothing to report

Zhejiang: City and provincial industrial unions are required to reinforce inspections and guidance on production safety and help to ensure safe transportation for workers before CNY. Factories will face greater public scrutiny as over one hundred wage arrears cases have been exposed by local news channels.

Fujian: The provincial government will continue its ‘zero-tolerance’ on wage arrears.

On the Horizon

Early February – Increased inspections in Zhejiang focused on timeliness of wage payments.
February 7-15 – Official Chinese New Year dates during which time factories will be closed
Now to late February/early March – Workers will be their home towns for the Chinese New Year.
April 2-4 – Factories closed for Ching Ming Festival

About Us

Cascade Asia Advisors is a boutique advisory firm focused on Southeast Asia. They help businesses anticipate risk and make better decisions using forward-looking, localized intelligence. For information about developments mentioned in this report, please contact them at info@cascadeasia.com.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email china@dezshira.com or visit www.dezshira.com.

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