Fights Over Chinese Labor Reform

Last March, in his annual speech to the National People’s Congress, Chinese Premier Wen Jiabao announced wide-ranging economic reforms of ​“epoch-making significance,” including a new labor law that would crack down on inhumane working conditions. 

But the move sparked opposition from many American and European corporations, even though they have long claimed that their business activities in the People’s Republic of China promote human rights.

The first draft of the law would have required all employers in China to sign written contracts with workers (preferably without fixed termination dates), restricted mass layoffs, increased severance pay and boosted the power of the government-sponsored All-China Federation of Trade Unions to negotiate layoffs, salaries, working conditions and internal company policies. 

In a suprise move, the government asked for public input. Nearly 200,000 comments were sent in. The responses were mostly from Chinese workers, but representatives of American and European business organizations, including the American Chamber of Commerce in Shanghai and European Union Chamber of Commerce in China, also chimed in, criticizing the proposed safeguards. They warned that the new law would discourage their corporate members from making further investments in China. 

The business community made its influence felt. Andreas Lauffs, a Hong Kong-based lawyer who advises Western corporations on Chinese employment law, says that in mid-January the Chinese government began circulating a second version of the law. Although much of the first version was left intact, companies no longer have to worry about union approval for changes such as conducting layoffs. Lauffs says he had expected government to simply ignore all the criticism. ​“Frankly, I was surprised how big the changes were.”

This has pro-labor groups in the United States crying foul. “[Western corporations] have shown themselves to be hypocrites,” says Tim Costello, co-director of Global Labor Strategies, a Boston-based think tank. ​“They’re opposing the very things that can raise the living standards of Chinese workers.”

Experts say the Chinese government hopes to close the huge wealth gap between prosperous urban dwellers and the vast majority of Chinese citizens who have gained little from the global economy. 

Violent disturbances, largely driven by the millions of migrant workers with few rights or protections, have become common throughout China. 

The Ministry of Public Security estimated that there were 87,000 public protests in 2005, a six percent rise over the previous year. Although the ministry reported a steep drop in disturbances during 2006, the South China Morning Post, a Hong Kong newspaper, has reported that the Chinese government began stopping the national media from covering protests and strikes, and many experts question whether the unrest has actually lessened. 

Lauffs says party leaders are trying to put their stamp on history by addressing the fact that ​“many quarters of society have totally lost out since the ​’80s.” But he feels they have gone about it the wrong way. Migrant workers tend to work long hours for Chinese-owned companies, and usually receive little or no overtime pay, an issue not covered by the new law, he says. Local governments are too weak or unwilling to enforce existing labor law, and frequently let domestic firms get away with serial violations. In contrast, he claims, the Western-owned firms he represents give all their workers contracts, and maintain good working conditions. 

Other business advocates agree. ​“It is a complete misnomer to say [American] companies oppose [Chinese] labor law,” says John Frisbie, president of the U.S.-China Business Council, a Washington, D.C.-based lobbying group with several hundred member corporations, including Wal-Mart, Microsoft and Boeing. The council did send the Chinese government a letter several pages long, mostly criticizing the proposals requiring companies to secure the union’s approval before laying off workers or changing any policies. 

Some groups, however, were more aggressive. The American Chamber of Commerce in Shanghai, which represents more than 1,000 corporations, submitted several dozen pages and rejected most of the draft law. And, according to their own English translation, they also gave the Darwinian advice, ​“that the fittest survives is the basic principle of all creatures.”

Costello says pro-labor forces need to publicize the role played by multinational corporations in suppressing progressive trends in China. Many unions simply criticize the Chinese government, but he does not believe that’s enough. ​“We need to put the attention back on global capital.”