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.
The Evolution of the ACFTU
According to Chinese press reports, less than 50% of Fortune 500 companies currently recognize the ACFTU compared with 73% of all foreign companies. In June the ACFTU launched a major drive to unionize at least 80% of the 483 Fortune 500 companies that do business in China. Already non-union firms like IBM and Volvo have agreed to recognize the union. Some observers think the drive will eventually alter the industrial relations landscape in China.
Two recent reports—one in the New York Times and the other in the Christian Science Monitor—and a commentary in the China Labour Bulletin, describe the evolution of the ACFTU and its possible effects.
New York Times correspondent David Barboza writes,
Long considered weak and ineffective, the state-controlled union, which already claims to have 200 million members, now appears to be gaining standing with Communist Party leaders….
Union officials are aiming at the China operations of the 500 biggest global corporations, which would mean millions of new union members, saying they intend to combat worker exploitation.
"As the economy and society develops, China needs to improve workers' legal rights and interests, which is a demand of a civilized society," Wang Ying, an official at the All-China Federation of Trade Unions in Beijing, said by telephone this week…..
Some experts say big corporations operating here could easily find ways to thwart unions and render them powerless, but other experts say the unions could evolve into powerful forces within the companies. "After you set up a union, these groups have to know how to become representatives of the workers, and really collectively bargain," said Anita Chan, an authority on labor issues in China who is a visiting research fellow at the Australian National University in Canberra.”
Peter Ford, writing in the Christian Science Monitor, says:
Though there are signs that some [unions] might be ready to try the sort of collective bargaining that is standard in Western countries, "they will not necessarily be confrontational as in the West," predicts Constance Thomas, head of the China office of the United Nations International Labor Organization.
Chinese enterprise-level unions, which have traditionally taken their cue from the government-controlled ACFTU, are among the most pliable in the world…..
Wang [a senior ACFTU official] is keen to dispel foreign misunderstandings about unions in China and regrets that it has been hard to organize in foreign-owned companies "because they equate their unions at home with unions here and they are very scared of them.
"Our purpose is to guarantee a win-win situation for companies and workers," Wang adds. "We coordinate labor relations, we don't fight against management."
Still there is much apprehension, says Chris Liu, a labor expert here with the US law firm Akin Gump Strauss Hauer & Feld LLP. Many businesses think that if "management can make decisions unilaterally, that is better than having someone slow them down."…….
"Even window dressing can take on real meaning sometimes," says Prof. Unger [of the Australian National University]. "Who knows what China will be like in a decade? Things could change."
"Nobody knows for sure where this is going to go," says Mr. Leininger [a management consultant from Watson Wyatt.]. "How much more collective bargaining will there be? How much more independence from the government? The fear is that once you let a mild and harmless union in, what is going to happen next year or the year after?"
Most likely, believes Mr. Liu, Akin Gump's labor law expert, the unions "will act as a social force, pushing society towards more employee rights. It will be entirely different from a few years ago."
The Hong Kong based China Labour Bulletin, long a critic of the ACFTU wrote this about changes in Shenzhen:
We may have reached a crucial turning point in the history of China's trade union movement. For the first time since 1949, trade union officials are openly stating that the union should represent the workers and no one else, while new legislation in Shenzhen places collective bargaining – previously a no-go area – at the core of the union's work.
“The trade union is a matter for the workers themselves," Chen Weiguang, chairman of the Guangzhou Federation of Trade Unions told a conference on 15 July 2008, adding that the role of enterprise unions must change from "persuading the boss" to "mobilizing the workers."
Shenzhen's Implementing Regulations (Shishi Banfa) for the Trade Union Law, enacted on 1 August, further define the union's new role, creating a "responsible, empowered and battle-ready union" that can protect workers' rights, according to Zhang Youquan, head of the Shenzhen Federation's legal department. Zhang told a press conference to announce the new regulations that this was the first time the term "collective bargaining" (jiti tanpan), as opposed to the previously-used but much weaker concept of "collective consultations" (jiti xieshang) had been applied in China's local legislation….
The new regulations “….make it very clear that during a labour dispute the role of the trade union is to represent the workers in negotiations with management.
Of course, the regulations are far from perfect….However the Implementing Regulations– together with the Shenzhen Labour Relations Regulations, due to go into force at the end of September – have effectively opened the door for the Shenzhen Federation of Trade Unions to transform itself into a much more effective representative of workers' rights and interests.
[China Labour Bulletin’s] Han Dongfang said: "We hope the Shenzhen Federation of Trade Unions can take practical steps to create a successful bargaining model that others can follow, thereby making collective bargaining a key part of China's emerging civil society."
Han stressed that change will not happen overnight but, step by step, progress is already being made. And in retrospect, 2008 may well turn out to be one of the most important years in the history of China's trade union movement.”
The real question to be resolved in the coming years is what kind of Chinese labor movement will emerge? Chinese authorities worry about the effect on social stability of the strikes and protests that mark industrial relations in China. Will they allow workers to transform the ACFTU into a genuinely representative workers’ organization? Will they suppress reform attempts and simply use the union to co-opt and diffuse workers’ discontent as they seem to have done at Wal-Mart? Will entirely new worker organizations emerge?
Of course, no one knows what the future holds, especially in today’s chaotic global economy. But a classic dynamic seems to be at work in China, one that has marked labor movements in many other countries. Workers strike and protest, government responds with new laws and institutions to contain the protests, and workers take the new laws and either adapt existing institutions or create new ones to see that they are enforced. If that dynamic is in fact currently in motion then we can expect major changes and intensifying labor struggles in China in the coming years.
The New Labor Contract Law
China’s new labor contract law went into effect on January 1, 2008. The law was drafted in response to widespread protests about labor rights and working conditions and was the result of an unusually open public debate. Foreign and domestic corporations used the debate period to attempt to weaken the law. They partially succeeded, although on balance the law that emerged extended important employment rights to workers. But the attempt by corporations to weaken the new law did not end with its passage. Instead, it continued as the implementing rules and regulations were being drafted. After a long delay the “Regulation on the Implementation of the Employment Contract Law of the People’s Republic of China” is now public. We will post it when it becomes available in an appropriate form.
One provision in the Regulations, in particular, is important not only to Chinese workers but should also be of interest to European workers. EU courts have recently ruled that some work site regulations will be governed by regulations in an employing company’s country of origin rather than where the work is being performed. Lower wage less regulated eastern European companies can undercut standards in countries with higher wages and more labor regulations such as Denmark, Sweden, and Germany. A similar controversy exists in China where significant regional differences exist. But Article 14 in the Regulations concludes that where there is a conflict between standards at the “the place of performance” and standards at the “place of a company’s registration”, standards at “place of performance” should govern. Here is the section:
Where the place of performance of an employment contract is not the place of registration of the employer, such matters about the employee as the minimum wage level, labor protection, work conditions, prevention against occupational harm and the local average monthly wages in the last year shall be governed by the relevant provisions of the place of performance of the employment contract. If the relevant standards at the place of registration of the employer are higher than those at the place of performance of the employment contract and both the employer and the employee have agreed on the following relevant provisions of the place of registration of the employer, the relevant provisions of the place of registration of the employer shall apply.
The issue illustrates the extent to which workers across the industrialized world face similar challenges and argues for developing some common standards. And it also shows that labor movements in different countries/regions can learn from each other since, at least in this case, China has better regulations on the books than Europe.
After years of shunning the ACFTU, unions and labor organizations around the world are continuing efforts to establish relationships with the Chinese union. The ITUC plans a series of discussions in the coming months. And the Change to Win federation in the US is planning to sign a protocol with the ACFTU in the coming months which will outline the framework for future relations. In addition, the Asia Europe People’s Forum being held this week [October 13-17] near Beijing brings together 500 trade unionists and social movement activists from Europe and Asia for a forum on a broad range of issues. We think that in a period when Chinese industrial relations are undergoing rapid change, especially in this period of global economic crisis, establishing contacts on the ground in China is important for both Chinese workers and for workers around the world.