New Law Gives Chinese Workers Power, Gives Businesses Nightmares

Liu Qin, left, was laid off by a shoe factory that didn't pay her for months of work. "This time I want to find a new company with a good environment," she says. "Now it's not the factories choosing me. It's me choosing the factory."
Liu Qin, left, was laid off by a shoe factory that didn't pay her for months of work. "This time I want to find a new company with a good environment," she says. "Now it's not the factories choosing me. It's me choosing the factory." (By Ariana Eunjung Cha -- The Washington Post)
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By Ariana Eunjung Cha
Washington Post Foreign Service
Monday, April 14, 2008

DONGGUAN, China -- Wei Hoqiang used to work in a toy factory that forced him to sign a contract it did not let him read. It paid him 30 cents an hour, made him work 100 days without a day off, and kept him in a room that was ice cold in winter and suffocating in summer. He said he knew he was being taken advantage of, but he was so afraid of his boss's ire that he stayed for two years.

Wei, 31, said he knew he could do better and in early March walked out on his employer. He immediately got three job offers.

Armed with a landmark new labor contract law that went into effect Jan. 1, employees like Wei 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 shift in power has far-reaching consequences for the Chinese economy, raising questions about whether this is the beginning of the end of China's role as the world's factory floor.

"You shouldn't see China anymore as a sweatshop," said Ronald R. Haddock, a vice president at Booz Allen Hamilton in Shanghai. "The guys and gals with spreadsheets on where the next incremental investments should go are saying there are lower-cost destinations to set up manufacturing."

Factory owners critical of the law argue that China is going backward and is bringing back the "iron rice bowl" -- a nickname for the Communist system in which jobs were assigned and guaranteed for life by the government. "The new labor law is to protect the lazy," said Huang Chuangji, the deputy director of the Dongguan Private Enterprises Association.

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.

While official government figures show that only a small number of ventures have closed so far, surveys by industry associations run by foreign investors indicate that broad swaths of factories may be gone by year's end.

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.


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© 2008 The Washington Post Company

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