China has seen one of the largest strikes ever in its private sector. Ashok Kumar reports

48,000 workers at the Chinese shoe supplier to Nike and Adidas, Yue Yuen (part of the Pou Chen Group), have been striking since 14 April.

Workers went on strike to demand that the company repay years of stolen social insurance payments, implement a significant wage increase, and sign legal labour contracts (having found that the company had been making them sign fake work contracts for nearly 20 years).

The company had responded by offering a measly wage increase and cost of living payment that the workers rejected. The sheer scale and longevity of the action represents an historic turn in the formation of global capitalism.

There are a number of reasons why this strike is terrifying not only for the supplier factory bosses in China but also for transnational capitalism.

1. It’s the largest strike in modern China.

Simply put, there hasn’t been a strike of this scale and magnitude in modern China. While strikes in China usually end once demands relating to a particular issue have been met, this strike is indefinite and escalating: a kind of collective bargaining by riot.

The demands here are more structural; the workers have rejected the crumbs off the bosses’ table, and it is now spreading to neighbouring provinces.

Changes in Chinese production can have reverberating effects on global production. As Jacques Rancière put it:

“The domination of capitalism globally depends today on the existence of a Chinese Communist Party that gives de-localized capitalist enterprises cheap labour to lower prices and deprive workers of the rights of self-organization.”

Due to strikes, real median wages in China have risen 17% per annum since 2009, and are now nearly five times what they were in 2000. Escalated strikes of this unprecedented scale will only deepen the crisis for industrial capitalism.

2. Chinese state repression is tempered.

Although there have been arrests made at Yue Yuen, in recent years the Chinese state has been less inclined to repress the militant actions of workers like decades past. This should be understood as a calculated economic decision to rebalance the economy towards consumption: more wages means more spending power. The state is less interested in ensuring depressed wages in order to entice foreign investment, and access to consumer debt has expanded in China soaring by 67% in the past five years – far above the US’s 10% in the same period – spawning a burgeoning false economy.

A 2012 International Monetary Fund report sees the Chinese economy as being in a process of reorientation, with a greater emphasis on internal investment and a transition away from export-led growth. If this move is successful, it will deepen the crisis of profitability and accumulation in the ‘real economy’, at least in the short term, for international capital.

Capital depends on the Chinese State to continue its role as comprador; a shift away from this configuration undermines industrial capitalism’s bottom-line.

3. It’s too big to cut-and-run.

The footwear industry has, up until recently, remained decidedly “buyer-driven”, meaning brands and retailers – not the producing suppliers – are the drivers of the global value chain. This meant that if workers struck at a factory, buyers (such as Adidas) would simply ‘cut-and-run’ to the next sweatshop. However, as production has begun to consolidate in a few countries, smaller suppliers have been absorbed by larger ones. These large suppliers have expanded horizontally across the supply chain to include warehousing, logistics and even retail.

This development has led to the emergence of quasi-supplier monopolization, leading to greater value capture at the bottom of the supply chain, and more capital expenditure at the supplier-end into innovations in technology and production processes further augmenting value capture. This is found especially in footwear. China’s Pou Chen Group is the largest casual footwear manufacturer in the world, producing 250 million pairs of shoes per year and accounting for 20% of the world’s athletic and casual footwear market.

Pou Chen is one of Nike and Adidas’s ‘strategic partners’: what workers can see as a ‘backbone shop’ because it offers economics of scale and agglomeration unmatched by any other supplier. As such, rather than being purely ‘buyer-driven’, both the transnational brand and Pou Chen are mutually dependent. This could be seen as a process of buyer-supplier dependency rather than asymmetry.

These changing dynamics inform strategy. Greater value capture at the supplier-end means less power for brands to dictate prices, however it could create greater levels of bargaining power for workers at larger suppliers, independent of the brands. It is now extremely costly for companies such as Adidas and Nike to cut-and-run from large-scale suppliers such as Pou Chen.

4. The price of consumer durables is rising.

Since the crisis of the 1970s the economies of the post-industrial west have benefited greatly from mushrooming debt and cheap consumer durables like shoes. As workers make greater demands in China through mass strikes, labour costs will increase as will the price of consumer goods in the industrialized economies. This factor, coupled with falling real wages in the west, a downward resetting of asset prices, accelerated automation of both the service and industrial sector, and a reduction of debt-financed purchases, will have the net effect of plummeting consumer buying power.

As Bruce Rockowitz, CEO of Li & Fung which handles 4% of China’s exports to the US, stated in 2011: “It is the end of cheap goods.” Rockowitz went on to claim that none of the alternative sites suggested will come close to curbing costs and inflation like southern China. Predicting that the price of goods will rise by 5% per annum (optimistically), he stated that “there is no next” after China, noting that Li & Fung’s sourcing operation had already seen price increases of 15% on average between 2010 and 2011.

5. It’s gone global.

Local organizations in Guangdong province and Hong Kong which have been supporting striking workers have called upon international allies to take action to force Adidas to intervene and ensure workers’ demands are met. Since 23 April there have been actions spreading globally from Taiwan, Melbourne, San Francisco, Los Angeles, Chicago, Milwaukee and New York.

From Novaramedia