Monday, 19 January 2009

China's labour laws under pressure

[Contribution by Fons Tuinstra] - As worries in China grow about a limited economic growth, measures taken in the past by the central government are reversed because they contributed to the cooling down of this fast-burning economy. Real estate was the clearest case, where the central government has been trying to slow down the industry, an effort that only became successful in 2008, when also the financial crisis hit global economies. Those measures have been largely been reversed.
Rising labour costs, triggered off by a combination of new labour laws and shortage of labour, caused the closure of many export-oriented factories in Southern China. Declining of the export started as early as the beginning of 2008, but when the global crisis kicked in, panic emerged in different parts of the Chinese government.
Opinions differ greatly on what the decline in export industries would mean for the employment rate in China and for the emergence of social unrest. Some seasoned experts like UBS's chief economist Wang Tao point out that China has been successfully dealing with tougher employment crises in the past. Western media have a long standing tradition of predicting China's collapse, predictions that have systematically failed. But others like assistant-professor Victor Shih dispute her assessment, both the expected number of unemployed and the possible effects.
But obviously, Chinese government departments are not waiting to see which of the positions in this China-debate is the correct one.
Reversing the labour laws would be unthinkable, but clear signals indicate that on a local level government agencies have been telling employers they do not have to worry about those laws anymore.
The China Law Blog was the first to report this development. Those reports - of course not confirmed by the government - have been followed by more reports by journalist Peter Ford of the CSM in another weblog, Danwei:
“I have heard, though not been able to confirm, that provincial governments have been quietly telling employers for several months that if they do not abide by the provisions of the Labour Contract Law they need not worry, and this seems perfectly plausible. A lot of employers have been complaining for a year or so that the labour law, along with the rising value of the RMB until last July, was a major factor in making them uncompetitive. That may be true of the low margin, low quality producers, and while the government clearly did not mind driving them out of business last year (so as to move China's economy up the value chain) such firms do at least offer jobs while they are still in business, and jobs are going to be in short supply this year”.
Again: official confirmation of this policy change is lacking and the Chinese trade union ACFTU has not taken a position here and it is very unlikely it will. We are ahead of a very interesting 2009.

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