(Mainichi: March 1, 2015 – p. 7)
By Fusako Taneichi, Shinpei Idei in Beijing
Japanese companies that have decided to withdraw from China are having a hard time dealing with their local employees. There have been cases where they had trouble with the employees over their layoff. China used to be known as “the world’s factory” but labor costs have been spiraling, so manufacturers are beginning to move their production lines to other newly emerging nations. However, it appears that withdrawal entailing the dismissal of Chinese employees is proving to be “more tedious than starting operations in China.”
The local subsidiary of Citizen Holdings in Guangzhou served notice on Feb. 5 on the closing of the company and the dismissal of all employees on the next day. Some 1,000 employees protested this action.
Chinese law requires a month’s notice for regular layoffs but companies have no such obligation when going out of business. There has been considerable critical reporting in China on this case, claiming that even though the action is legal, the company “concealed important information from its employees,” (Xinhua News Agency). In the end, Citizen had to provide extra separation pay to settle the dispute.
When Toshiba closed down its liquid crystal TV plant in Dalian, Liaoning Province, in late 2013, it had to arrange for the placement of about 900 employees to be dismissed. In many cases, local governments demand the reemployment of workers when a foreign company withdraws from China, so “tedious effort was required to request nearby companies to hire the dismissed workers.”
A survey conducted by the Japan External Trade Organization (JETRO) in 2014 on Japanese companies doing business in China shows that 7.5% of the companies were considering retrenching their operations or moving to another country in 1-2 years, representing an increase of 3.1 percentage points from a similar survey three years ago. Most companies (65%) cited higher labor costs as the reason.
The rise in labor costs is expected to continue. For example, Guangzhou, where many Japanese manufacturers have production plants, has decided on a 20% increase in the minimum wage this year. Therefore, it is believed that an increasing number of businesses will consider withdrawing from China from now on.
A firm advising Japanese companies planning to do business in China or to withdraw says: “Proper labor management taking cultural differences into account is also necessary when withdrawing. Trouble with the workers may damage the trust that Japanese companies have built in China over the years.” (Slightly abridged)