BEIJING - When Mr Liu Junde was told by his boss he could not take 20 days of leave from his factory job in Yiwu city in China, he promptly quit.

Like hundreds of millions of workers across China, it is the first time in three years that Mr Liu, 48, will be able to travel to his hometown during the upcoming Chinese New Year holidays. Having endured three years of Covid-19 travel restrictions, which had made the journey home complicated and costly, he says he has no regrets leaving his job at a solar panel parts factory, where he was a warehouse worker.

“I feel great now because I’m going home,” Mr Liu said outside the crowded train station in Yiwu, where he stood smiling next to his large woven plastic bag and grey suitcase. He will spend 28 hours changing between trains and buses to reach his hometown in rural Gansu province.

“I just really want to spend some good time with my family,” he said. “I will start to look for jobs when the holiday is over.” 

With China’s 296 million migrant workers on the move this year, factories and local governments are bracing for disruptions during a longer-than-usual holiday period. China has seven days of public holidays for the Chinese New Year – which runs this year from Jan 21 - 27 – but many workers do not plan to return until after Feb 5, the day of the traditional Lantern Festival. 

In the manufacturing powerhouse province of Zhejiang – where Yiwu city is based – factories have stopped production one to two weeks earlier than normal this year.

With Covid-19 infections starting to surge in December and travel restrictions suddenly dropped, many workers began journeying home from late in December already, according to interviews with over two dozen employers and workers last week.

Businesses and local governments are now kicking into gear to minimise the disruptions. They are doling out cash, arranging recruiting trips for employers and organising job fairs to make sure workers return in early February.

Yiwu is a hub for the global trade of small consumer goods – everything from jewellery to home furnishings, toys and electronic equipment. Before the pandemic, the city would be bustling with thousands of buyers from across the world flocking to its massive wholesale trade market. 

During a visit to the market last week, most shops were closed and staff at the few ones still open were busy sorting their inventories and making last-minute sales to workers returning home. 

Official data already shows some damage to the labour market as workers leave their jobs. The labour participation rate declined by 1.1 percentage point in December, according to data released by the National Bureau of Statistics this week. 

Labour shortages were a major problem for many factories in 2020, when China locked down most of the country starting from the Chinese New Year break and then reopened in the following months. Urban employment and average hours took about three months to recover, according to a study published by the Reserve Bank of Australia. 

And even when the labour market recovered in June 2020, a small proportion of migrant workers did not return to their jobs once they had left. 

The difference now is that workers no longer have to go through quarantines in order to return to their place of work. That makes employers optimistic they will not run into labour shortages, and workers like Mr Liu upbeat about finding employment once the holidays are over.

Mr Li Chongqing, chairman of Yiwu Chuangju Craftwork, is offering an extra month’s wage to employees who will return before Feb 5. The company employs some 70 employees and makes plastic products like food containers in the eastern city.

“2023 will probably be a better year than 2022,” said Mr Li, whose company’s revenue plunged by more than 20 per cent in 2022 from the year before, mainly due to greater competition in the domestic market. “As long as people start to go out again, there will be more spending.”

Mr Wu Jijiao, general manager of Yiwu Hongsheng Toy, said the company is reimbursing returning workers’ travel expenses. He has resorted to hiring temporary day workers since Jan 1 as many full-time employees left to go home.

The local district government is rewarding factories as much as 20,000 yuan (S$3,900) if they resume production by Jan 31, said Mr Wu. 

A number of local governments have announced plans to secure workers and help factories resume operations after the holidays. Economic Daily, a newspaper affiliated with the State Council, China’s Cabinet, urged local governments to take early steps to prevent a labour shortage around the holiday.

Taizhou, another city in Zhejiang province, is offering subsidies worth 2,000 yuan to newly employed workers at manufacturing firms, and paying half the expenses for companies to hire buses for returning workers. 

The southern province of Guangdong, which has China’s biggest regional economy, organised for companies to visit Guangxi province, a major exporter of migrant workers, in December to recruit workers, with 4,500 jobs offered.

To be sure, workers cannot risk staying out of a job for too long in China, where social welfare is limited, and the government has refrained from giving cash handouts to the population during the pandemic.

A sharp slowdown in income growth and relatively high unemployment means lower-wage employees have few options but to look for work.

Mr Wei Guofu, 35, is thinking of switching jobs after Chinese New Year. The fashion accessories factory Mr Wei worked at was shut for two months in 2022 due to a lack of orders, forcing him to find temporary work as a courier and doing odd jobs at other factories in Yiwu. His income plunged by half to just over 30,000 yuan in 2022 from the previous year.

“I considered buying a ticket for the high-speed train, but decided to get the slower train in the end so I can save 300 yuan and buy my son a present,” said Mr Wei, who is spending 25 hours travelling home to Guizhou province. “I will probably look for a better job when I’m back.”

Consumer demand

Aside from possible labour and production problems, factories are also having to contend with falling demand for their goods. For business owners like Mr Li and Mr Wu, who are in the labour-intensive consumer products industry, the question on everyone’s mind is how much consumers will loosen their purse strings this year. 

Mr Li said he doubts there will be “revenge spending” by consumers like in many other countries after they reopened, which fuelled growth in those economies. 

“Chinese people always like to save up and now they have a sense of crisis” after a tumultuous three years of the pandemic, said Mr Li.

There is still hope that a return of foreign clients now that China has opened up its borders may help boost exports and make business easier. 

Mr Nie Xingquan, owner of Italy Elsina Group, which produces hand-made leather shoes in Wenzhou city, is hoping his clients in Japan and the Philippines will return in a few months for the first time in three years.

His business took a beating in 2022, with revenue plunging by half and the company posting a loss after two years of earning profits. He has also been forced to cut his workforce to about 30 from more than 80 before the pandemic. 

The streets in Wenzhou, which is located 200km from Yiwu and famous for its shoe industry, were empty last week and factory gates were shut at a major shoe-making district. Yet Mr Nie was optimistic about prospects and a return of his workers.

“We might resume production earlier than scheduled if business turns out to be good,” he said. BLOOMBERG