The industrial relations system in China is in play as workers, peasants, corporations, and a variety of civil society, state, and party actors vie to determine its future. Now the collapse of the global financial system and the likelihood of a deep global recession/depression add a whole new dimension to the struggle of Chinese workers and reformers for a more equitable system. Global markets for goods made in China will shrink. Thousands of foreign companies with operations in China could be swept away or be forced to significantly downsize. Indeed, even global giants like automaker GM, one of China's biggest auto producers, are teetering on the brink of bankruptcy. China’s banking system—while somewhat isolated from global pressures—is likely to feel the effects of the financial crisis. No one knows what effect the crisis will have on the value of the vast quantities of the US dollars and debt that China currently holds.
Against this back-drop we take a look at aspects of the Chinese industrial relations system before China is sucked into the vortex of a global recession.
Trouble at Wal-Mart
It has been two years since the ferociously anti-union Wal-Mart recognized the ACFTU in its stores. The event made headlines around the world.
Under Chinese labor law if 25 workers petition for a union, a committee can be elected and the union must be recognized. Normally this is a top-down pro-forma affair in which both management and the official union play a part, but in this case, Wal-Mart’s refusal to play by the normal rules forced the ACFTU to actually recruit workers at the workplace and establish the union without management participation. Once Wal-Mart recognized the first union branch, at its Fujian store, recognition quickly followed at Wal-Mart’s other Chinese facilities. Today, the ACFTU says it represents 50,000 Chinese workers at 108 Wal-Mart locations in China. Many hoped the Wal-Mart experience would be a breakthrough in the development of the Chinese industrial relations system and in the evolution of the ACFTU. Things have not turned that way.
We have a good glimpse into the world of Wal-Mart’s workers through voices of the workers themselves as they discuss and debate–and criticize–the actions of Wal-Mart and the ACFTU in on-line blogs. Some of these discussion threads, as well as relevant articles from the Chinese press, have been translated by the excellent, and increasingly indispensible, China Labor News Translations (CLNT). Read them here.
Wal-Mart has not engaged in serious collective bargaining and the ACFTU has fallen into a typically cozy relationship with Wal-Mart’s management. After Wal-Mart and the ACFTU signed a substandard contract at a store in Liaoning province, the company presented the agreement as a template for contracts at stores throughout China and essentially refused to bargain any further. Among the contracts provisions were a pay increase that did not keep up with inflation and which will not come into effect until mid-2009. According to CLNT report, “Many individual store unions were not even given a chance to sign the template themselves. Indeed in Shenzhen City, for example, the Buji store has signed a collective contract on behalf of fifteen other outlets in surrounding areas.”
For its part, the ACFTU defends its approach to bargaining with Wal-Mart. According to Zhang Jianguo, the ACFTU’s director of collective bargaining, the new contracts require annual negotiations, wages above the minimum wage, and contain language on working hours, vacations, and social security and training.
But workers at Wal-Mart’s Bayi store wanted to negotiate a better agreement. A grassroots leader, Gao Haitao, who has become a hero to Wal-Mart workers throughout China for his combative defense of Wal-Mart workers’ interests, organized a fight back and made new demands in negotiations with management. Instead of negotiating, “Wal-Mart simply bypassed Gao by convening the staff and workers’ congress and finding a trade union chair from another store to sign the contract in his place!”, according to CLNT.
The ACFTU—which says it supports Gao—stood by while Wal-Mart refused to bargain leading the CLNT to conclude. “….the experience of Gao Haitao and the farcical top-down collective bargaining contract negotiation procedure shows that there is no genuine collective bargaining by workers’ representatives. When a Wal-Mart union did come out to negotiate a good contract, the ACFTU did not tender its support.” As a result of Wal-Mart’s actions Gao resigned from his job in frustration in September in a move that many see as a blow to authentic union development in China.
Here is a review of the fast moving and important developments in the run-up to the January 1, 2008 implementation of China’s new Labor Contract Law.
As we reported in our last post, Huawei—the Chinese owned telecommunication company with ties to many foreign firms—recently instituted a personnel program widely believed to be an effort to avoid a key provision in China new Labor Contract Law. That provision automatically grants open ended contracts to workers with either 10 years of service or two consecutive fixed term contracts. Open ended contracts allow workers much more job security—since there is no renewal date and workers can only be removed for just cause—and they provide for more severance pay should a layoff occur. Under Huawei’s program 7,000 long term workers were offered economic incentives to quit and be rehired on 1 to 3 year fixed term agreements. The layoff program was widely reported in the Chinese press and roundly criticized by labor rights advocates inside and outside the government.
Now, under intense pressure from the public and the All China Federation of Trade Unions (ACFTU), China’s sole legal union, Huawei has suspended the program.
There is a widespread sense that many firms are engaging in similar practices as they position themselves for life under the new law.
And it’s not just Chinese owned firms. Wal-Mart has also come under scrutiny in the Chinese media for some staff reductions. According to the independent on-line Asia Sentinel:
Dong Yu Guo, Public Relations director of Wal-Mart China, told the Jing Hua Times newspaper that the reshuffle of its employees is not aimed at the new labor contract law. Dong noted that Wal-Mart China has two business areas ‑ procurement for its worldwide operations and stores for the local market. Yu said the staff reduction is not going to affect its nearly 100 department stores and Sam’s Clubs, and that more hiring beyond the current 44,000 employees in the retail division is expected.
However, on October 22, the Global Procurement Center for Wal-Mart announced in an internal meeting that more than 100 employees had been laid off, including 40 in Shanghai and 60 in Shenzhen. A woman who works in the Shenzhen center, who asked not to be named, said she has been working there for four years and was laid off last month. She was told she would receive three months salary plus some additional compensation. She said she expected to be off for one to two months before returning to the company.”
Evidence is mounting that they are. In a recent post we reported that some firms in China are firing workers in the run-up to the implementation of China’s new labor contract law which grants more rights to workers. Now it appears the problems are widespread and that foreign corporations–including Walmart–may be complicit.
In the interim period between the law’s passage on June 29th, 2007 and its effective date on January 1, 2008 employers must bring personnel policies into compliance. Among its provisions, the new law requires a written contract for each employee; encourages open ended contracts rather than fixed term agreements; makes dismissals more difficult; automatically grants open-ended contracts to workers with 10 years of service; and requires that many company policies and procedures be negotiated with employee representatives.
Corporations are looking after their own interests: as 2008 nears, law firms and HR consultants are hard at work giving advice and holding seminars on how to best deal with the new law and HR staffs are drafting new contracts and policies. For workers it’s a different story. At a meeting here in the US last week a visiting Chinese scholar called the current situation “a-symmetrical”. Citing the example of one firm that has laid off workers to avoid provisions of the new law he asked, “Who is looking out for the interests of the employees?” Who indeed! Against the power of the employers, workers have been left to their own devices.