Laws (and Costs) for Labour, the Environment (and Harmony)

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China Law Blog is on top of things as usual. It points to useful updates on the very topical labour and environmental laws.

Environmental Law
The environment in China has become a key policy focus, and presents real challenges. China Daily reports on legal developments:

    “In order to protect its environment and support economic development, China passed its first draft of Environmental Protection Law in 1979, as the fundamental legislation for the country’s green drive. The official version of the law was published 10 years later.

    It is the cardinal law for environmental protection in China. The law established the basic principle for coordinated development between economic development, social progress and environmental protection, and defined the rights and duties of governments at all levels, all units and individuals with regards to environmental protection.

    …To implement the State’s environmental protection laws and regulations, people’s congresses and governments at local levels, have enacted and promulgated more than 600 local laws on environmental protection according to the conditions in their own areas.

    …In 2005, the country adopted a renewable energy law, amended the energy conservation law, and water pollution control and prevention law.

    In 2006, when the country’s economic development entered its 11th Five-Year (2006-10) Plan, China mapped out an ambitious blueprint on energy conservation and environmental protection.

    The country plans to cut energy consumption per unit of gross domestic products (GDP) by 20 percent, and reduce sulphur dioxide emissions and chemical oxygen demands by 10 percent from 2006 to 2010.”

A list of environmental laws can be seen in the article, via the link below. As ever, it is enforcement that holds the key…at least, as reported recently, The State Environmental Protection Agency (SEPA) is being upgraded into a Ministry – the Ministry of Environmental Protection. Hopefully they will also get more (much needed) resources.

Labour Law
The launch of the labour law was noted in an earlier post. An article from the Washington Post gives an update on its impact:

    “Armed with a landmark new labor contract law that went into effect Jan. 1, employees…are turning the tables on employers in China.

    The law — designed to combat forced labor, withholding of pay, unwarranted dismissals and other abuses — represents a major victory for Chinese workers who for decades have complained of companies that would stop at nothing to wring out profits. It has prompted legions of workers in recent months to become bolder about quitting and about staging strikes to demand improvements in work conditions and wages.

    For companies already struggling with inflation, high energy costs, the falling dollar and an environmental crackdown, however, the new law has been devastating.

    It has added to the rising cost of doing business in China — contributing to an exodus of what is estimated to be thousands of factories from places like the Pearl River Delta in southern China, for 20 years synonymous with cheap and abundant labor and the engine behind China’s rapid growth.

    …The new law, which company owners and industry associations said can add 10 to 25 percent to manufacturing budgets, has been so painful that some foreign factory owners have snuck away in the middle of the night to avoid confronting — and paying — angry workers.

    …A survey released in March by the American Chamber of Commerce in Shanghai and Booz Allen Hamilton found that a fifth of companies with foreign ownership or investment have concrete plans to move some or all operations out of China. In the Pearl River Delta, which produces about a third of the country’s exports, an estimated 10,000 companies are planning to scale back or shut down, according to a survey by the Federation of Hong Kong Industries.

    Not all of these companies are leaving the country, however. Many say they are moving to less developed parts of China that offer tax breaks and other incentives to offset the increasing costs associated with the new labor law.

    The law requires firms to provide contracts that include pension and insurance contributions. It also requires companies to pay workers who are fired a month’s wages for every year worked.

    Another costly component of the new law regards overtime. For extra hours on a weekday, companies need to pay workers 1.5 times the normal rate. On weekends, it’s double time. On official holidays, it’s triple time.”

Next up is likely to be the food safety law, a draft of which has already been produced.

The introduction of new laws and regulations such as these will raise the costs of doing business, and of the “China Price”. Of course there are good reasons for this, and it is all part of China’s grand development plan (and of the drive towards a “harmonious society”). But businesses that rely on low cost production will increasingly have to look to new areas, such as those in central and western China (or even further afield), where costs can be significantly lower than in the developed southern and eastern provinces.

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One Response to “Laws (and Costs) for Labour, the Environment (and Harmony)”

  1. Archive » Google, Rio Tinto & The China Business Environment| China Business Blog Says:

    […] Labour & Environment Laws: The Labor Law, along with more focus on environmental protection, has helped increase the […]

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