To the long list of negative effects of China's liquidity-fuelled recovery – high food price inflation, runaway property prices – add another: increasingly militant workers. Honda's closure of all four of its assembly plants in China, after almost 2,000 staff at a wholly-owned parts unit downed tools in a dispute over pay, is a symptom of a shift in bargaining power.
At least in this case, workers are holding employers to ransom because they can. Honda's commitment to the world's biggest car market is in no doubt: it sold almost 40 per cent more cars in China in the first four months of this year than it did a year earlier. Earlier this week, the company said it planned to raise its local production capacity by a third by the second half of 2012, while introducing two new models. In that context, the chances of a higher settlement look good, regardless of whether the workers – currently paid about $220 a month – have a strong case for a raise. It is true that national income, for the time being, is rising faster than individual incomes. While real output rose almost 12 per cent in the first quarter, urban and rural incomes increased by less than 10 per cent.
In the unlikely event that employers refuse to budge, moreover, employees have options. This is a reasonably tight labour market: nationwide, unemployment of 4 per cent is where it held between September 2004 and June 2006, during a period of global prosperity. In export hubs such as Guangdong – home to Honda's parts plant – wage pressure has become particularly intense as migrants from the interiors return or stay home, where fiscal stimulus has spurred jobs growth. The likes of Honda, in short, may find workers have almost nothing to lose.