Global monitor: China puts pressure on business to allow unions

Published on Saturday 13 September 2008 13:59

SOME of the world's biggest corporations are facing intense pressure from China to allow the state-approved union to form in their Chinese plants and offices. But many companies fear admitting the unions will give their Chinese employees the power to slow or disrupt their operations and will significantly increase the cost of doing business here.

The companies, many of which moved to China to lower manufacturing costs and to avoid unions in their home countries, are now being asked to meet a September 30 deadline to make their offices and factories union shops. Companies that do not comply risk being publicly vilified or blacklisted by the union, and perhaps penalised by the government, since businesses are required by law to allow unions to form.

Lawyers and analysts say that demands of the All China Federation of Trade Unions, the only union the Communist Party allows, could sharply alter business practices of foreign companies in China, including giving lower-level workers the power to bargain over anything from pay rises to whether a Chinese headquarters should be moved elsewhere in the country.

"This will dramatically change the landscape here," said Andreas Lauffs, a lawyer at Baker & McKenzie's Shanghai office who is an authority on China's labour laws.

The union push is coming at a time when global corporations are already facing rising labour and commodity costs in China, which is struggling to contain inflation. Hundreds of big corporations, such as Wal-Mart, McDonald's and Yum Brands, which operates KFC and Pizza Hut, have agreed to set up unions in their Chinese operations. But union officials say that some non-manufacturing companies are resisting.

Union officials say they are focusing on global companies, but Chinese companies make up the bulk of the manufacturing workforce and they are also expected to face audits and pressure to unionise.

For years, Western labour activists have taken aim at China's manufacturing industry, exposing hundreds of exploitive factories that employ child labour, force workers to toil for as many as 100 hours a week without overtime pay or benefits, and violate labour and safety rules.

Some of the world's biggest brand names, such as Wal-Mart, Disney and Adidas, have been singled out for using contractors that violate China's labour laws. The companies have, in many cases, investigated the claims and fired contractors.

The new government pressure seems to be part of a sweeping effort aimed at addressing some of the ugly consequences of China's dynamic economic growth, such as rampant pollution, a growing income gap and widespread labour abuse. Up until now, though, the state-controlled union has done little to agitate on behalf of workers, legal experts say, and has often done more to control workers than to benefit them.

But the union, which says it already has 200 million members, is promising to truly represent workers, and is gaining standing with Communist Party leaders.

In 2004, the National People's Congress, the state legislative body, carried out inspections of companies operating in China to ensure that they were following labour laws and had dues-paying union members. Union officials, using increasingly bold tactics, have zeroed in on the China operations of the 500 biggest global corporations, which would mean millions of new union members. The union says it intends to combat worker exploitation.

Forming unions could be costly, lawyers and labour experts say, because a union could fight for higher wages and benefits and because companies are required to pay 2% payroll dues. The dues could amount to millions of dollars in additional costs for big companies.