Aug. 5 (Bloomberg) -- The name gives no hint of potential changes for workers’ rights. Yet the proposed Regulations on the Democratic Management of Enterprises, under debate in the Guangdong Provincial People’s Congress, offers Chinese labor a new bargaining tool: an officially sanctioned right to strike.
“This has been a no-go area in China for decades,” says Robin Munro, deputy director at the Hong Kong-based China Labour Bulletin. “This is the first time ever Chinese authorities have said it is okay to strike.”
The draft law could take effect as early as this fall in Guangdong, the industrialized coastal province where Honda Motor Co. workers in June illegally and successfully struck for higher wages, Bloomberg BusinessWeek reports in its Aug. 9 issue.
The proposed law is seen as a trial balloon before a possible countrywide rollout. The rules: If one-fifth or more of a company’s staff ask for collective bargaining, then management must discuss workers’ grievances. Once workers demand negotiations, the union must elect worker representatives. Until now, union representatives came from management ranks.
The next section of the proposed law ventures into more radical territory. For six decades, allowing workers to picket and disrupt production has been officially illegal and subject to punishment. Under the Guangdong proposal, as long as workers first try negotiating and don’t engage in violence, they are allowed to strike.
Attempt to Regulate
Though the draft could still get changed, the fact that officials are even considering legalizing strikes signals a sea change. The party’s moves are an attempt to recognize -- and regulate -- what is already happening.
“Every month there are hundreds of strikes,” says Chang Kai, a labor-relations professor at Renmin University of China in Beijing, who advised the Honda workers. “What the government is concerned about is whether it can control these strikes or not.”
Suppliers to Japanese automakers including Tokyo-based Honda, Toyota Motor Corp. and Nissan Motor Co. have suffered at least 10 strikes China since the middle of May. The walkouts have disrupted the companies’ local output and forced them to raise wages.
Formalizing workers’ rights could also advance China’s goal of rebalancing the economy, along with the increased pay packets boosted in part by provinces including Guangdong raising minimum wages. China’s past reliance on exports as a main driver of economic growth proved a vulnerability during the global financial crisis, which prompted the deepest contraction in world trade since World War II.
“There is a new emphasis on how to reduce the wage gap and get consumers to spend more,” says Chang-Hee Lee, a labor expert at the International Labour Organization’s Beijing office. “This is not very easy to accomplish unless workers have more bargaining power.”
Prospects for higher labor costs at plants in Guangdong’s Pearl River Delta have led to increased automation of assembly lines as employers seek to maintain margins.
Foxconn Technology Group, Nissan Motor’s Chinese venture and VTech Holdings Ltd. said earlier this year they are investing in factory equipment to reduce their reliance on labor. Wages in the region called the world’s factory floor increased 17 percent in the past six months, according to a survey by the government-backed Hong Kong Trade Development Council.
Labor costs will probably bloat to 30 percent of gross domestic product in the next decade from 15 percent now, Morgan Stanley estimated in June. Higher wages in urban areas may cost companies about $1.5 trillion by 2015, according to Credit Suisse Group AG.
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