South Korean Factories Up and Leave China–without Paying Salaries

Here’s one for the books:

Beijing (AsiaNews/Agencies) – There is the danger of a full-blown diplomatic crisis with the exodus of many South Korean business owners, who are closing factories in China without paying their employees or their suppliers. Yesterday, Seoul asked Beijing to discuss a solution. It is likely that the South Korean government will cover part of the unpaid debts of its companies. According to the South China Morning Post, in Jiaozhou (Shandong) 103 of the 119 businesses that suddenly closed without paying are South Korean.

New taxes (from which foreign companies were exempted at first), greater pollution controls, the appreciation of the yuan, and the rise in labor costs (the new law recognises employees’ rights to health insurance and severance pay) have made it less advantageous to maintain production in China. It is estimated that there are about 20,000 South Korean companies in the country, many of which have been producing at a loss for some time.

Unscrupulous businessmen have taken advantage of the lunar new year holiday, and their workers have found the factories closed after returning from their brief vacation. Many Hong Kong and Taiwanese companies are also closing their factories in China to move them elsewhere. It is expected that at least 10,000 factories will close this year in the region of the Pearl River Delta alone.

The 200 employees of the Dongguan Hongsheng Mould Factory, a Taiwanese company, also found the factory closed. “The boss”, comments one worker, “always withholds our money at the end of every year to force us to come back next year. We never thought the boss would shut the factory”.

It’s the wild west…or rather…the wild, wild east. A lot of stuff here on which to comment.