Held hostage in China

By John Clark
Published: June 26th, 2013

Amid projections of approaching manufacturing cost-parity between the U.S. and China comes the story of Chip Starnes, co-owner of Specialty Medical Supplies (SMS), a Coral Springs, FL-based maker of disposable medical supplies, who is being held hostage by workers at the company's SMS China site on the outskirts of Beijing.

According to the AP report, Starnes had traveled to Beijing last week to lay off the remaining 30 employes of the company's plastics division there. The division is being shifted to Mumbai, India. Apparently workers thought the whole operation was being moved to India and demanded severance packages like those given to the plastics division workers.

Chip Starnes
Associated Press photo of Starnes at the SMS plant.

Employees have blocked the exits, and Starnes, who has been held for four days now, reportedly was "coerced" by local officials on Saturday into acceding to the workers' demands, and reports indicate payment, which was unspecified, would be wired to the workers today. Starnes has been subjected to sleep deprivation during his ordeal.

Starnes has apparently met with U.S. Embassy officials, and is not thought to be in any danger. The AP report quotes a spokesman of the Huairou Public Security Bureau as saying, "I can guarantee the personal safety of the manager."

We certainly hope this is the case.

I personally wasn't acquainted with the fact that such actions are not unprecedented in China, perhaps because it seems foreign executives are targeted less often than their Chinese counterparts. Labor protests are said to have been increasing in China in recent years (thanks to The Atlantic for the link in their story) and apparently the demands are often met as local officials give in due to concerns about social stability and public image.

The incident brings the issue of low-cost labor, and the increasing rapidity with which manufacturing can be transferred in response to rising costs, into stark relief. Wherever they are, workers see the trend. While glad to get the work, they also don't want to lose it.

It's not hard to imagine that in the not-too-distant future manufacturing costs might reach some sort of equilibrium, and faster than we might have thought.

Editor's Note: Chip Starnes has been freed by his workers, according to various media reports, after reaching a resolution to end the 6-day standoff. According to USA Today, citing a report in the Beijing News: "A deal was reached by early Thursday morning, when 97 workers received two months' salary and compensation that together totaled almost $300,000."

No votes yet

I wonder if the shift to

I wonder if the shift to India was precipitated by labor problems or other factors, such as costs. It would appear the former is likely.

The race to the bottom

The race to the bottom presumably reaches the bottom at some point.

Definitely an interesting exercise to think about manufacturing costs in equilibrium...what that looks like and what it means.

All things being equal, I suppose it makes the most sense to keep production local.

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