China Workers Strike, Labor Issues Move Beyond Europe

China’s financial sovereign interests are worried about Europe, and there are rumors that they may sell debt from the region if it does not stabilize. Part of the trouble in the Eurozone is that public employees are striking to resist the pay cuts that come with austerity. That, in turn, could undermine future GDP growth.

China, it is supposed, can control its work forces. The regime is totalitarian and has an huge army. Workers will do as they are told. Honda Motor (NYSE: HMC) has found out otherwise.Employees at a Honda factory in China  are on strike over what they think are low wages. It is hard to say if employees of other Chinese firms would take the same risk. AsiaOne reports that “Employees refused to work on May 17 and 22 over claims they are paid 50 times less than their Japanese colleagues.” It is the kind of problem that will continue to grow as more foreign countries build their presence in the People’s Republic.

The US has already complained that China’s government has made it markets somewhat impenetrable. China may want to protect the viability of its own companies by setting the bar for foreign firms high. Car companies  have long done business in China, which is the world’s largest auto market. And, the Chinese are known for taking the knowledge they gain from car companies based in Europe, Japan, and the US and then forming their own local companies.

The Honda strike sends a clear message to overseas firms doing business n China. Workers who normally could not stage a labor stoppage otherwise, can send a message that Chinese workers are worth as much as their foreign counterparts. And, Honda has to question whether the strike is just about raises or rather a message the China will control its work forces and foreign companies will not.

Douglas A. McIntyre