HONG KONG (Kyodo) -- Three factories operated by Hong Kong-listed toy maker Smart Union Group in southern China's Guangdong Province have shut down, leaving more than 6,500 workers jobless, according to news reports Thursday.
The reports here and on the mainland reported that the factories were shut down starting Wednesday. A worker representative, identified by his surname Zhou, told Hong Kong's Cable TV that about 2,000 of the workers are gathering at the factories, seeking severance pay compensation.
"The government has mediated the dispute, and the company has paid us full salaries of September and October," Zhou said. "But it has refused us severance pay according to our length of service."
Another local media outlet ATV showed footage of riot police officers equipped with shields standing by near the factories.
The factories are located in the town of Zhangmutou in the industrial hotbed of Dongguan city. The company's website said it is manufacturing toys, recreational and sports products for the United States and European markets.
Mainland media reported that the government has posted a notice outside the closed factories, which said, "The enterprise was shut down because it was poorly operated. The government has set up a special working group to handle (the workers') pay issues."
The company, which suspended trading in Hong Kong's stock market Wednesday, has announced an interim net loss of HK$201 million (about $25.8 million) for the six months ended June 20, 2008.
Its Hong Kong office was also closed, while its chairman, Tony Wu, has declined to comment on the closures, Cable TV said.
Industrial sector legislator Andrew Leung said the tightened labor contract law and new regulations on manufacturing procedures have made it hard for small and medium-sized enterprises to operate.
"Manufacturers can foresee the impact of the new laws and regulations," Leung said. "However, the global financial tsunami hits too quickly and no one has the experience to weather it. If the world economy runs into recession, more companies will be shut down."
Leung said he expects more than 10,000 manufacturers in the province will be shut down.
Manufacturers have faced increasing pressure on their businesses this year because the global economic downturn has seriously cut consuming power of the U.S. and European markets, which are the major buyers.