Recently, there has been circulating news on the internet claiming that the jewelry company Chow Tai Fook’s Shenzhen factory has suspended operations. Several employees from the factory have confirmed the authenticity of this notification. The issue stirred up significant attention on June 5th, prompting an official statement from Chow Tai Fook, stating that they are relocating certain production departments from the Shenzhen factory to the Shunde factory in Guangdong.
On June 5th, a “suspension of work notice” from the Chow Tai Fook Shenzhen factory dated May 29, 2024, went viral on mainland Chinese social media platforms. The notice cited changes in market conditions and the need for business production transformation as reasons for the decision by the shareholders to migrate the production manufacturing business from the Beishan factory, including the transfer of related production lines, equipment, raw materials, and assets. The production manufacturing business of the company ceased operations starting on June 1, 2024, with the duration of the suspension and subsequent arrangements subject to market conditions and group plans.
Starting from June 1, 2024, employees from the production manufacturing departments – including the high-end jewelry department, inlay department, hydraulic department, and C2M experimental center – began their furlough awaiting reassignment. During this period, the company will pay the salaries for June, following the wage standards stipulated in the labor contracts for each employee.
“Blue Whale News” reported that multiple employees from the Chow Tai Fook Shenzhen factory have confirmed the authenticity of this notice. Some of the dismissed employees expressed surprise, stating, “We had thought of retiring at Chow Tai Fook, never expected the factory to suddenly disappear.” Others mentioned that the factory closure was a “relocation-type downsizing,” where Chow Tai Fook provided two options: receiving severance pay for contract termination, or choosing the Shunde option, whereby Shenzhen factory employees can opt for relocation to Shunde.
An employee who had worked at Chow Tai Fook for over ten years shared that the severance pay would be “N+3”; however, the compensation for employees transferring to the Shunde factory is not substantial, capped at no more than 30,000 yuan, regardless of years of service. They added, “There are also many workers in the Shunde factory; perhaps they don’t need us from here.”
Another employee from the Chow Tai Fook Shenzhen factory mentioned that the Shunde factory is already saturated, stating, “There is simply not enough work there.”
When contacted, the Shenzhen factory of Chow Tai Fook responded to inquiries by questioning the relevance to the caller.
Regarding the reason for the factory closure, a laid-off employee speculated that it might be linked to the high costs of the Shenzhen factory; deeper reasons could be related to the ripple effects of the rise in gold prices.
In recent months, China has witnessed a surge in the demand for gold, leading to an increase in the price of 24k gold jewelry in Chinese gold stores from nearly 600 yuan per gram to over 700 yuan. Although there have been fluctuations, the prices have mostly remained above 700 yuan.
The upward trend in gold prices combined with the already significant processing fees at jewelry stores has led to higher product prices at stores like Chow Tai Fook, resulting in decreased sales.
Chow Tai Fook Group, owned by the Hong Kong businessman Cheng Yu-tung’s family, operates three factories in mainland China located in Shenzhen, Foshan Shunde, and Wuhan Huangpi. The Shunde factory was first established in 1988. The Shenzhen factory that has now suspended operations primarily focuses on research and development. According to Chow Tai Fook’s interim report for the fiscal year 2024, as of the six months ending on September 30, 2023, employee costs and related expenses saw a year-on-year decline of 0.8%, with the average number of employees in the production department also declining by 0.4%.
Following the attention sparked by the suspension of work notice, Chow Tai Fook responded to mainland Chinese media outlets on the afternoon of June 5th, refuting the rumors and stating that through adjusting enterprise resource allocation to enhance operational efficiency, they have reorganized and relocated certain departments from the Shenzhen factory, including transferring some production departments to the Shunde factory in Guangdong.