|
Not so long ago, China was the promised land for Korean textile and footwear companies that felt stifled by labor costs and regulations at home. The country offered labor for less than 1/10 of what Koreans demanded, provided benefits in taxes and land use, and workers there never went on a strike. The majority of such companies, over 7,000 of them, started settling in Qingdao in the late 1980s. But they have had a rude awakening.
The combined business results of foreign companies doing business in Qingdao in 2005 show that some 70 percent of Korean companies there are suffering losses, an official with the city government says. Why? There are four broad reasons: sharp increases in labor costs caused by labor shortages in coastal areas like the city, which was created by the nation¡¯s fast economic growth; better welfare for Chinese workers; tighter environmental regulations; and cutbacks in benefits for foreign investors.
As China¡¯s service industry develops rapidly, workers in the manufacturing industry are abandoning manufacturing. In some areas on the coast, the problem is so serious that mere recruitment ads cannot solve it, and that is hitting the Korean firms hard.
Then labor costs rose. The city¡¯s minimum wage jumped by 29.3 percent from 410 yuan (W49,000) to 530 yuan (W63,000) last year. Medical insurance, welfare and unemployment insurance and pension plans also grew.
If workers are covered by all of China¡¯s five major insurances as stipulated by law, companies bear an additional burden equivalent to some 30 percent of worker¡¯s average income. When various subsidies are taken into account, such as housing assistance and union contributions, which demand 2 percent of wages from the company, indirect labor costs increase to 52 percent of staff pay, a Korean Embassy official in China said.
So now more and more Korean manufacturers are leaving for inland areas including Xian and Guangxi. Firms without enough technological capability and core competitiveness move about the country, and a lot of them simply ¡°shut down and disappear under cover of darkness,¡± the CEO of a small company working there said.
(englishnews@chosun.com )
|
