Recruiting in China

Foreign companies operating in China have been given a 30 September deadline to allow unions to be fomed in their offices and factories failing which, the companies could be publicly vilified or blacklisted by the union and also attract penalties from the government.

China is asking all foreign companies to permit state approved labour unions at a time when raw material costs have risen dramatically and labour costs escalated by 30 to 40 per cent, forcing foreign corporations to think twice about setting up shop in China.

Many large corporations had set up manufacturing units in China mainly because of cheap labour and also to avoid labour problems that disrupt operations in their own countries. The ongoing Boeing machinists and the strike threat at Arcelor Mittal steel plants in the US are striking examples.

This move to permit unionisation stems from China's recent economic boom and the government is keen to rectify some of the maladies like vast income disparities and labour exploitation that has been highlighted by leading western labour activists.

Many large American corporations such as Wal-Mart, McDonald's, Yum Brands, Kentucky Fried Chicken and Pizza Hut who own and run their establishments in China, have yielded to employees setting up unions, while those like Microsft and PricewaterhouseCoopers are resisting on the grounds that they do not operate manufacturing units.

In 2006 nearly Wal-Mart employees at 108 stores have opted to have a trade union although Wal-Mart's dislike for trade unions is well known in the US and other countries where it operates.

Companies that have set up manufacturing units in China will be the hardest hit due to soaring raw material and labour costs. Despite adhering to Chinese labour laws, they fear allowing unions would force them to have to pay substantial overtime wages, as many factories maintain a six-day work week.

Labour activists worldwide have targeted Chinese manufacturing enterprises, which employ child labour, with reports in the western media of children being forced to put in working hours of nearly 100 hours a week without any overtime and often in violation of safety regulations.

Some of the contractors for big renowned brands such as Wal-Mart, Adidas and Disney were fired for hiring and exploiting child labour.

Analysts say that allowing unions in Chinese companies would give absolute power to the the only union allowed by the government, the All China Federation of Trade Unions, in terms of bargaining and force foreign companies to consult with the unions on every issue, a thing foreign companies never had to do in the past.

The question of agitating for their legal rights and the ability to bargain collectively is still a question mark as unions are a relatively new concept in China.

According to the All China Federation of Trade Unions, by the end of September about 80 per cent of the top 500 global corporations operating in China would have unions.