When my way IS the highway…
April 16th, 2009 by Kent KedlThis just in … Wal-Mart is making some big management changes in China (see story here). That, I guess, is not such big news – their business is down significantly and they may have grown beyond their own supply lines. Wal-Mart entered China through a JV years ago but waited until the law against wholly-owned retailers fell a couple of years ago to really step on the gas. They opened 30 outlets in 2008 and have done 23 in the first quarter of this year. Yikes.
But Wal-Mart is not necessarily cutting staff … they are “relocating” them. This might not be such a big deal in the U.S. where white collar management in retail is somewhat used to being moved about like pawns on a national chess board (a friend of ours with Best Buy was relocated 5 times in 11 years). But in China, this is a big deal. The hukou system – whereby everyone has a city “residence permit” that gives them and their families access to cit services such as education – is still alive and well in China. It used to be (10+ years ago) that the hukou system would keep people from moving at all because you could not get healthcare or education in a city in which you did not have your hukou. Many of those restrictions, particularly for white collar workers, have been lifted. A lot of people now living in the big cities (i.e. Beijing, Shanghai, Guangzhou) are not originally from here, but many of them sure hope to get their hukou here some day. For instance, of the 20 people in our Shanghai office, only 6 are from Shanghai itself; the rest are wai di ren, or “outsiders”, in a polite way of speaking.
So when Wal-Mart says they are going to relocate people, this – in and of itself – is not a shocking thing. Lots of people in modern China are from “somewhere else”. The problem is where Wal-Mart will likely relocate them to. The vast majority of Wal-Mart’s recently-opened stores are not in the big cities. Ammend that: they ARE in big cities, just not THE big cities of Shanghai, Beijing and Guangzhou. They are in smaller cities like Wuhu (in Anhui province with 2.3 million people) or in Maoming, a prefecture-level city in southwestern Guangdong province with a population of “only” 6.8 million.
“There are no layoffs,” said Jonathan Dong, a spokesman for Wal-Mart China. “If someone wants to go somewhere else [outside Wal-Mart], that is their decision.” Right. The “choice” they are offered will be moving to Maoming and keep your job or stay in Shanghai and lose it. If true, it is an ingenious play…Wal-Mart is able to stay within the strict confines of the labor law that makes it difficult to let workers go and still effectively reduce their workforce. If my way IS the highway, the choice is easy.
