A strike involving 40,000 workers at Yue Yuen Industrial (Holdings) Ltd. (HKG:0551) (OTCMKTS:YUEIY)’s huge shoe factory complex in Dongquan has been going on for more than a week with few signs of a breakthrough in negotiations.

Yue Yuen

Nearly all the workers were still on strike Tuesday, according to labor groups and Chinese media sources. The workers rejected the company’s most recent offer, which would have made up back payments for social security and housing and called for full contributions for those benefits as of May 1, as well as a $37-a-month cost of living allowance.

Reasons for the strike

The strike was called after years of complaints about underpayments for social security and housing fund payments by Yue Yuen Industrial (Holdings) Ltd. (HKG:0551) (OTCMKTS:YUEIY). It has turned into perhaps the largest strike ever in China’s private sector, where manufacturers are having to deal with a shortage of manpower that is pushing up labor costs.

Little reason for optimism

Analysts are expressing little optimism that the Dongguan strike will be resolved soon. They say the two sides are firmly entrenched and remain far apart in the negotiations.

The striking workers are demanding a 30% pay raise and firm guarantees regarding future benefit contributions. The strikers also say the current deal would require them to make up their share of missed contributions from the past which they cannot afford. Furthermore, workers want their own representatives to negotiate with management rather than just waiting out a series of slightly better offers.

The Dongguan complex workers are not unionized, so issues of leadership and group communication are also hindering a resolution to the situation. “We are not quite sure who to come to a deal with,” Yue Yuen spokesman George Liu said.

Strike at another Yue Yuen plant settled

More than 6,000 workers at a smaller Yue Yuen Industrial (Holdings) Ltd. (HKG:0551) (OTCMKTS:YUEIY) plant in neighboring Jiangxi province also went on strike on Monday regarding social security payments, but for another reason. Workers in that plant slowed production because they didn’t want to pay their full share of government benefits, as this would lead to smaller paychecks. The strike ended after local government officials informed workers the payments are required by law and that they have no choice in the matter.