A REFORM of Chinese labour laws may lead foreign investors to leave the People’s Republic in favour of rival Asian nations with weaker labour standards, employers have said.

A Bill introducing tough laws that prevent the exploitation of workers, including regulations that exceed some European standards, is heading for the Chinese People’s Congress. The Bill is being tabled at a time of heightened industrial unrest and soaring wage inflation.

Pressure is also mounting on the Chinese Government to reduce the disparity between impoverished areas in the rural west and economic hothouses on the eastern seaboard.

The new Labour Contract Law will be the biggest shake-up yet by China on employment regulation. It will strengthen safety and workplace inspections; force employers to consult with workers’ representatives over significant job cuts and tighten the enforcement of minimum wages that already apply in provinces. It may also cut the maximum working week and impose higher pay rates for overtime.

A draft of the Bill has suggested cutting the maximum working week to 40 hours — eight hours less than in Europe. It has also proposed paying double rates for overtime. In some provinces, a maximum working week of 50 hours is enforced but workers often choose to work 60 hours or longer.

International union organisations fear that the new employment laws will be toothless unless there is enforcement by free trade unions in China. There is no right for workers to join free trade unions, although they are entitled to be members of sectoral unions belonging to the All China Federation of Trade Unions — an adjunct of the Communist Party. Disaffection and the move of workers from state organisations to private businesses have triggered a decline in membership.

Dr Keyang Wu, a Chinese relations expert for the British Chambers of Commerce, said that the new laws were “long overdue” because China had been weak in employment law and that greater regulations could stabilise employment practices both for workers and organisations. However, he gave warning that businesses would look elsewhere.

He said: “I don’t think China has the luxury to put in labour laws that are totally out of reality. It cannot be in parallel with Europe. Business is attracted to China not only because of its labour costs but also because of its efficiency. If regulation starts to affect that and flexibility, then companies could turn to India, Pakistan and South-East Asia.” He said that plans to cut the working week would be unpopular with companies and employees who want to do the work.

The European Chambers of Commerce has said that the new law will increase Chinese production costs and will “force foreign companies to reconsider new investment or continuing with their activities in China”.

CHINESE workers have no official right to strike, but the trend in labour disputes is in their favour.

According to government statistics, there were 5,600 labour disputes in 1987, with action ranging from wage conflicts to full strikes. By 2001 that number had soared to 154,600, according to the International Labour Organisation. Last year there were 300,000 disputes — a 53-fold rise since 1987.

Last month the All China Federation of Trade Unions appointed its first union lawyers — a total of 670 across all its industrial unions — to give free advice.

The unions had already 11,000 legal specialists working for them, but they were barred from practising as lawyers under Chinese law.

Unlike in Europe, where industrial action is usually about increased pay, better conditions or against job cuts or closures, Chinese disputes are often over unpaid wages or lower-than-expected pay.

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