[Marxism] New Law Gives Chinese Workers Power

[Louis Proyect <lnp3@xxxxxxxxx>]

New Law Gives Chinese Workers Power, Gives Businesses Nightmares

By Ariana Eunjung Cha
Washington Post Foreign Service
Monday, April 14, 2008; A01

DONGGUAN, China -- Wei Hoqiang used to work in a toy factory that forced 
him to sign a contract it did not let him read. It paid him 30 cents an 
hour, made him work 100 days without a day off, and kept him in a room 
that was ice cold in winter and suffocating in summer. He said he knew 
he was being taken advantage of, but he was so afraid of his boss's ire 
that he stayed for two years.

Wei, 31, said he knew he could do better and in early March walked out 
on his employer. He immediately got three job offers.

Armed with a landmark new labor contract law that went into effect Jan. 
1, employees like Wei are turning the tables on employers in China.

The law -- designed to combat forced labor, withholding of pay, 
unwarranted dismissals and other abuses -- represents a major victory 
for Chinese workers who for decades have complained of companies that 
would stop at nothing to wring out profits. It has prompted legions of 
workers in recent months to become bolder about quitting and about 
staging strikes to demand improvements in work conditions and wages.

For companies already struggling with inflation, high energy costs, the 
falling dollar and an environmental crackdown, however, the new law has 
been devastating.

It has added to the rising cost of doing business in China -- 
contributing to an exodus of what is estimated to be thousands of 
factories from places like the Pearl River Delta in southern China, for 
20 years synonymous with cheap and abundant labor and the engine behind 
China's rapid growth.

The shift in power has far-reaching consequences for the Chinese 
economy, raising questions about whether this is the beginning of the 
end of China's role as the world's factory floor.

"You shouldn't see China anymore as a sweatshop," said Ronald R. 
Haddock, a vice president at Booz Allen Hamilton in Shanghai. "The guys 
and gals with spreadsheets on where the next incremental investments 
should go are saying there are lower-cost destinations to set up 
manufacturing."

Factory owners critical of the law argue that China is going backward 
and is bringing back the "iron rice bowl" -- a nickname for the 
Communist system in which jobs were assigned and guaranteed for life by 
the government. "The new labor law is to protect the lazy," said Huang 
Chuangji, the deputy director of the Dongguan Private Enterprises 
Association.

The new law, which company owners and industry associations said can add 
10 to 25 percent to manufacturing budgets, has been so painful that some 
foreign factory owners have snuck away in the middle of the night to 
avoid confronting -- and paying -- angry workers.

While official government figures show that only a small number of 
ventures have closed so far, surveys by industry associations run by 
foreign investors indicate that broad swaths of factories may be gone by 
year's end.

A survey released in March by the American Chamber of Commerce in 
Shanghai and Booz Allen Hamilton found that a fifth of companies with 
foreign ownership or investment have concrete plans to move some or all 
operations out of China. In the Pearl River Delta, which produces about 
a third of the country's exports, an estimated 10,000 companies are 
planning to scale back or shut down, according to a survey by the 
Federation of Hong Kong Industries.

Not all of these companies are leaving the country, however. Many say 
they are moving to less developed parts of China that offer tax breaks 
and other incentives to offset the increasing costs associated with the 
new labor law.

The law requires firms to provide contracts that include pension and 
insurance contributions. It also requires companies to pay workers who 
are fired a month's wages for every year worked.

Another costly component of the new law regards overtime. For extra 
hours on a weekday, companies need to pay workers 1.5 times the normal 
rate. On weekends, it's double time. On official holidays, it's triple time.

"Margins are small in the Pearl River Delta," said Shen Minggao, a 
Citigroup economist in Beijing. "If they have to raise wages, their 
profits would be squeezed and they would have to go out of business."

Stanley Lau, deputy chairman of the Federation of Hong Kong Industries, 
said the law requires too much of companies too soon. "With the new 
labor-contract law, all the principals of the factories will have big 
problems. Their burden is getting heavier and heavier," he said.

Nicholas Kwan, regional head of research for Standard Chartered Asia, is 
less concerned. He said some companies are already finding ways to get 
around the new law. "They will lay off the existing workers and rehire 
afterwards. Or employ someone else with less pension burden. There are a 
lot of techniques that companies are using."

Dongguan, one of six major cities in the Pearl River Delta, is known for 
its ubiquitous shoe, toy and paper-product factories filled with migrant 
laborers. Disney, Nike, Mattel, Wal-Mart and a slew of other American 
companies have made products here.

To the more than 200 million Chinese workers who have left the 
countryside to find jobs in factories or at construction sites, Dongguan 
is known for its two faces: It is revered as a place where fortunes can 
be made, but it has a reputation tainted by several high-profile cases 
in which factories were accused of employing child labor, cheating 
workers out of wages and bullying employees who tried to quit.

Until recently, however, factory owners and industry association 
representatives said labor relations were relatively peaceful.

"There used to be a harmonious and stable relationship between employers 
and employees, but now we are all at a loss," said Zhao Weinan, 
secretary general of the Dongguan Taiwan Business Association. Zhao 
blamed the new labor law for recent incidents of civil unrest, saying 
that the law has led to some misunderstandings.

Zhu Weiping, a professor of industrial economics at Jinan University, 
said there was a lot of discussion within the Chinese government about 
"whether or not it's the right time" for the labor law.

"For the long term, it's a must-happen road. The state cannot let the 
region's labor remain concentrated in manufacturing forever," Zhu said. 
But in the short term, officials recognized, the law could lead to 
clashes between workers and employers.

For example, an Aigo electronics factory said it would increase 
employees' mandatory contribution for the cafeteria, by about 100 yuan, 
or about $14, a month, while keeping their salaries the same, leading 
workers to strike. For several hours on the morning of Nov. 27, 
thousands of workers who walked off their jobs clashed with riot police. 
The employees returned to work after their managers agreed not to raise 
the cafeteria fee.

Dongguan officials emphasize that though some factories are closing, 
more continue to move in, and they say overall investment to the city 
will increase this year in dollar terms. They say that despite some 
initial confusion, many company owners are realizing that the new law is 
in their best interest.

"Most people consider the new labor law a law that protects only the 
interest of employees, but not protecting enough the interest of 
enterprise investors. This is in fact a misunderstanding. The new 
labor-law articles not only protect the interest and rights of 
employees, but also regulate their responsibilities," said Cai Kang, 
vice director of the Dongguan Bureau of Foreign Trade and Economic 
Cooperation.

Lately, the factory entrances of some of the larger companies in 
Dongguan are full of what look like vast unemployment lines. But the 
nature of the job-seeking crowds is deceptive. Nearly everyone is 
employed, just looking to upgrade his or her job.

Wei, who quit his job in early March, was in front of a computer company 
with more than 200 other workers on a recent workday, waiting for an 
interview. He said he was attracted to the new company because it offers 
a base salary equivalent to about $140 a month, 25 percent more than he 
made at his last job, including overtime. "I used to work at a factory 
that told me lies," he said. "I don't need to do that anymore."

A few blocks down, another crowd was waiting in front of a shoe factory.

Liu Qin was laid off from her job when the shoe factory she was working 
for went out of business. It didn't pay her for months of work. She said 
she thinks it may be the best thing that ever happened to her.

"This time I want to find a new company with a good environment," said 
Liu, 34, who has spent more than a decade working in the Pearl River 
Delta's factories. "Now it's not the factories choosing me. It's me 
choosing the factory."

Wang Erhao, 22, who is leaving his job at a small shoe factory to seek 
work at a larger one with better benefits, said he wasn't the least bit 
worried about finding a new job. It's an employee's market, he said. 
"You quit a job one day, and the same day you can have new work."

Researchers Crissie Ding and Wu Meng contributed to this report.

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