Industrials

David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

You think strikes by Chinese coal miners are a big deal? Consider this: The country saw more protests by taxi drivers over unlicensed cabs and ride-sharing apps during 2015 than by disgruntled mine workers.

The People United
China saw more strikes over taxi apps and unlicensed cabs than over mining last year
Source: China Labour Bulletin
Note: "Taxi apps" records all transportation actions where Uber, Didi-Kuaidi, or taxi apps were cited. "Illegal/unlicensed taxis" records all actions where those categories were cited. Disputes not involving taxis, over unlicensed rickshaws, or citing taxi numbers, fees, subsidies, etc., have been excluded.

That's not to play down the significance of protests at major state-owned mines. It's to emphasize that China's economy is changing, and the nature of industrial unrest is changing with it.

The strike data, exhaustively documented with maps, photographs and databases by the Hong Kong-based advocacy group China Labour Bulletin, is hard to verify in every instance. But the thousands of reports paint a fascinating impressionistic picture of the situation on the ground.

In Hangzhou, a provincial capital an hour's drive southwest of Shanghai, hundreds of Uber drivers blocked roads and protested against entrapment by police earlier this month. In Nanchang, an inland city considered one of the birthplaces of the Chinese Communist revolution, thousands of taxi drivers went on strike in January to protest high fees and competition from ride-sharing apps. In December, taxi drivers in the northeastern port of Weihai blocked roads to interrupt the wedding of a manager for Didi Kuaidi, which runs the ride-app joint venture between Tencent and Alibaba.

China Crisis
Protests and industrial action, by industry
Source: China Labour Bulletin

Zoom out to the economy as a whole and you get an even clearer picture of the fault-lines. Construction accounted for about 40 percent of industrial action recorded since the start of 2015, or about 1,402 separate protests. Manufacturing, a key area for foreign companies investing in China, was another 30 percent, with transportation accounting for 9.4 percent. Mining, at 4.4 percent, barely registers.

Such data are important. Going on strike is no small matter in China. The country bans independent trade unions, and it's not unusual for industrial action to result in prison terms.

In that context, the spike in industrial action picked up by China Labour Bulletin toward the end of last year is a telling sign of the strains currently playing out across the economy . While Chinese workers have seen rapidly rising earnings from the opening of the economy over the past decade -- in contrast with U.S. employees who've seen their real incomes stagnate since 1973 -- their ability to capture the gains from rising productivity has been falling behind.

The Iron Rice Bowl Wears Thin
China's workers have seen rising incomes, but they aren't enjoying the full fruits of their labours
Source: IMF, China National Bureau of Statistics
Note: December 2000=100

Uber isn't the only overseas employer in China that should pay heed to this. Foreign companies in recent years have done much of the heavy lifting in terms of increasing worker incomes, typically paying about 20 percent above the national average wage, according to an annual report by the German Chamber of Commerce in China.

That's getting harder to justify as alternative locations in Southeast Asia, India and parts of Africa become more attractive for the sorts of low-wage assembly work in which China specialized through the 2000s. The nation just isn't that cheap any more as a manufacturing destination: adjusted for productivity, labor costs are now only 4 percent lower than in the U.S., according to Enda Curran of Bloomberg News. Measured in dollars, the value of the country's exports has been falling for a year.

Past the Peak
On a trailing 12-month basis, China's U.S. dollar-denominated exports have been falling for a year
Source: Bloomberg data

With China's economy slowing, companies operating there have been hoping this dynamic will start to correct. German employers in the country expect to increase their salaries just 7.1 percent in 2016, the slowest pace in five years, according to the German Chamber's survey.

Investors may have to moderate those expectations. Consumer prices rose at the fastest pace in 19 months in February, and cost-of-living pressures such as social security contributions that can eat up more than one-third of income are also squeezing the take-home pay of workers. China's labor problem isn't predominantly in the resources sector, but the increase in industrial action can be taken as a canary in the coal mine for the pressures facing the economy.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. It's possible that some of the increase is simply a result of better reporting of incidents, but the rapidity of the rise toward January and the drop-off since suggests that's only a small part of the picture.

To contact the author of this story:
David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story:
Paul Sillitoe at psillitoe@bloomberg.net