China Factories Turn to Undocumented Labor as Local Wages Jump

China’s embrace of higher wages to help bolster consumer spending has sparked a jump in factories along the east-coast export corridor bringing in undocumented and lower-paid workers from Myanmar and Vietnam.

Border police found 59 illegal immigrants from Vietnam in a bus heading for the Pearl River Delta on July 29, the official Xinhua news agency reported on Aug. 6. “Thousands” of workers from Vietnam and Myanmar were discovered working illegally in Shenzhen between 2010 and 2012, the state-run China News Service reported, citing a local prosecutor.

China, the world’s most populous nation, faces elevated labor costs as the government drives up incomes and the working-age population starts to shrink. While official data show domestic migrant workers currently earn an average 2,477 yuan ($405) a month, some illegal employees made about 1,400 yuan a month in 2011, with 200 yuan of that going to snake-heads, a term for labor traffickers, China News said.

“The problem will become more serious, as salary gaps between China and neighboring countries such as Vietnam are actually widening,” Qu Jian, a researcher with the China Development Institute, said in a telephone interview from Shenzhen. “It’s time for the government to think of a systematic approach to address the issue, say making it easier to hire overseas laborers legally,” said Qu, whose research group provides advice to the government.

Happy Hiring

Employers are happy to hire undocumented immigrants because they don’t have to pay pensions or health-care insurance, China News Service reported. The minimum monthly wage at Vietnam state firms and government agencies was $55 in June, according to the Vietnam labor ministry’s website.

The share of China’s population that’s of working age saw its first consecutive annual decline since at least 1995 last year, statistics bureau data show. A survey of 325 members of the American Chamber of Commerce in China in November and December found that rising labor costs were the biggest business risk in the country.

“It’s an emerging criminal act of organizing people from southeast Asian countries to work illegally in Shenzhen,” Huang Yong, a Shenzhen prosecutor, was cited as saying by China News Service. “The workers are obedient, hardworking and never complain about overtime -- in short, they are very attractive for some firms struggling with costs.”

China’s Ministry of Public Security conducted a four-month campaign in 2012 that targeted the provinces of Guangxi, Yunnan, Guangdong, Fujian, Hainan and Jiangsu, catching 139 organizers of illegal labor and 3,410 illegal immigrants, according to Xinhua.

To contact Bloomberg News staff for this story: Xin Zhou in Beijing at xzhou68@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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