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China labor law changes

A law firm I use sends out a regular newsletter to their business clients. This arrived in my mailbox some time back. At first I just read it and thought ‘interesting’. But reading it again, I think it may be of interest to some Samizdatistas.

Sections 1 and 2 seem reasonable enough. Section 3 is iffy. But, starting with section 4, some things definitely look like, if actually enforced, they will have a substantial effect on business in China and its overall economic trends. Things like this are what may provide concern for China’s continued economic growth:

Company Rules

Current Law – With no guidance or requirements in the current law, employers often draft their own employee handbooks, manuals and work rules. Enforcement is very similar to that in the United States, with fairness and degree of conduct weighed.

Draft Law – Essentially, every employer policy, rule and procedure that governs its employees must be discussed and approved by the union or employee representative. Rules unilaterally imposed by the employer will be void. The term “employee representative” is new and remains undefined in the draft law. There are also unique challenges for employers posed by this new provision. This provision fails to recognize the fluid nature of employer policies and rules. As stated, every change must be approved by the trade union or employee representative, which will inevitably lead to delay in timely implementation. And, despite the trade union’s power to effect employee policies and rules, an employer is ultimately on the hook for what is implemented. Finally, it is worth noting that this provision does not contain any incentive for the trade unions and/or employee representative to negotiate with employers.

We have a lot of commenters and contributors who travel to China; presumably some of them have business there. I would be interested in knowing what they think of these proposed labor market reforms. Will China actually try to enforce all of these parts of the law, or is it just for show? And if they do enforce it, what will the repercussions be?

7 comments to China labor law changes

  • Sunfish

    Laws consistently enforced can be trusted. Sometimes. They may be stupid, evil, sick, and wrong, but at least they’re consistent.

    I don’t see consistency here. What I see is a future of foreign investors being squeezed under these laws while the paperwork involved in enforcement actions against industries owned by the People’s Liberation Army keeps getting lost in someone’s desk.

    Put another way, in communist China I see the potential for corruption such as Boss Tweed or Richard J. Daley could only have dreamed.

    For all of the complaints about labor relations law here in the US, a union which refuses to deal in good faith will eventually get squeezed by the NLRB. Unions can have their CBA’s thrown out. Contracts are sacred, except where the bankruptcy court is concerned. That’s why unions have at least some occasional pressure to do the right thing (except for the *hack* *spit* FOP, whose management should all be deported to Abu Dhabi, but I digress).

    I don’t see the Chicom regime allowing truly independent quasi-political movements (any organization that size is at least a little political, per Jerry Pournelle). Look at the way they freak out when presented with groups of people doing yoga in the park!

    Mark my words: there will be no AFL-CIO in communist China. There will be no barricades. There will be no job actions at state-owned job sites, unless people want to be shot for treason. The Chinese Woody Guthrie will go in the same shallow unmarked grave as the Chinese (or American) Joe Hill. The Chinese Mother Jones will be shot for violating the one-child policy.

    Now, let’s hypothesize some American company dumb enough to ink a contract with Hugo Chavez in 2004. With Venezuela gone, they could move into China. Think they’ll have the same cozy, controlled relationship with their organized labor as the state-owned firm?

    Never been to China, so take the above for whatever it’s worth, but I’m skeptical whenever communists are concerned.

  • James of England

    I’m an India man, not China, so I don’t get much news about Chinese legal changes. OTOH, I really should try to keep up with them. This does seem to be a fairly big change and I’m grateful for this posting.

    I’d like to note a degree of disagreement with Sunfish’s unitary model of Chinese power, since my sense is that there’s a lot of disputed authority and a lot of middle-men currently in existence, but I can’t think of a good cite for this offhand.

  • Paul Marks

    Of course in China “representative of the workers” means “representative of the Party”.

    It is much the same as National Socialist Germany in the 1930′s. Private ownership exists, indeed one can make a lot of money – BUT the Party can take everything at any time, by deciding to be difficult.

    Just as the power to tax is the power to destroy, so is the power to regulate. And if Party representatives in the workforce can veto anything they like, that means the Party can (quite “legally”) break any businessman they dislike – for any reason (say he has not bribed the right people – or has not bribed them enough, or they take all the money and decide to hit him anyway because they do not like his haircut or ……..).

    The broader problem is the arbitrary nature of “law” when the government legislature and courts can change “the law” on a whim.

    Take the example of the Bangalore area in India (the great boom zone).

    The courts have decided that the private English language schools must change policy (stop being Englsh first) or close down.

    Oh and there has also been a general strike (about other matters) due to the “laws” giving unions so much power.

    If “law” is whatever the government says it is and can be changed on a whim then doing business is difficult and dangerious.

    But, of course, this is not a problem confined to China and India.

    Even the notion of the law being written down and clear (even if the written law is crazy, and also can be changed at the will of the government) is NOT obeyed in the modern West (at least not all the time).

    Take the man who has just been elected Governor of New York State. He made up “the law” as he went along (when he was a prosecutor) – without any clear reference to any written text. No contract was safe if he took a dislike to the businessmen involved (for whatever reason).

    And this man was wildly popular for his actions – indeed that is one reason he got almost 70% of the vote.

    What does that say about public understanding of and support for the principles of private property and voluntary contract in the modern United States?

  • Sunfish

    James of England:

    I’d like to note a degree of disagreement with Sunfish’s unitary model of Chinese power, since my sense is that there’s a lot of disputed authority and a lot of middle-men currently in existence, but I can’t think of a good cite for this offhand.

    Paul Marks:

    Of course in China “representative of the workers” means “representative of the Party”.

    In China, my read is that the state is everything, or at least has its thumb in every pie. However, I don’t think I said that the state is monolithic. When there are multiple competing parties, which are largely irrelevant in matters of employment and wealth accumulation, the parties still break apart or have multiple factions. When there’s only one Party, and that party requires membership for advancement in society, then everybody will want in. And just because they join some party and mouth the words at the meetings doesn’t change the fact that everybody, and every functionary, will want to do his own thing.

    In other words, the Party might ignore a left-handed smoke grinder plant that pays the proper taxes and has the proper permits. However, if some Representative of the Workers wants to call a strike because, well, he wants to, there’s nothing in the article that suggests that he won’t.

    That being said, I imagine if some Minister of the Town Clock Tower decided to jerk the union leader’s leash and tell him to get in line, he would.

    And Elliot Spitzer proves that having the law written down doesn’t make abuse impossible. However, it’s a hell of a lot harder to abuse written laws on file in every public library and every county courhouse and http://www.law.cornell.edu.

  • James of England

    Having one party rather than many parties doesn’t necessarily increase diversity. English parties combined have a good deal less diversity on many issues than either US party, for instance. It’s true that important people will all be party-members, but that’s not quite the limiting factor might appear.

    It’s true that enforcement isn’t apolitical anywhere, and also that it’s even less consistent in places that aren’t America, but it’s better in China than in some places. This isn’t stuff that renders itself susceptible to objective statistics, so there aren’t great country to country statistics, but my sense is that dirigisme is a good marker.

  • Paul Marks

    I never said that the state controlled everything in China – although it once tried to (under Mao).

    Since 1978 (only a couple of years after Mao’s death) private ownership, fairly free prices (in many things) and voluntary trading have been allowed.

    Indeed (if anything) China has a much less government controlled economy than Nazi Germany had in the 1930′s. The party CAN hit anyone at any time – but normally it does not (so it like the risk one takes of being stuck by lightning – it could happen but it most likely will not).

    There was a good article in “Newsweek” (of all places) of how business enterprises function in China in spite of their being no real rule of law.

    If some one violates a contract never trade with them again (and put the word out about what they have done) – taking them to court will do no good. And (of course) never risk something in a single deal that you could not afford to lose, and make sure you have the cash or goods from one deal before you make another one (do not get overextended).

    As for such things as “intellectual property rights” – if you have secrets guard them well, do not trust the state to guard your “patents and copyrights”.

    Of course things could change – the party could turn on private enterprises, but unless it does (due to some change in the wind) it will be possible to make money in China.

  • Paul Marks

    As so often I apologize for the typing errors above – the missing “is” as “it is like…”, the “their” rather than “there” and so on.