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Chinese Shoemaking Factory Strikes Worsen; Gov’t Finally Intervenes

Rivet's 2020 Denim Circularity report takes a deep dive into how the global denim industry is plotting its circular future amidst a worldwide pandemic.

As the strike of Chinese shoemaking factory workers continues to grow in number and spread to adjacent territories, the local government has decided to intervene.

Local government officials in Dongguan decided that Yue Yuen Industrial, one of China’s largest shoemakers, is obligated to compensate workers for pension contributions promised but never delivered. Also, the government-run trade union released a survey that determined the pension payment should be calculated on the basis of each worker’s base wage, rather than total income.

The strikes have lasted for more than two weeks and some estimate they involve as many as 40,000 factory workers. The labor organizers claim that management reneged on their promises to pay full social security benefits and to provide stipends for housing costs. According to China Labor Watch, the strikes began on April 5 and have since snowballed into a sprawling demonstration of thousands. Some workers reported that only two or three out of ten plants remain in operation.

The Taiwanese-owned company, Yue Yuen Industrial, employs over 60,000 workers in the southern province of Guangdong. The factory produces sneakers for several major Western brands including Reebok, New Balance, Asics and Timberland, as well as Adidas and Nike. The parent company also owns shoemaking facilities in China, Indonesia, Vietnam, Mexico and the U.S.

Yue Yuen tried to placate the workers by offering them a compensation package that would include funds to cover pension contributions never made as well as housing funds also pledged. Yue Yeun would not specify how much it was willing to compensate its workers, and it remains unclear how many years of back payments that package would include. Some estimate the collective disbursement could be as high as $32 million which would cover both social insurance payments and housing funds.

The workers were apparently underwhelmed by the offer and, instead of winding down their demonstrations, expanded next door into Jiangxi. More than 2,000 workers in the neighboring province have followed suit, showing up for work but refusing to manufacture any shoes.

Some see Yue Yuen’s offer as a genuine show conciliation. Li Qiang, director of China Labor Watch, speaking to the Financial Times, said, “This official response…creates an important precedent. Unpaid social insurance is a pervasive issue in most Chinese factories, including suppliers to major international brand companies.”

There still remains, concern, however, about the mounting police presence, interpreted by some as a spectacle designed to intimidate workers into accepting a deal. Geoff Crothall of the China Labour Bulletin, also speaking to the Financial Times, expressed some anxiety on this score. “The Dongguan trade union federation is to be commended for taking the issue seriously and looking for solutions. The company too seems to be engaging in good faith. But at the same time, we have heard the police presence around the factory is increasing and there is more pressure on workers to accept the deal on the table. Looks like the authorities are using both carrot and stick.”

Adidas has shifted some of its sneaker production out of the Yue Yuen facilities to avoid disruptions. However, the retailer insists it will continue to maintain its contracts with Yue Yuen. Nike and Asics, brands that also manufacture shoes at Yue Yuen factories, have not yet commented on their plans.

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