China Tells Businesses to Unionize
By DAVID BARBOZA
September 12, 2008
SHANGHAI — 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 some to avoid unions in their home
countries as well, are now being asked to meet a Sept. 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 penalized 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 raises
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 labor laws. “At the
very least, company management must now consult, and in
many cases bargain, with employees and unions on a wide
range of matters, whereas in the past they enjoyed almost
The union push is coming at a time when global corporations
are already facing rising labor and commodity costs in
China, which is struggling to contain inflation.
Hundreds of big corporations, like 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 nonmanufacturing
companies are resisting. Microsoft’s China operation did
not respond this week to questions about the union drive.
The consulting giant PricewaterhouseCoopers said that its
workers were not unionized but that it was studying the
Union officials say they are focusing on global companies,
but Chinese companies make up the bulk of the manufacturing
work force and they are also expected to face audits and
pressure to unionize.
For years, Western labor activists have taken aim at
China’s manufacturing industry, exposing hundreds of
exploitive factories that employ child labor, force workers
to toil as many as 100 hours a week without overtime pay or
benefits, and violate labor and safety rules.
And some of the world’s biggest brand names, like Wal-Mart,
Disney and Adidas, have been singled out for using
contractors that violate China’s labor laws. The companies
have, in many cases, investigated the claims and fired
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, like rampant pollution, a
growing income gap and widespread labor 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. The union’s reputation for allowing abuses to exists
has led some to doubt whether it can properly represent
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 labor
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.
“Some foreign companies in China haven’t behaved well in
dealing with their workers’ interests and rights,” Wang
Ying, an official at the All China Federation of Trade
Unions in Beijing, said in a telephone interview this week.
“As the economy and society develops, China needs to
improve workers’ legal rights and interests, which is a
demand of a civilized society.”
Forming unions could be costly, lawyers and labor experts
say, because a union could fight for higher wages and
benefits and because companies are required to pay 2
percent payroll dues. The dues could amount to millions of
dollars in additional costs for big companies. Yum Brands,
for instance, has about 160,000 employees in China.
Manufacturers are already coping with soaring labor costs,
which have jumped by 30 to 40 percent in some coastal
manufacturing zones over the last four years. Also, a new
contract labor law and stricter enforcement of older labor
rules means some companies can no longer avoid paying
overtime costs, which can be substantial because many
factories insist that some employees work six days a week.
But whether unions can really protect workers and bargain
collectively on their behalf is still in question.
“It all depends on how they are set up,” said Anita Chan,
an authority on labor issues in China who is a visiting
research fellow at the Australian National University in
Canberra. “After you set up a union, these groups have to
know how to become representatives of the workers, and
really collectively bargain.”
Mr. Lauffs, the labor law expert, said it was too early to
tell what impact new unions would have on companies here.
But union members would need to be consulted on all
employee-related and operational matters.
“Employees may have a say in major operational matters,” he
said. “And employees may have the right to strike.”
Many big corporations in China that have recently allowed
unions to form under pressure have declined to comment on
the union drive. Some company spokesmen have admitted
privately that they do not want to raise the ire of the
state-controlled union or anger China’s political leaders,
who are backing the effort.
But several big companies said they were working well with
the union. Wal-Mart, which for years has fought against
unions in the United States and elsewhere, now has unions
operating in nearly all of its 108 stores in China.
“We have a good relationship working with the union,” said
Jonathan Dong, a Wal-Mart spokesman in China. “The union
provides a complement to what we do.”
The top executive in China at PricewaterhouseCoopers, Frank
Lyn, said accounting and professional services firms like
his could not be equated with manufacturers.
“We’ll continue to monitor the situation,” Mr. Lyn said.
“At this juncture we don’t see a pressing need for a
Ms. Wang, the official at the All China Federation of Trade
Unions, said that by the end of September about 80 percent
of the top 500 global corporations operating in China would
have unions here. “We are making great progress,” she said.
Chen Yang contributed reporting.