China's protesting workers will mean higher prices in the west

The Chinese premier Wen Jiabao had the opportunity this weekend to pop into the MG car plant in Longbridge – now owned by Shanghai Automotive. The phrase “auto plant” oversells it a bit.

It is more of a “final assembly” area – all the parts are made in China. That is something we are pretty much used to now.

Over the last two decades China has been busy making the things we want to wear and play and type on for less. The process is simple. Businesses in the UK go to Hong Kong and speak to the men and women in “sourcing”. The sourcing people head over to south east China and find themselves a factory. The factory owner then gets himself a bunch of cheap Chinese migrants to make the product.

The goods are then put in a container and 30 to 45 days later, we in the west reap the benefit of the “China price” – which is just another way of saying the cheapest possible price. The magic ingredient in this manufacturing alchemy are the Chinese migrants – a plenty supply of labourers willing to work 12, 14 – even 16 hours a day for 2,000 odd yuan (about £200 a month).

But here is an urgent message for all those lovers of cheap electronics and shiny handbags in the house. The tail is now wagging the dog. That is not my phrase. There are the words of Ben Schwall – an American businessman who sources goods in China for retailers around the world. Mr Schwall says the factory owners are in trouble this year. It turns out those hard-working migrants want more out of life.

Mr Schwall says many factories producing labour-intensive goods like textiles, shoes and furniture are facing chronic labour shortages. Workers from inland China (the “tail” in Mr Schwall’s analogy) are refusing to work unless managers come up with more money. If they do not get what they want, they stay away – or negotiate a better deal somewhere else.

By way of example, I was taken to a plant that made lighting fixtures. The factory manager told me he raised his workers’ salaries by 27 per cent this year just to get them in the door.

There are two factors at play here. When migrants come to the factory-lands of south east China, they are looking to save some money for their eventual return – or send cash home to their family. However, inflation is at a three-year high in China and the cost of accommodation and, particularly, food is soaring. That makes it difficult to save and defeats the purpose of migrating to the south.

Secondly, a new generation of migrants have greater expectations than their parents. Generally speaking, they are only children – the product of China’s single child policy. They are more likely to have been to college and less keen on the long hours and drudgery. Consequently, they dream of something better.

This combination of frustration and financial hardship often works to upset the balance in China – a country where stability and harmony are prized above all else. Not only are workers demanding more money but they are also more likely to take to the streets.  Human Rights Watch says the number of protests and strikes have greatly increased in recent years – they estimate some 400 a day presently.

Channel 4 News travelled to a city called Xintang – best known for its factories which pump out 200 million pairs of jeans a year (our report airs on Sunday, 26 June). Two weeks ago “denim town” was rocked by four days of rioting. Migrant workers burnt cars and buildings and trashed the police headquarters.

The disturbances were triggered, say locals, by the “manhandling” of a pregnant woman by local police but anger and disillusionment run deep in this place.

Local people told us that everyone in Xintang is under pressure. The factory owners are struggling to find enough labourers. The migrant workers are struggling to make ends meet – one told us it was all pointless and exhausting. The recent riots were like a communal nervous breakdown.

It turns out the “tail” may just decide to stay at home. Ben Schwall says the factory owners are starting to go to the workers by building new plants thousands of miles inland. This is the great Chinese migration in reverse – an “industrial migration” to find the bodies that make the “China price” possible.

But beware – building new factories (and entirely new supply chains) costs lots and lots of money. Expect to pay more for those shiny handbags and mobile phones because you and I will be picking up the tab.

Follow John Sparks on Twitter at @c4sparks