World’s workshop becomes world’s strike capital

So what does the new law provide? According to the Yale Centre for the Study of Globalisation "The law provides higher wages and greater job security, including a guarantee of lifetime employment for workers with 10 consecutive years of experience." Apparently, business sees the new law as "the twilight of the age of cheap labor in China, undermining one of the country’s prized economic advantages in globalized economy" and prompting a flight of firms to less-protected and lower-wage economies such as Vietnam's.

"Olympus Corporation, the world's fourth largest digital camera manufacturer, and Yue Yuen Industrial, the biggest maker of shoes for brands such as Nike, are among companies shifting some production facilities to Vietnam to cut costs.

"Karen Lin, a senior fund manager at Paradigm Asset Management Co. in Taipei, predicts the law will add roughly 25 percent to the cost of labor in China, which typically accounts for 10 percent of total manufacturing costs. Companies that fail to adjust will start to feel major pressure on their profits within “five to six years,” Lin said.

“China’s biggest advantage in the manufacturing and processing trade is cheap labor,” admitted Chang Han-wen, director of the National Association of Taiwan Businessmen in Dongguan, an industrial hub in southern China. “But now that’s going to change. Hundreds of small and medium-sized Taiwan-invested firms in Pearl River Delta region will be affected.”

Employer alarm centred in particular on an alleged right to ‘permanent employment’ after ten consecutive years or two consecutive contracts. Predictably, there was a rush of dismissals before January 1 2008 as employers sought to rehire employees on new contracts and get round what were believed to be the new provisions.

In one of the most notorious cases Huawei Technologies, a telecoms giant in Shenzhen, offered 7,000 employees with at least eight years service a bonus to resign and reapply for their positions. And French supermarket giant Carrefour was said to have asked its 40,000 employees to resign two-year before the contract deadline.

Other shared the alarmist view. On January, one day after the new law took effect, the Financial Times quoted Willy Lin, the Hong Kong-based managing director of Milo’s Knitwear (International) Group, as estimating that: "added together, labour costs [in mainland China"> will be close to 40 per cent higher for this year." However, "Mr Lin says the new labour contract law, which will make it harder to dismiss workers, could increase costs by about 8 per cent this year, with the rest of the increase caused by higher minimum wages, social security payments and the renminbi’s steady appreciation against the US dollar."

So how much of the well-authenticated trend for overseas and especially Taiwanese firms to shift from the Guangzhou region to Vietnam and elsewhere can specifically be attributed to the new labour law, and how much to other inflationary factors - including upward labour market pressures unrelated to the new law and clearly predating it?

To begin to answer that we must first be clear about the new law’s actual provisions. And it does seem that employers have been 'crying wolf’ about what the new law means. According to one independent labour rights consultancy, the Employment Contract Law:

"aims to formalise contractual relations and reinforce stability of employment by strengthening the existing legal requirement for written contracts of employment; shortening the maximum lengths of probationary periods for new employees; and restricting the use of successive fixed-term contracts...while the new law creates two new permitted grounds for summary dismissal, and new grounds for collective dismissals, and restricts termination payments, it also entitles a dismissed employee to claim the remedy of reinstatement or, in its place, double compensation for dismissal. Among a number of other amendments the rules on secondment of employees are tightened up, and the new law decreases maximum part-time working hours."

And as far as the right to collective bargaining is concerned the new law apparently retreats from the provision in the earlier drafts which would have allowed workers to negotiate directly with management, and entrenches the position of the official All-China Federation of Trade Unions [ACFTU">.

Hardly revolutionary. No wonder that one hard-headed business consultant? was unimpressed by the scares;

"I took a deep breath and listened to the arguments of those who want us to prepare for the worst. What happens next year?

- Employees in China cannot work longer than forty hours per week and if they make overtime, the employer has to pay.

- Employees cannot be sacked at a will, but only for well defined reasons.

- Employees can no longer be forced to sign non-competitive agreements, unless they belong to the senior management.

- Employees can sue you, if you break the law as an employer.

"Shocking isn't it?" He then asks.

But cycnicism about the exaggerated predictions of business organisations should not lead us to ignore the significance of this flurry of legislation. As Han Dongfang of the Hong Kong-based China Labour Bulletin points out, the new laws ‘ indicate just how effective workers’ action has been in forcing the government’s hand. These laws have not been introduced because the government is particularly enlightened, but because workers’ strikes and protests against widespread and continued rights violations have left the government with no option but to change the law, as a means of forestalling increased labour conflict.”

In fact the Pearl River Delta, often called the ‘factory floor of the world’, is now in effect also its strike capital, As China Labour Bulletin puts it ‘workers in China do not have the constitutional right to strike. Yet, every day in the Pearl River Delta alone there is at least one major strike involving over a thousand employees and dozens of smaller strikes and stoppages. This continuous wave of industrial action has forced the national and local governments in China to reassess the legal framework of labour relations and introduce new legislation that seeks to address workers’ needs and bring the law into line with social and economic reality’.

And this rising tide of unrest has even made itself felt in the previously moribund channels of the ACFTU. When that body proudly announced that it had signed the first-ever union agreement anywhere in the world with the notoriously anti-union US supermarket chain Walmart many assumed it was merely a sweetheart deal.

And so it may have been. But China’s Walmart workers have been using the official union channels to press the company to respect their legal rights, as the informative China Labour News Translations site reports. http://www.clntranslations.org/article/30/draft

China Labour Bulletin translates a fascinating interview with an ACFTU official in the central city of Luoyang who makes clear that the new legislation needs teeth if employers are to be made to respect the rights it contains, while other union officials and activists are demanding the right to strike. http://www.clb.org.hk/en/node/100269

And that key right may be on the verge of being conceded in Shenzhen according to another CLB report - as it happens, the same city where local party officials have beenr reported as proposing radical political reforms.

There may even be more labor law reforms on the way, even including, according to one report, ‘a salary reform... requiring pay raises in line with inflation... salary-fixing mechanism whereby companies would negotiate collective agreements with workers' unions; salary distribution in state-owned enterprises; and realizing a minimum wage’.

The implications of all this are still not clear. Wage inflation is not the only upward pressure on Chinese costs, and labour laws are far from the major contributor to Chinese wage inflation. Chinese employers - or more exactly, the employers of Chinese labour wherever they are based - may be looking at parts of Africa as alternative pools of cheap labour. If so African workers may have some useful experiences to exchange with their Chinese counterparts.

*Stephen Marks is the co-ordinator of the Fahamu China in Africa project.

*Please send comments to [email protected] or comment online at http://www.pambazuka.org/