"The End of the Worker’s Paradise”- The Labor Situation in China"

By Brittany Ell

In May, thousands of workers went on strike at a Honda factory in China’s southeastern Guangdong Province.  In the months following, the Chinese media reported extensively on strikes and walkouts at several other foreign-owned companies in China.  These incidents halted factory operations, but were ultimately resolved when the companies agreed to boost workers’ salaries. Labor unrest and subsequent wage increases for Chinese workers present a challenge both for Chinese authorities seeking to maintain social stability and economic growth as well as for U.S. interests in the country. 

The Nixon Center held a panel discussion September 8^th to examine the causes of China’s recent worker unrest and possible consequences for both China and multinational companies. The panel featured Zhao Li, Senior Advisor for East Asian and Pacific Affairs at the U.S. Department of Labor, and Derek Scissors, Research Fellow at The Heritage Foundation’s Asian Studies Center.  The Nixon Center’s Director of China Studies and Starr Senior Fellow, Drew Thompson, moderated the discussion.

Zhao Li discussed what the labor strikes reveal about changes occurring within China.  In January of 2008, Chinese authorities implemented a new Contract Labor Law, mandating increased wages and improved working conditions for China’s workforce.  Because of public campaigns by the All-China Federation of Trade Unions (ACFTU), Chinese workers have become increasingly cognizant of their rights.  Younger migrant workers are less willing to forego workplace rights or be treated as second-class citizens, and are now actively seeking to protect their rights.  With the ability to easily exchange information, these workers are more aware of conditions at other factories and the comfortable life of city-dwellers.  Li stated that the protests were not directed at the Chinese government but were motivated by a desire for greater employer accountability.  Looking at this summer’s labor unrest, Li confidently affirmed that the strikes were not indicative of an emerging revolution within China, but rather a function of the market economy and growing worker awareness.

By making a specific note of the fact that media attention was focused on labor unrest at Taiwanese and Japanese companies in China, Derek Scissors questioned the significance of this summer’s strikes.  He described available Chinese economic data to be insufficient to label the episodes as indicative of major structural changes occurring within China.  Current pressure on domestic wages appears to stem from the overheated housing market and widening income inequality.  There is not yet evidence of sustained labor shortages or an overhaul in government policy resulting from the strikes or the new law.  However, the future holds significant structural changes as China transitions from a labor surplus to a labor balance. Though it is currently unclear when this transformation will begin, Scissors emphasized it will occur rapidly, with implications for both Chinese economic planners and companies with investments in China.

Though changes in the labor market have serious domestic consequences for China, the changing labor situation also concerns U.S. interests.  Li spoke of the positive prospects for both countries to address core issues of workers’ rights, including better protections and the enforcement of minimum wage standards.  He commended recent efforts by both the Chinese government and the ACFTU to implement of the new labor law, particularly efforts to raise public consciousness, and added that the U.S.-China Strategic and Economic Dialogue along with the recently started Labor Dialogue have been path breaking forums to discuss such issues.  Scissors emphasized the challenges ahead as China loses its title as “workshop of the world.”  U.S. companies faced with increased labor costs resulting from rising wages, will be forced to make decisions whether to remain in China, perhaps moving inland, or to relocate to lower-cost countries.  As to what the future holds, both speakers acknowledged the complicated and long-term nature of labor changes in China and the widely publicized strikes at foreign factories hint at wider labor issues facing Chinese workers at all companies, foreign and domestic.

For further reading see:

"Border Burdens: China’s Response to the Myanmar Refugee Crisis," China Security, Fall 2009

"The Geopolitics of Cross-Strait Disaster Relief," China Brief, September 10, 2009

Flood Across the Border: China's Disaster Relief Operations and Potential Response to a North Korean Refugee Crisis, US-Korea Institute, 2009

China's Health Care Reform Redux, CSIS, 2009

China's Health-Care Challenge, Wall Street Journal, April 16, 2009