A GLS Report Back: The Crisis in Chinese Industrial Relations

Take a walk through Beijing or Shanghai or any big Chinese city and you will experience, in a very tactile way, China’s economic miracle. The forest of construction cranes, the neighborhoods being torn down and rebuilt, the shops bursting with consumer goods, the traffic clogged streets, and a prosperous looking citizenry all speak to the country’s remarkable achievements. China’s 20 year run of nearly double digit growth has transformed an economic basket case into a world economic power.

Look a little closer and you can see another side to China’s spectacular growth. The temporary dormitories on building sites for migrant construction workers, the barracks-like housing in the factory districts, the train stations full of workers with bindles or cheap suitcases coming from or going to their hometowns in the provinces. These images graphically portray the turmoil of life for large segments of the Chinese working class and they beg the big question yet to be answered: what role will workers have in the new economic order?

In this and a following post we offer some observations gleaned from recent conversations by GLS staff with dozens of knowledgeable observers—including workers—in China, in the US, and in Europe about what is currently happening inside and outside of China in the battle for economic fairness and labor rights and why it matters for workers everywhere.

A model in trouble?

The Chinese economic miracle has been driven by a low wage export oriented development model based on a partnership between the Chinese state, which provides a wide open business environment and cheap labor, and global capital which provides know-how and access to global markets. The model reflects a strong current of neo-liberal thought among China’s political and economic elite, many of whom have been educated in the United States. High growth rates over the last few decades and a growing middle class lend a great deal of credibility to this model.

But a crisis in the Chinese industrial relations system could challenge the current neo-liberal model. The roots of the crisis are in the very economic reforms that were introduced in the 1980s when China largely abandoned the command and control economy for a market based system and opened up to foreign investment.

A new ideology of “socialism with Chinese characteristics”—which includes “harmonious relations” between workers and employers—was promoted to square the new capitalist economy with the founding myths of the People’s Republic.  This language of “harmony” is still the official line of the Party/State. But a growing wealth gap and a major wave of strikes and protests are a constant reminder that the harmonious society is an ideal yet to be attained and indeed one that may be slipping further away every day threatening the social fabric.

Indeed, according to many Chinese observers, the system lacks the balance necessary for “harmonious relations”. The economic reforms granted enormous power to capital, but left workers with virtually no new tools to develop counter-veiling powers. On the contrary, the old “iron rice bowl” that guaranteed a basic living was discarded leaving urban workers and those in the countryside to fend for themselves with no social safety net and lax enforcement of inadequate labor laws. The All China Federation of Trade Unions (ACFTU) charged with representing workers and providing some balance in the industrial relations system is almost universally regarded as ineffective. Attempts to establish new unions have been repressed.

But today, according many knowledgeable observers in China, there is a growing awareness that the playing field needs to be leveled. Workers need new laws and a reformed union to represent their interests, as distinct from those of business—and perhaps even the Party/State. And there is surprisingly open and vigorous debate—within ever shifting bounds to be sure—about exactly what reforms are needed to accomplish this.

The strike capital of the world

Chinese workers make their voices heard. In the absence of effective unions, workers have turned to direct action to address their grievances. In one of the great ironies of history, China—a nation that does not recognize the right to strike except in limited circumstances—is the strike capital of the world. There were around 94,000 “major public order disturbances” in 2006, according to official statistics—a significant number of which were strikes or labor protests. But many of the experts we interviewed think this figure underestimates the actual number of strikes. In addition, despite major obstacles to access, workers flood the courts and administrative agencies with hundreds of thousands of claims against unjust firings, unpaid wages, or other labor law violations.

The strikes and protests are not intended as attacks on the prevailing order, but should be viewed as a demand for fairness, for a piece of the economic pie, and for adherence to the rule of law in labor relations. Still, the very scale of the current strike wave is a graphic measure of the turmoil in China’s labor markets and has authorities worried about social stability.

Controversy and constraints

There is debate at the top in China over what to do now. One the one hand, authorities generally ignore local strikes and protests sensing the need for some kind of mechanism to let off steam; on the other hand, they act harshly to break those strikes that move beyond the local and “threaten public order” or which could lead to the emergence of organizational rivals to the state sanctioned union.  Similarly, the passage of the new Labor Contract Law—even in the face of stiff foreign and domestic corporate opposition—represents a significant movement in the direction of more labor rights, while on-going attempts by businesses to avoid the law, and sluggishness by the state in fully implementing it, represents movement to slow or reverse this trend.

And today, with China firmly anchored in the global economy, economic planners face the same litany of issues and constraints familiar to people throughout the world. Indeed, there is widespread worry about whether increased labor rights will undermine global competitiveness, lead to inflation, increase unemployment, or drive jobs to other countries.

In addition, China’s leaders face a problem common to authoritarian regimes everywhere: how to introduce necessary changes while holding on to the reins of power. They wonder, according to many with whom we spoke, whether increased labor rights and more democratic worker organizations will undermine the prevailing order?

The state of the union

The All China Federation of Trade Unions (ACFTU) is the sole legal union China. It is part of the Party/State apparatus assigned by China’s Trade Union Law to both support economic development and the interests of the State and to represent workers interests in the workplace—tasks which are often at loggerheads. But since it is unlikely that Party/State will permit other unions to form in the foreseeable future, many see reform of the ACFTU as the only realistic route to establishing an effective labor movement.

Reform will not be easy. In conversations with people from all walks of life in China, we rarely heard any positive things about the ACFTU. At the workplace level, the union is generally considered to be employer dominated since most union officials are also managers, often HR managers.  At the regional level, officials are part of the Party/State apparatus. They owe allegiance to the local government and party organizations that pay union officials their salaries and evaluate their performance. As a result regional officials are often more committed to meeting production targets set by local planners than to promoting worker interests.

Still, some observers are optimistic about the future. They argue that in the next five years new laws will be enacted and new reforms introduced which will bar managers from holding union office, replace old line union bureaucrats with more aggressive officials, and extend collective bargaining rights.

In fact, these observers point out, there are already reformers in the ACFTU. Some are driven by traditional trade union impulses to improve workers lives; some want to solidify the standing of the Communist Party with workers; and some simply worry about preserving social stability—but they all agree on the pressing need for more effective worker representation.

The ACFTU’s role in enacting the new Labor Contract Law and its current efforts to insure implementation are signs that the reformers are having an effect.

Other observers are more pessimistic. They argue that the union’s core mission is more about worker control than it is about worker advocacy.  The ACFTU is a deeply entrenched and insular bureaucracy unlikely to change in the near future. Even the reformers currently in the ACFTU, they argue, back down when the bureaucratic infighting gets tough.

But both the optimists and pessimists with whom we talked agreed that if the ACFTU does change it will be as a result of pressure from above from a nervous Communist Party which is obsessively worried about preserving social stability and below from worker strikes and protests. 

Seen from this angle, the growing grass roots activity is an extremely important—but often underrated—force for change. While it is true that the strikes and protests are focused on bread and butter grievances, rather than on broader social/economic/legal issues, they are an important barometer of social discontent.  As one prominent lawyer told us: “strikes are essential for change since it will take both bottom up and top pressure” to reform China’s industrial relations system.  Another observer told us, “the ACFTU is the just the meat in the sandwich” between the workers and the Party.  And a third said, “the Party and the State must remain neutral [between labor and capital] since it is governing in a market economy. It therefore needs [a reformed] ACFTU to achieve social harmony.”

Not the only game in town

The ACFTU is not the only institutional actor charged with representing workers’ interests in China’s industrial relations system. One Chinese scholar estimates that there are 71 labor oriented NGOs currently active in all of China. Some are officially registered and some are not. But they may be beginning to get a foothold in a country with only a rudimentary civil society. These organizations provide a range of training and services for workers and some represent workers in the courts and administrative agencies and in the government. Today, these organizations must tread lightly to avoid legal and institutional conflicts, but a number of NGO staff and other knowledgeable observers we interviewed thought that in 10 years they could be a significant voice for workers.

Some long established organizations like the Chinese Women’s Federation—a quasi-independent group with close ties to the Communist Party—have also begun to intervene in the labor market. For instance, the Women’s Federation has reportedly negotiated pregnancy and child leave provisions with some employers. In addition, at the urging of rural women, who stay behind while their husbands work in the city, they have negotiated with some employers to establish a system to insure that migrant’s remittances get back to wives and children in the countryside.

But conventional enterprise based collective bargaining is not the only way forward for workers in China. China’s labor contract legal system mandates that each worker have a written contract which is legally enforceable in the courts and administrative agencies. Bringing a case is a complex and—for workers— costly process. Still, in 2006 some 400,000 workers managed to overcome the obstacles and file complaints. A new grassroots legal services sectors has emerged to represent workers in administrative hearings. These organizations—a mix of for-profit and not-for-profit groups are utilizing existing law and pushing the boundaries of labor rights. The implementation of the new labor contract law, and another new law making access to the courts easier, has led to even more complaints being filed. This increased legal activity could contribute to growing pressure for the imposition of the rule of law in industrial relations.

Change is coming

Whatever happens in China will not happen in isolation. Not only does China play a huge role in the global economy, the global economy plays a huge role in China. This is an opening for non-Chinese worker organizations and their allies to play a supporting role in the fight for labor rights in China and to draw Chinese workers and labor rights activist into the global fight labor rights.

Far from being a settled institutional environment China is filled with contradictions and problems the solution to which is impossible to predict. But whatever the outcome it won’t be the status quo and it will affect workers everywhere.

TC

In our next post we will look at the growing engagement of non-Chinese unions and worker organizations with China and why it is important for the future of labor rights in China and the world.

Comments

[Greg King]

I think Chinese workers, through their industrial actions, will worry the Chinese Party-State enough about social stability that it will allow the reforming of ACFTU and its transformation into more of a labor union, which will also continue from "below" -- from the actions of the workers themselves, who are members of ACFTu whether they want to be or not. They will demand and eventually elect new leadership, whom they are choosing informally right now anyway.

[Fons Tuinstra]

A very nice overview of the battlefield indeed, but I'm missing one key observation I see as instrumental to explain the existence (and sometimes success) of policy changes, more strikes, the actions by the ACFTU or other organizations:
China is heading for a serious shortage of labor, offering at least part of the labor force something they did not have in the past: a choice. A choice to choose between the better and the worse employers; sometimes the choice to stay at home in stead of accepting poor jobs in China's industrial centers.
That means that the policy change you describe are a reaction on changing economic realities and might make them for that reason also more permanent than we sometimes might think.