COMMENT: The Evolving Narrative of Chinese Labour

ImageCOUNCILLOR COMMENT: A very public experiment is about to take place in China, one that may have far reaching implications for domestic security, the economy and how the world sees china as an investment destination. Taiwanese company Foxconn announced earlier this month it would hold ‘genuinely representative’ labour union elections for its Chinese factories. This decision has emerged from years of labour unrest, protests and strikes, not only at Foxconn, but also across much of the industrialised southern coastline. The difference today, is that it comes at a time when Chinese leaders must ensure their legitimacy is maintained while the economy cools down. Meanwhile the labour force is ceasing to appear as competitive for foreign manufacturers as it once was and a policy shift from export-led growth to domestic consumption is underway.

Looking back, labour unrest in China has typically focused on meeting minimum standards, such as receiving unpaid wages or minimum wage. As the economy surged ahead, the demand for labour in coastal cities increased and the notion that income be commensurate with labour demand resulted in an uptick of demonstrations. In 2010 demonstrations across the Pearl River delta erupted, resulting in a range of wage increases across many companies. Since then, a policy to increase minimum wages to 40 percent of average provincial salaries has been implemented in an attempt to both fix industrial disputes and to encourage domestic consumption. However, the policy has inherent risks – primarily, that the increased wages will see a shift of foreign investment to other, more competitive, developing countries in the region that have lower labour costs. In turn, this reduces the demand for labour in China, putting the onus on the domestic population to drive growth.

China needs to achieve two different, but inextricably connected goals – social stability and economic prosperity. Combined, these two goals provide the one-party state’s leadership its legitimacy. Foxconn’s aspiration of a democratic representation of labour in a state that does not have a democratic tradition provides an interesting litmus test for the idea, but risks public failure. Meanwhile, due to manufacturing making a gradual shift inland, factories in the Pearl River delta are now struggling to find labour as many workers are choosing to stay home after the Chinese new year to apply for jobs within the interior. The labour shortage is also exacerbated by the late-onset effects of the one child policy, resulting in another initiative by Foxconn, to replace a significant portion of the labour force with robots.

Inside the companies, the legacy of the trade union, created by Communist Party to relay instructions to workers (not necessarily represent them) endures. Furthermore, the union leaders themselves are often Party appointees or connected to the company itself. This has often been a source of dissatisfaction and unrest amongst workers. The political risk that increased agency on behalf of the workers resulting in ‘genuinely elected’ representatives could serve to exacerbate expectations that Beijing adopt a more democratic model – especially as the near universal employment model (thanks to the export-driven economy) undergoes reform.

It is useful to gaze ahead and consider how industrial relations in China may affect the global market and the domestic political landscape, however, the process will be slow, and initial reactions to the Foxconn election announcement may overstretch the degree by which ‘true reform’ may occur. China is well aware of the potential of the election to be a public, damaging failure. Evidence of this emerged when Foxconn announced that the idea of elected union representatives was conceived in 2007, well before the most violent bouts of unrest in the region during 2010. Furthermore, a ‘special team’ from the unions will select candidates for election after discussion with the workers – a process that could severely limit the worker’s ability to pick true representation.

Although Foxconn’s announcement that it would have a worker-elected union is significant, it is not the first time such an election was proposed and ideas that this may be the start of collective bargaining and true reform are overly optimistic. That said, the size, visibility and attention Foxconn receives (which will undoubtedly continue, not just because of this initiative, but because the Apple supply chain attracts vast amounts of interest) will put tremendous amounts of pressure on the company to deliver a result that at the very least has a semblance of legitimacy and doesn’t spark greater unrest – damaging prospects for more attempts, share price and Party credibility.

Foxconn’s history, and indeed its future, may not be emblematic of the entirety of China’s workforce, but its position as a major employer, exporter and now, potential reformer, may serve as a worthwhile prelude to what is a changing narrative in China’s economy as it attempts to undergo a transition from the export led model while maintaining employment and social stability.

Comment by William Hobart – Councillor, AIIA (NSW)


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