Page 7 - SCBJ-201606
P. 7
June 2016
In addition to hiring migrant workers, compliance with written laws as workers letting businesses take advantage of the
labor dispatch is another method by become more vocal and the overall proximity for reduced shipping costs.
which employers have historically economy slows.
reduced labor costs. In response to Although the country has not yet fully
rising wages and 2008 laws requiring Prospects for the Future transitioned from low cost to high
companies to more diligently pay worker value manufacturing, capitalizing on
insurance, overtime, severance, and other While a diminishing workforce and government incentives promoting the
benefits, employers took advantage of the stronger government enforcement of sector can potentially pay dividends.
labor dispatch loophole to avoid assuming regulations are increasing the costs of Investors can also take solace in the
additional expenses. labor, China aims to remain competitive fact that the factories they contract are
by boosting productivity and producing gradually providing their employees
Although labor dispatch was supposed to higher value goods. As certain labor- with better conditions and benefits, thus
be used only for temporary, auxiliary, or intensive industries such as apparel providing often marginalized groups
substitute jobs, companies would often shift to lower cost locations like Vietnam with improved living standards. Though
employ dispatched workers for years at and India, Beijing is responding by the manufacturing sector risks being
a time. In some cases, factories would encouraging manufacturers to move caught in the middle income trap, China’s
directly hire workers and force them to up the value chain and produce more vast financial resources and significant
sign with a dispatch agency, and over 80 innovative products. The “Made in China domestic market present lucrative
percent of a given factory’s workers could 2025” campaign promotes this effort, opportunities during the industry’s
be comprised of dispatched labor. Because hoping to spur the Middle Kingdom into a transition phase.
dispatched workers are technically global power in manufacturing advanced
employed by their agencies, employers technology in place of cheap and often Since its establishment in 1992,
could avoid responsibility for payment imitated merchandise. This process Dezan Shira & Associates
of benefits and the risk of labor disputes. requires significant financing to develop has been guiding foreign
Similar practices have been used when innovative R&D, train skilled workers, clients through Asia’s complex
hiring so-called “student interns”, who and upgrade factories to include more regulatory environment and
are sometimes intimidated into accepting automation and robotics. With enough assisting them with all aspects of
lower wages and worse conditions than resources, the government hopes China legal, accounting, tax, internal
regular employees. However, recent can break through the dreaded “middle control, HR, payroll and audit
regulations have come into force to curb income trap”, where a country loses its matters. As a full-service
these practices, forcing companies to cost advantages in manufacturing and consultancy with operational
be more responsible in meeting their exports but is unable to compete with offices across China, Hong Kong,
obligations to their employees. developed economies in value-added India and emerging ASEAN, we
products. are your reliable partner for
As the work force keeps diminishing and business expansion in this region
diffusing across the country, workers The expiration of China’s demographic and beyond.
are increasingly empowered to make dividend, growth of the service sector,
demands to employers and seek greater and westward diffusion of factories For inquiries, please email us
protection of their rights. Protests have resulted in a smaller and less at info@dezshira.com. Further
have been increasing in recent years as concentrated labor pool. However, China information about our firm can
workers object to unpaid employer tax remains an attractive destination for be found at: www.dezshira.com.
contributions, underpaid wages, and poor manufacturing overall and holds many
work conditions. Such demonstrations advantages over its competitors. While
are also sparked by aging workers wages have risen, so too has worker
who are eyeing retirement and have productivity as the workforce becomes
greater awareness of the importance more skilled with higher quality resources
of retirement, housing, and insurance to work with. China also has a developed
contributions than when they were young. shipping and logistics infrastructure, and
To maintain social stability, Beijing is is increasingly a market for manufactured
taking steps to ensure greater company goods rather than just a producer,
5
In addition to hiring migrant workers, compliance with written laws as workers letting businesses take advantage of the
labor dispatch is another method by become more vocal and the overall proximity for reduced shipping costs.
which employers have historically economy slows.
reduced labor costs. In response to Although the country has not yet fully
rising wages and 2008 laws requiring Prospects for the Future transitioned from low cost to high
companies to more diligently pay worker value manufacturing, capitalizing on
insurance, overtime, severance, and other While a diminishing workforce and government incentives promoting the
benefits, employers took advantage of the stronger government enforcement of sector can potentially pay dividends.
labor dispatch loophole to avoid assuming regulations are increasing the costs of Investors can also take solace in the
additional expenses. labor, China aims to remain competitive fact that the factories they contract are
by boosting productivity and producing gradually providing their employees
Although labor dispatch was supposed to higher value goods. As certain labor- with better conditions and benefits, thus
be used only for temporary, auxiliary, or intensive industries such as apparel providing often marginalized groups
substitute jobs, companies would often shift to lower cost locations like Vietnam with improved living standards. Though
employ dispatched workers for years at and India, Beijing is responding by the manufacturing sector risks being
a time. In some cases, factories would encouraging manufacturers to move caught in the middle income trap, China’s
directly hire workers and force them to up the value chain and produce more vast financial resources and significant
sign with a dispatch agency, and over 80 innovative products. The “Made in China domestic market present lucrative
percent of a given factory’s workers could 2025” campaign promotes this effort, opportunities during the industry’s
be comprised of dispatched labor. Because hoping to spur the Middle Kingdom into a transition phase.
dispatched workers are technically global power in manufacturing advanced
employed by their agencies, employers technology in place of cheap and often Since its establishment in 1992,
could avoid responsibility for payment imitated merchandise. This process Dezan Shira & Associates
of benefits and the risk of labor disputes. requires significant financing to develop has been guiding foreign
Similar practices have been used when innovative R&D, train skilled workers, clients through Asia’s complex
hiring so-called “student interns”, who and upgrade factories to include more regulatory environment and
are sometimes intimidated into accepting automation and robotics. With enough assisting them with all aspects of
lower wages and worse conditions than resources, the government hopes China legal, accounting, tax, internal
regular employees. However, recent can break through the dreaded “middle control, HR, payroll and audit
regulations have come into force to curb income trap”, where a country loses its matters. As a full-service
these practices, forcing companies to cost advantages in manufacturing and consultancy with operational
be more responsible in meeting their exports but is unable to compete with offices across China, Hong Kong,
obligations to their employees. developed economies in value-added India and emerging ASEAN, we
products. are your reliable partner for
As the work force keeps diminishing and business expansion in this region
diffusing across the country, workers The expiration of China’s demographic and beyond.
are increasingly empowered to make dividend, growth of the service sector,
demands to employers and seek greater and westward diffusion of factories For inquiries, please email us
protection of their rights. Protests have resulted in a smaller and less at info@dezshira.com. Further
have been increasing in recent years as concentrated labor pool. However, China information about our firm can
workers object to unpaid employer tax remains an attractive destination for be found at: www.dezshira.com.
contributions, underpaid wages, and poor manufacturing overall and holds many
work conditions. Such demonstrations advantages over its competitors. While
are also sparked by aging workers wages have risen, so too has worker
who are eyeing retirement and have productivity as the workforce becomes
greater awareness of the importance more skilled with higher quality resources
of retirement, housing, and insurance to work with. China also has a developed
contributions than when they were young. shipping and logistics infrastructure, and
To maintain social stability, Beijing is is increasingly a market for manufactured
taking steps to ensure greater company goods rather than just a producer,
5
