Stanley Black and Decker, the world’s largest manufacturer of industrial tools and household hardware, closed its plant in Shenzhen last Monday, leaving over a thousand workers unemployed.
While Chinese media reported that the redundant staff received hefty compensations and were highly sought-after, observers questioned if the reports are authentic or merely published to stabilize public sentiment amid economic turmoil.
The announcement came shortly after President Xi Jinping visited the Southern Chinese city to celebrate the 40th anniversary of the Special Economic Zone, where he described Shenzhen as the “core engine” of the Greater Bay Area.
Staff members received a high severance payment, according to two former employees named Wang and Tang. A manager who had worked for the company for two decades was given 640,000 yuan (US$95,588), while Wang, who had six years of experience, received around 50,000 yuan.
They claimed the company will move the factory to Suzhou and Vietnam. According to Chinese media outlet Security Times, the firm’s rental contract in Shenzhen ends next year and is shutting the plant due to a significant increase in rent.
Chinese media also report that most of the workers have already been recruited by other factories and obtained employment on the same day. Middle management and executives were snapped up by other firms. Staff from a neighboring electronic factory claimed they hired up to 200 former employees of Stanley Black and Decker.
Kevin Tsui, an associate professor of the Department of Economics at Clemson University, casted doubt on the authenticity of these reports. While the Chinese economy has shown steady recovery, it is unlikely for firms to be able to take over unemployed workers on such a large scale. Stories of the generous compensations were published to stabilize public sentiment and prevent people from panicking as more and more foreign investors are pulling out, he added.
Veteran news commentator Johnny Lau said the growing production costs in China, as well as new labor law restrictions, have prompted firms to move to South East Asian countries, which are more welcoming to foreign investors amid the U.S.-China trade war.
Liu Meng-chun, director and research fellow of Chung-Hua Institution for Economic Research in Taiwan, said traditional industries like Stanley Black and Decker have become less valued in Shenzhen, where the authorities have shifted their focus to innovative technology.
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