Why It Matters : China: Parliament Hears Corporate Pain

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China: Parliament Hears Corporate Pain

Newsweek

By Mary Hennock

China's parliament is frequently dismissed as a rubber stamp body whose delegates agree with every government measure and avoid controversy. This year's session has seen a new trend at work. The two-week gathering of the National People's Congress has seen protesters lobbying hard against a key government policy. No, not Tibet independence activists, angry farmers, or unemployed workers, but company bosses. Many delegates are entrepreneurs, and they're objecting to China's new labor contract law, introduced just over two months ago. "The law is overly-protective of workers' rights," delegate Zong Qinghou told Reuters, adding, "It isn't reasonable." Zong is the chairman of Wahaha Group, China's biggest private soft drinks company.

The new legislation compels bosses to provide written contracts and contribute to health insurance and pensions schemes. What's more, they can no longer dismiss staff at whim. Some bosses are painting these modest steps towards labor rights as a return to the jobs-for-life policies of the Mao-era. It's a line that has forced government officials like NPC spokesman Jiang Enzhu to issue denials, insisting to local media that the new law is "not an iron bowl or a life-long contract".

There's no doubt that the law is causing corporate pain as wage bills rise. Of 91 small firms surveyed by CLSA Asia Pacific in February, the majority said the law had added at least 10% to their labor costs. The manager of Zhejiang-based shoemaker Hassan Manufacturer Co (who is not a delegate) told NEWSWEEK on the phone that his company has suffered a 20% cost increase that "has made us feel more disadvantaged in competition".

Curbs on flexible hiring and firing are controversial, particularly with small firms who often expand and contract their workforces to suit their order books. Doubts about the law appear to have made companies more cautious about hiring than at any time in three years: that's the finding of Manpower Inc's latest quarterly employment outlook report, which polled 4,055 employers in seven cities across China.

What's more, added protection means "workers are no longer acting as obedient as they were before", says the chairman of Jiangsu Huarui, a garment-maker with 8,000 staff. One reason is better protection from dismissal; another is that companies can no longer ask new hires to pay a fee that's forfeited if they leave.

China's second richest woman, Zhang Yin, has been one of the labour contract law's staunchest critics. Zhang, who's $10 billion fortune comes from her Hong Kong-listed paper-making empire, is a member of the government's highest consultative body - Chinese People's Political Consultative Conference (CPPCC) that meets alongside the parliamentary session. Critics of a new "iron rice bowl" are angry about clauses that entitle workers to open-ended staff contracts after 10-years' service, or after two short-term contracts. Ms Zhang suggested this should not apply to labour intensive industries like her own.

Several delegates say they support fairer labor laws, but want key parts of this one changed. According to He Yongzhi, CEO of a chain of hot-pot restaurants, "the intention of the law is good" but it is a "vague legal blueprint" that needs guidelines, some of which should "better balance" shopfloor and boardroom needs. Like her, Wahaha's Zong is hoping amendments will be introduced when implementation guidelines are drawn up. "I think there is room for some revisions", he said.

Corporate protesters will not be able to stampede down this law. It's a vital part of the government's policy of creating a more harmonious, less fractured society. Senior government officials have dismissed calls for the new law to be scrapped: "The issue now is not revision, but full enforcement," according to China's Vice-Minister of Labor and Social Security. However, the ruckus is an instructive snapshot of the new China. While grassroots activists still risk jail for demanding workers' rights, the National People's Congress is a lobbying channel for entrepreneurs.

Asia, Business and Economics, Politics

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Posted By: beijingbro (March 21, 2008 at 1:57 PM)

you guys are really missing the point. i am an american businessman who has lived in china for 12 years now and i have two factories here. i also have an office in china. this law is really a step back towards communism. every time we hire someone now we must have a signed contract with that person. if the term is one year for the first contract then we must think long and hard about keeping that person pretty much forever because if we sign a second contract with them we pretty much own them until THEY decide to quit. we have no rights to fire these "open ended" workers. the bar for firing someone is way too high and heavily favors the worker. all conditions for terminating someone must be written clearly in a company handbook and when you want to fire someone you need to convene a special labor board to review the termination. for my office in america i have a guy now who is making everyone mad for his lazy behavior. we will be letting him go at the end of the month. that simple. with this new china labor law the employers don't dare fire someone. all we can do is wait for their first contract to finish and then we simply don't give them a second one. if we give them a second one then there is no easy way to let them go after that. this law really sucks.

and trust me,, workers in my factory have plenty right to protest. they are not prisoners. this new labor law has given the workers the upper hand on just about every level. there is no way possible for this law to continue as is. this open ended contract part of the law has to go. i don't mind waiting until the end of a one year contract to let someone go,, but for the workers to have the right to stay until they decide they want to quit is ALL iron rice bowl.

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Posted By: Christall (March 20, 2008 at 11:27 AM)

AMERICAN WRITERS HAVE THE RIGHT TO PROTEST FOR PAY RISE, BUT NO CHINESE WORKERS ARE ALLOWED TO CLAIM THEIR REASONABLE RIGHT.

CORPORATE OWNERS CAN COMPLAIN TO POLITICAL OFFICIALS IN CHINA. BUT ALL THEY CARE ABOUT IS JUST THE CHEAPEST LABOR, LONGEST WORKING HOURS POSSIBLE AND MAXIMAM PROFITS, WITH THEIR ETHICS AND SOCIAL RESPONSIBLITIES BEEN FORSAKED.

I REALLY HATE COMMUNIST PARTY AND CRUEL BOSSES IN CHINA AS WELL.

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Posted By: Christall (March 20, 2008 at 11:12 AM)

I TRULY RECOGNIZE Corporate's pain. BUT WITHIN A COUNTRY WHERE ANY FORMS OF LABOR PROTESTS ARE NOT ALLOWED, THE THORNY QUESTION REMAINS WHEN IT COMES TO LABOR SECURITY, UNDERPAY AND HUGE EXTRA WORK HOURS WITH LITTLE PAY RISE.

WITHIN A COUNTRY WHERE STABILITY AND QUIXOTIC "HARMONY" IS HELD HIGH, EVERYONE HAS SOMETHING TO COMPLAIN BUT NOT EVERYONE HAS BEEN GRANTED TO COMPLAIN IN MEDIA.

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