New labor law could put squeeze on low-margin foreign firms
02 Jan 2008
China yesterday introduced a labor law that enhances rights for workers. But higher labor costs may drive out manufacturers with low margins. Olympus, the world's No4 digital camera maker, and Yue Yuen Industrial (Holdings) (0551), the biggest maker of shoes for brands such as Nike, are among companies shifting some production to Vietnam to cut costs.
"We are likely to see more factory closures next year," said Stanley Lau, vice chairman of the Federation of Hong Kong Industries.
The Labor Contract Law allows open-ended terms of employment for those who have completed two fixed terms. It limits overtime, sets minimum wages and guarantees one month's pay for each year worked for those sacked.
