‘Chinese Labor Unions Have Replaced Party Apparatchiks’

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CHANGCHUN, Apr. 21 – Speaking at the UNDP-sponsored GTI Business Advisory Council for Northeast Asia, Chris Devonshire-Ellis of Dezan Shira & Associates compared the new political framework that affects foreign investors in China with that of the past.

Speaking at the Greater Tumen Initiative conference in Changchun, he generally welcomed the changing role of labor unions in today’s larger foreign invested companies, stating that the structure of the labor unions had improved and that it was a far more transparent method of communicating with the state over employee welfare issues than the previous method.

“In the past, China used to surreptitiously inject Communist Party members into foreign businesses to report back to their superiors as regards the activities of the business without any reference to the company managers,” Devonshire-Ellis said. “That was all done in secret, and provided no room for dialogue or explanation. The new laws as effect labor in China place far more responsibility for the monitoring and management of labor on the union, and this is providing a more open and transparent platform for the company management, its workers, and the state to deal with labor issues, incentives and problems.”

The days of the state-owned enterprise’s local employees regarding the factory and business as their own were now drawing to a close he said. “In most cases, local staff recognize that the business does not in fact belong to them individually and that they must take any issues to the union rather than getting personally involved. This is now significantly minimizing the opportunity for management-worker conflict as the workers attitude has changed.”

Many foreign JV investors, especially those with larger SOE partners were “going beyond the legal limit” in treatment of workers Devonshire-Ellis said.

“As demand has picked up significantly in the domestic China market, many employers are recruiting staff and are providing employment incentives above the legally defined standard. Companies are getting more involved with interacting with local universities on degree and other courses and are reaping the benefits of doing so by obtaining a fast track graduate base of local employment. The provision of housing loans and so on is also becoming popular as the company seeks to maintain and secure its high value workforce and tie them to the company financially. Such schemes bode well for foreign companies investing in the long term in China as they seek to consolidate and expand their domestic workforce.”

Chris Devonshire-Ellis is the principal and founding partner of Dezan Shira & Associates, establishing the firm’s China practice in 1992. The firm now has 10 offices in China. For advice over China strategy, trade, investment, legal and tax matters please contact the firm at info@dezshira.com. The firm’s brochure may be downloaded here. Chris also contributes to India Briefing , Vietnam Briefing , Asia Briefing and 2point6billion