Wal-mart China has begun mass layoffs of staff working at its purchasing centers, a move industry insiders say may be a prelude to the company moving to lower-cost countries.

The mass sackings had occurred at the purchasing centers in Shenzhen, Shanghai, Putian in Fujian Province, and Dongguan, involving more than 1,200 employees.

Dong Yuguo, a spokesman for Wal-Mart China, which is headquartered in Shenzhen, said the layoffs were simply adjustments to the company’s structure. The sackings were carried out in stages and each time around 200 people were fired.

“Purchasing centers in four countries — Singapore, the Philippines, Sri Lanka and Turkey — have all been closed down, while the positions in other countries will be adjusted, with China being part of it,” Dong said. He dismissed speculation that the layoffs were part of a plan to cut mainland-purchasing operations.

However, an unnamed senior manager of a human resources firm was quoted by the First Economic Herald as saying that Wal-Mart’s mass layoffs two months ahead of the new Labor Contract Law is more than a simple coincidence.

“The labor cost will increase substantially after the new labor law becomes effective in January. It will cost an employer a lot more to fire an employee,” said the manager.

China is the main venue for Wal-Mart purchasing. Wal-Mart said half of the US0 billion expenditure on purchases last year was spent in China.

One of the sacked workers, Ivan Hu, was quoted by the newspaper as saying that he and fellow workers at Wal-Mart’s Shanghai premises were “made redundant Oct. 22 and were offered compensation.”

“I totally cannot accept this,” Hu said.

The company offered staff an “N+1” compensation package. “N” means the years a worker had worked for the company. A worker with two years of service would be entitled to compensation of three months’ salary.

Dong refused to comment on whether the layoffs violated the law. (By Han Ximin)