China’s Labor Relation Obstacles for Manufacturers

Labor in  China

Worker relations in China are complicated. Despite rising standards of living,  many companies receive negative publicity for their handling of labor in the far east nation.  With low costs for human capital manufacturers around the world flock to China to produce their goods. However, the managing labor in China can cause major problems.  Furthermore, strikes sector wide are common under China’s unique union policy. Understanding the history of labor relations in China can help a new company avoid costly mistakes

Trade Unions

The right to privately organize labor unions in China is forbidden.   However, strong trade unions exist in every sector. These trade unions function with government approval. It is important to understand the implications of a national union for a company’s workforce. Factors outside the control of your company can play a role in disrupting your manufacturing facility. These powerful trade unions organize together in the All-China Federation of Trade Unions. This is the largest trade union in the world with 136 million members. A strong labor union needs recognition when entering China. Sector-wide strikes and protests occur. Managing this risk  needs to be a major concern for any company  entering China.

Protests

As China’s  trade unions strengthen  labor relations become more difficult to handle. Further complicating the situation  is the corruption some of these unions known for. Labor protests are a growing problem for manufacturer’s in China. In 2016 labor strikes reached the second highest level alltime with around 2500 strikes. Large cities such as Shanghai and Beijing saw the most stikes. However, the province of Guangdong contained the most strikes in 2016 with between 251 and 400 strikes.

Worker’s Compensation

China has strict laws about compensating workers at a certain level. The minimum wage varies drastically from province to province, similar to the United States. The level of compensations is much lower than in the U.S. however.  The average monthly wage in Beijing is just $983. This is a substantial increase from previous years. The  government also mandates mandatory social insurance contributions from employers. These costs add up and employers should consider them when entering the Chinese market.

Abuse Scandals

Provided that living standards are rising in China, worker abuse scandals still affect major manufacturing companies. Accusations of always weaken a company. Despite one companies distance from a scandal supply chains connect large amounts of businesses. Even if a company is not directly responsible for the abuse it still can be implicated. Apple recently recently suffered this fate with FoxConn. In today’s climate of corporate responsibility companies need to manage their supply chain for not only efficiency, but also ethics.

These factors are important considerations when engaging with a workforce in China. Navigating the complex landscape in this far east nation requires knowledge of history, culture, and law.  Understanding the local climate for your labor force helps avoid possible dire consequences.