One side of the outsourcing of industrial production to China that you don't often hear about is how dynamic that situation really is, and how labor is taking a big role in managing the changes. Or how relatively easy it is to start a business but difficult to get out.
It turns out that Korean companies are finding some of the challenges big enough that they are running away from their operations secretly in the night, in part because their employees are starting to express their feelings about work conditions and pay. Which may support my theory that the warming of relations with North Korea is partly driven by a belief that it is a fertile field for really cheap labor, even closer to home (one reason that South Korea sent secret agents north to reassure them that Lee's victory would not rock the boat too much)
It turns out that Korean companies are finding some of the challenges big enough that they are running away from their operations secretly in the night, in part because their employees are starting to express their feelings about work conditions and pay. Which may support my theory that the warming of relations with North Korea is partly driven by a belief that it is a fertile field for really cheap labor, even closer to home (one reason that South Korea sent secret agents north to reassure them that Lee's victory would not rock the boat too much)
A growing number of Korean companies are dumping their businesses in China literally overnight and fleeing for home.
Once considered a gold mine of cheap labor and lax regulations, China is becoming a tougher place to do business and investors complain that when they want to go home they have to maneuver through a complicated web of bureaucratic procedures. Now so-called moonlight exits by Korean companies operating in China are expected to cause more labor and trade disputes between the two countries as Beijing is set to file official complaints over the situation.
According to the provincial government of Qingdao, one of the major destinations for Korean companies in China, 43 Korean chief executives dumped their businesses here in the first NINE months of last year, fleeing the country without paying taxes or proper severance packages to employees.
...Foreign companies wanting to do business in China are offered “one-stop” service where a company can complete all the paperwork to start a business in a few easy steps.
It’s a different story for those who want to leave. Companies have to get authorization stamps from a large array of government agencies, including the tax office, customs bureau and social security and land management offices. The process can take six months or more, businessmen said.
“They require us to return the benefits offered when we open the businesses here and to pay social security fees that they have not bothered to charge before,” said a Korean businessman in Yentai. “It’s no different than forcing us to make an illegal departure.”
...And forget about cheap, strike-free labor in China. According to Kotra’s survey of 535 Korean companies operating in China in November, 168 respondents, or 32 percent, said they have experienced labor strikes. Also, the Chinese government, which once worked hard to attract foreign investment with benefits and tax breaks, is changing its stance.
“So-called qualitative growth is at the core of Chinese President Hu Jintao’s economic policies,” said Cheong Young-rok, a professor of International Studies at Seoul National University. He said the Chinese government, which once focused on expanding the nation’s economy with little concern about social safety nets, is now trying to offer more protection for laborers and create more middle-income families that can spur local consumer spending.
“In the process, businesses that rely on cheap wages will be falling behind, meaning the trend in China’s business environment is changing,” he said. “The Korean manufacturing boom in China is nearing an end.”
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