I often note the fact that the government, and related organisations, can play an active role in business in China. The latest example comes from the actions of the All China Federation of Trade Unions (ACFTU), which is reported (by Forbes) to be bullying foreign retailers into setting up union branches.
The ACFTU, the Communist Party’s mandated trade union monopoly, claimed last year to have 459,000 branches and 55.463 million members in privately-held commercial enterprises (as reported in China labour Bulletin). ACTU states that, in total, it has “membership of 134 million in more than 1.713 million primary trade union organizations”. On its website it notes:
“The major social functions of the Chinese trade unions are as follows: (1) to protect the legitimate interests and democratic rights of the workers and staff members, (2) to mobilize and organize the workers and staff members to take part in the construction and reform and accomplish the tasks in the economic and social development, (3) to represent and organize the workers and staff members to take part in the administration of the State and social affairs and to participate in the democratic management of enterprises, (4) to educate the workers and staff members to constantly improve their ideological and moral qualities and raise their scientific and cultural levels.”
However there are reports that the organisation has trouble getting branches set up in domestic private firms, let alone foreign ones, and that they lack strong support from central government because senior officials are trying to balance “workers’ rights” with economic development. There is also, as ever, the small issue of the management fee. Under the Trade Union Law this is set at 2 percent of wages.
The fees aside, given this rather surprising comment in an ACFTU resolution adopted in July 2005, it is unsurprising that there is some friction with foreign investors:
“Ideological and cultural interaction is growing, resulting in various sharp contradictions getting increasingly complicated. The attempts of the hostile forces to Westernize and split our country remain unchanged. We are still facing the pressure of economic and technological superiority from the developed countries.”
Wal-Mart (known for its non-union stance in the US) and other big retailers now face intervention to try to force them to set up official branches of the ACFTU. It is suggested that a change in the law is being considered, and that ACFTU wants all foriegn-invested enterprises to be forced to have unions.
Wal-Mart has been in discussions on the issue since at least 2000, but no action has yet been taken. The report says that while Wal-Mart agreed in principle, no formal request to set up union branches have been made by staff (as is required under the regulations). Wal-Mart’s negotiating strategy sounds familiar, and not unlike what is often produced by Chinese negotiators who play for time and agree in a half-hearted sort of way (”OK”, “I understand”, “interesting idea” etc.), but without any concrete action.
No doubt Wal-Mart also has friends in high places in local governments (who are keen for local employment and investment: 37,000 staff and 49 stores in 2005) and central government (who want to develop the consumer market, and who will have noticed that Wal-Mart is giving them billions in procurement spending a year: US$18 billion in 2004).
Nevertheless, this is an issue to watch, and joins the ranks of “malicious foreign investor” stories, together with the proposed anti-monopoly law, promotion of “national champions” in the accounting sector, and a crackdown on foreign lawyers in Shanghai. I suspect a bit of a PR battle may also ensue.
See news sources:
China to pursue Wal-Mart and other foreign firms over staff unions …
Forbes – USA
– BEIJING (XFN-ASIA) – Lawmakers in China are planning to take action against US retailing giant Wal-Mart and other foreign firms to force them to allow their …
Official trade union gets the cold shoulder from private firms
China Labour Bulletin