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China Faces Growing Labor Unrest Amid Wave of Strikes

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It is the epitome of all ironies. A supposedly workers Marxist/Communist political entity, the People's Republic of China, is in reality capitalism's ultimate creation: an authoritarian workshop for multinational corporations that keeps wages at the lowest possible levels, while making strikes and plant shutdowns by workers strictly illegal. This enforced low-wage corporate model is the basis behind China's export boom and economic ascendancy. However, despite government pressure, cracks are beginning to appear in the façade.

Strikes are breaking out throughout China. The factory of the world is in revolt, with workers' unrest growing like wildfire. Most recently, plants that produce parts for the Japanese automakers Honda and Toyota have been hit by labor shutdowns. In virtually every case that has become publicly exposed, the employers have been forced to provide large pay rises as the price of ending the strike. Illegal or not, the strike has emerged as a potent and popular labor weapon across the shop floors of the factory of the world.

There are profound economic and political ramifications related to China's growing labor unrest. Inflation is increasing in China amid asset bubbles fed by Beijing's loose fiscal and monetary policies. The Chinese workers are becoming increasingly militant in reacting to the widening gap between rich and poor in this supposedly classless communist nation. What is at risk is the very essence of what has thus far enabled China to compete on the world stage and emerge as the primary global exporter. Also at risk is the ability of the central government to profit from a low wage economy, in the process building up huge cash reserves. In large part, these reserves are what has enabled the Chinese sovereign fund to invest in U.S. treasuries.

This is potentially a huge story, bigger than many currently appreciate, given that the Chinese authorities have probably suppressed the news concerning most strikes and workers demonstrations in China. What we have learned about the strikes at Honda and Toyota plants in China is merely the tip of the iceberg of labor discontent in China, a factor that may in time create severe obstacles for the Chinese and global economy.