China’s labour protections are coming under fire from high places as economic restructuring pits officials concerned about social stability against a lobby arguing inflexible policies are stifling job creation and suppressing wages. Company executives, especially at foreign or private firms, have long been critical of labour contract legislation and minimum wage laws that make it difficult for owners of an ailing business to turn it around or find willing buyers. Now policymakers anxious to modernise China’s slowing economy and slash overcapacity in heavy industry are making similar noises. The export powerhouse province of Guangdong, a trillion-dollar economy that often leads the way on market reforms, said on Tuesday it would scrap scheduled rises to the local minimum wage in 2016, and keep it at 2015 levels – slightly over 1,500 yuan (160 pounds) per month – through 2018. On the same day, the official Xinhua media service highlighted comments by finance minister Lou Jiwei, who criticised China’s Labour Contract Law in a speech during the annual meeting of parliament. The law dates to 2008, when China had a reputation for sweatshops staffed by underpaid workers, an embarrassment for a ruling party that monopolised power in the name of socialism. The law fixed a 40-hour working week for most employees, regulated maternity leave, and required businesses to be able to prove their case for sacking employees for incompetence or criminality or face heavy penalties. Its standards aspire to those of developed economies, rather than emerging markets, though enforcement is weak. The EU, for example, limits the working week to 48 hours, while China’s maximum is about the same, after allowing up to 36 hours month overtime. Regulations say minimum wages should be between 40 and 60 per cent of the local average – though in practice 30-40 per cent is typical – compared with about 30 per cent in the United States and 50 per cent in Britain. Protections against dismissal are comparable to Japan’s. ‘The Chinese government wanted the best, the most polished labour legislation they could find, and simply imposed it on an economy that couldn’t cope with it,’ said Geoffrey Crothall, communications director at China Labour Bulletin. Chinese wages have risen at double-digit rates since the 2008 act, so factory workers now earn significantly higher than competitors in Bangladesh, Vietnam and Cambodia, and some think labour protections are hampering an economic transformation that will benefit workers in the long run. ‘For enterprises and employees, the extent of protection afforded by the Labour Contract Law is unbalanced,’ Lou said, adding it encouraged companies to moves jobs from China to other countries. ‘Who eventually bears the costs? The working class, who the law was intended to protect,’ Lou said. Labour activists say the protections are still needed, and businesses often break labour law with impunity, especially if they have local government connections. The Xinhua article was circulated in both Chinese and English with supportive comments from regulators, exciting speculation that changes to the law could be afoot. The timing could suit Beijing, which aims to reduce overcapacity in several industries, laying off an estimated 6 million workers at state-owned firms in the process.
