Chinese workers wearing yellow safety helmet. Image by Pixabay available at Pexels.com under CC license.

04:03 pm | June 28, 2021

Beyond CAI – Why China’s Labor Rights Matter

For the EU, improving China’s labor standards and protecting the economic and social rights of Chinese workers is not only a moral responsibility but a long-term benefit as well.

By Xu Hui

Quick Take

China’s exploitative labor system can be viewed as government subsidies in disguise for Chinese and multinational corporations operating in China.
European companies have never been motivated to change the existing exploitative labor regime. However, as recent examples have shown, China’s labor rights became a global economic, social and political issue.
For the EU, pushing for China’s ratification and implementation of the ILO’s core conventions and protecting the economic and social rights of Chinese workers is not only a moral responsibility but a long-term benefit as well.

In May 2021, a US court awarded $5.4 million to seven Chinese workers in compensation for forced labor, human trafficking and workplace injuries at a construction site in Saipan. The company that lost the lawsuit is based in Hong Kong and owned by Mainland China.

For Chinese workers, this rare victory highlights a different perspective when we’re trying to understand China’s labor rights. So far, whether we’re talking about the China-EU Investment Agreement or Germany’s recent Industrial Chain Law, the European Union’s focus on China’s labor rights violations has recently only been highlighted because human rights organizations have pointed to the forced labor of the Uighurs in Xinjiang in the ‘re-education camps’. However, it still fundamentally ignores the exploitative labor system all over China, which has long been the institutional basis for international companies to over-rely on China’s supply chain. With the labor system’s low cost, China has a large-scale comparative advantage, and they are already a main player in the global production network. But the consequence of the lack of basic workers’ rights is that the standard China labor model challenges pre-existing international labor standards.

As a member of the International Labor Organization, China has yet to sign the four core labor conventions, which have to do with forced labor (29, 105) and association and collective bargaining (78, 98), especially because China has always viewed the independent organization of workers as one of the biggest threats to its political survival. Therefore, the International Labor Organization has no way of pushing China to approve of these four core values in order to guarantee labor rights. The writer of this article once overheard an ex-International Labor Organization official in Geneva say that they no longer expect to change China’s mind when it comes to labor, and that they only hoped that China wouldn’t change the International Labor Organization. They furthermore added that all signs point to the weakening influence of the Geneva headquarters on Beijing. For this reason, at least in Europe, emphasis is made on Chinese labor rights when it comes to trade agreements, as the EU is trying to establish a system of workable supervision and verification mechanisms.

This article aims to argue - on three levels - why European society should proactively advance China’s signing of the core values of the International Labor Organization: from the perspective of the specific characteristics of China’s system of labor exploitation, new developments and China’s exportation overseas.

Labor Exploitation with Chinese Characteristics

The enormous market in China is hugely attractive to European enterprises. Volkswagen Group’s businesses in China are a perfect example. Its factory in Urumqi, Xinjiang, has lately come into question in the eyes of the Western public. Volkswagen’s response to this was to say that every single one of the Volkswagen employees in Xinjiang has directly signed a labor contract, and therefore they believe there is no such thing as a phenomenon of forced labor.

Screenshot of a Weibo post by a Changchun Volkswagen’s worker on May 16, 1997, shows pictures of protests and dissatisfaction with the handling of relevant departments such as labor union, the court and the goverment.

No matter the specific situation in this factory, it is fair to say that there are labor issues when it comes to Volkswagen in China. Like many other international automobile enterprises, Volkswagen uses ‘labor force dualism’ by hiring both formal contract workers and agency workers side by side on production lines in order to cut labor costs.

The dispatch workers do the same assembly work as formal workers, but make half the income, with none of the similar benefits. For many years in the Volkswagen factory in Changchun, China’s labor law contract has been violated with different pay for equal work. Finally, in 2016 and 2017, thousands of dispatch workers protested to defend their rights, causing the arrest and sentencing of the protest leaders. Volkswagen was then pressured to sign official contracts with some of its dispatch workers, but workers’ demands for compensation for their wages were not fulfilled.

Screenshot of the DW report on the protest held by the Chinese workers from the Volkswagen factory in Changchun on March 3, 2017.

Aside from this, most of the suppliers that provide various accessories for large multinational car companies are local, private companies, which means they have even lower labor and environmental standards. Therefore, it can be argued that over the last thirty years, a multinational company like Volkswagen benefited immensely from China’s labor regime, and at its core still has exploited cheap migrant workers economically, socially and politically. This is also the systematic driving force behind China’s market reforms that have created the economic miracle, which Chinese economists have called their ‘comparative advantage’, though a more precise way of saying is its “low human rights advantage”（低人权优势）as historian Qin Hui has pointed out. According to data from 2020, there are 285.6 million migrant workers in China who form the main body of industrial workers and are mostly spread out in manufacturing, the construction industry and the service industry. This article will focus on migrant laborers in labor intensive industries and will talk about how they have been exploited in delate.

A Quasi-Militarized Regime for Production

First of all, economic exploitation is embedded in the labor process where migrant workers’ wages have been intentionally suppressed in the long term. In practice, the minimum wage set by the local government has become the basic wages for workers (five days a week, eight hours a day). The salary doesn’t even cover the basic necessities of life, so workers have to agree to work over-time. For example, workers worked more than 100 hours per month on average at Foxconn, where in 2010 there were a string of suicides. For migrant workers, they were doing overwork ‘voluntarily’ but this was actually without a choice, because they have to make more money in order to live. In order to get around the bounds of the labor laws, the factory demands its workers to sign a Voluntary Overtime Contract.

Also, to ensure maximum efficiency during production, Chinese factories carry out a militaristic factory dictatorship with strict discipline, loud scolding and the widespread use of fines at the core of this dictatorship. With these management methods, not only does it force migrant workers to work tirelessly on the production line, but they must also suffer through long periods of mental distress. Aside from the itemized nature of the production workshop and the isolation and compartmentalization of the migrant workers’ living quarters, the workers themselves come from different production workshops. These have different day and night shifts, so there is extreme transience where the workers do not know each other, even though they are sharing the same room. This means they are unable to form a supportive social network. This kind of factory regime is the root of what caused the streak of Foxconn migrant worker suicides. But what’s worse is that labor standards at Foxconn are actually the best compared to other factories, and the OEM companies that have become popular recently have made the migrant workers’ conditions even worse. For example, it is now harder for them to get an official labor contract, as well as pay into social insurance, which means they can only work as an outsourced worker. Even though the phenomenon of labor shortage has occurred in some areas, and some factories raised wages for some short-term contracts. However, the high pressure, high dictatorship and exploitative situation hadn’t changed in the slightest.

Foxconn workers. Image by iphonedigital available at Flickr.com under CC license.

The Collusion of Government and Capital

Enterprises achieve their growth in profits from low costs, easily tamed and efficient migrant workers, and more so they are the pillars for China’s transformation into the ‘factory of the world’. This is significant because together with capital, the Chinese government has created an exploitative system for labor workers that is beneficial to both parties, and the main ‘contribution’ from the policy aspect is social and political exploitation.

Social exploitation manifests as a split labor reproduction mode, which means the State has constructed, through the household registration system, a dual labor market based on the urban and rural divide, so that the household registration for migrants state ‘peasants’, whereas their occupation is industrial worker. This separating of their identity and occupation means their wages in the city can merely maintain the costs of their own labor reproduction. They don’t have an urban household registration, only a temporary residence permit, and they will go back to their villages after they get old or retire, but their children have to stay and be educated in the village, and therefore the companies do not need to make payments towards their retirement, housing, their children’s education, medical bills, skills training and other social benefits. This is the fundamental reason that China has been able to maintain low long-term labor costs.

For the migrant workers, this system sets them up for double-exploitation: on the one hand the traditional political and economic exploitation of the factory owner and the laborer and the exploitation of the laboring class, and on the other hand the State purposefully creating a separation in identity, where the civil and social rights for migrant workers are being deprived. Because there are serious problems with unbalanced distribution between the city and the countryside, public services and social benefits for migrant workers remain low.

The political exploitation is manifested as the government’s, at all levels, prioritization of economic development. The first Chinese Labor Law was unveiled in 1995, and the Labor Contract Law was introduced in 2008. Yet, in reality, justice and law enforcement agencies often pretend they are oblivious to these acts of labor exploitation. For example, in instances where Volkswagen employees took their cases to a local court, their cases were not upheld, yet local police quickly apprehended the leader of the workers. Furthermore, in May of this year, the Standing Committee of the Shenzhen People’s Congress revised the “Regulation on Paying Wages”, which openly went against the Labor Law, deleting the regulation that stipulates triple-pay on statutory holidays, while adjusting the period for revising the minimum wage standard from every two years to every three years.

Migrant workers, particularly the first generation, have a low level of education and are without knowledge about labor laws and arbitration, therefore it is hard for them to protect their interests through a long and complicated legal process. In the last dozen years or so, faced with low wages and poor working conditions, a new generation of migrant workers who have entered the factory have started to resist the conditions with large-scale strikes one after the other. And on the other hand, learning from the example of the Polish Solidarity Movement, the State has absolutely banned migrant workers from forming trade unions or to fight for their rights using strikes. At the same time, the State severely attacks NGOs which voluntarily provide legal aid and social services for migrant workers. For example, National Security workers often follow as well as talk to NGO workers, shut down the space where NGOs operate, or even detain and sentence the people who provide supportive strategies for strikes. Under these circumstances, where there is lax enforcement, with high political pressures, migrant workers often have to resort to extreme methods such as suicide, self-immolation, seeking revenge or the help of the mafia when they are owed salaries, denied social insurance, or have work-related injuries and occupational diseases.

In recent years, migrant workers have become less interested in traditional manufacturing work and have instead started to focus on service jobs such as housekeeping, driving, and food delivery. The assembly line for these jobs are, comparatively speaking, more flexible, but the characteristic exploitation has not changed. For example, most of the work for internet platforms is outsourced, and no clear labor contract are signed with the migrant workers, not to mention social security, and the Labour Law and the Social Insurance Law cannot give them systematic protection. Workers still have to use extreme methods when in the middle of a labor dispute, such as riots or self-immolation.

In order to get used to this structural change in the labor market, the Chinese manufacturing sector is experiencing the spatial fix that Silver talks about in Forces of Labor, as well as the technological fix and the product fix.

Race to the Bottom

As mentioned above, a basic advantage that China has in being able to compete internationally is due to a supply of hundreds of millions of migrant workers who act as cheap labor. General speaking, China still relies on developing labor-intensive industries, and takes a fundamental role for manufacturing and production, in order to advance the fast pace of economic development. It’s obvious that this Chinese growth is actually a continuation of the ‘East Asian Miracle’. As the historical experience of Japan, Korea and Taiwan shows, with the arrival of the Lewis turning point, the supply and demand relationship in the labor market will change, and the ‘world factory’ method of development will be hard to sustain, which means the industrial structure will require adjustment.

At present the Chinese economy is experiencing this process. Since 2011, the working population of ages 15-59 has begun to grow negatively, which means that China’s demographic dividend has begun to disappear, and the labor force no longer has this ‘unlimited’ characteristic. In order to get used to this structural change in the labor market, the Chinese manufacturing sector is experiencing the spatial fix that Silver talks about in Forces of Labor, as well as the technological fix and the product fix.

Spatial adjustment is when the company moves production to a place where labor is cheaper and where the workers are more easily disciplined. In the era of globalization, the high fluidity rate of capital means that there is an increased flooding of a ‘race to the bottom’, increasing the rate of ‘deindustrialization’ of Western society as well as the fading of the accompanying union movement. In China, even though the centralization of politics means that the organization of union movements is banned, the migrant workers’ ‘wild cat’ method that has grown organically has in recent years put pressure on international capital. Take the example of a big strike in Dongguan which fifty to sixty thousand workers participated in against a Taiwan-funded enterprise, Yue Yuen Industrial (Holdings) Limited, which successfully demanded the payment of over ten years of social security benefits. After this, the company quickened its pace in moving the factory to Southeast Asian countries, and their employees went from 100,000 to 10,000 workers.

Overall, the labor movement in China has been strictly controlled by the government, so its impact is limited, and the main reason why manufacturers focused on export have left China in the last ten years is rising labor costs, the rise in standards for environmental protection, as well as the imposition of tariffs during the China-United States Trade War. In terms of industry categories, the trend for moving to Southeast Asia is quick for textiles and electronics. Samsung had already started, in 2018, to shut down its factories in China, making Vietnam its core base for production. Apple is also pushing its supply chains, for example Foxconn, Quanta, Pegatron and Wistron, to increase their investment in Vietnam and India, especially under the influence of Covid. Thus it was obvious that Apple had a strategy to create another supply chain outside of China, and this lessens the strategic risk of the world’s over-reliance on China’s manufacturing.

On the other hand, in order to maintain a competitive advantage in the cost of manufacturing, in the last ten years China has promoted the idea that international companies should go mid-west, in order to avoid the phenomenon of extreme labor shortage in the east coast area, while at the same time shortening the time-span for wage-increase. Because different parts of China develop at different speeds, there is still surplus labor in the central and western regions, suitable for labor-intensive industries to develop—the Chinese version of the ‘flying-geese model’ in Development Economics. According to this logic, in the past ten years electronic and textiles manufacturing in the central and western regions have developed vastly. For example, Chongqing has already become the world’s largest manufacturer of laptops, Zhengzhou produces half of the world’s iPhones, and Xinjiang has become an important base for the manufacturing and exportation of textiles.

However, speaking of the labor regime, the factories that have moved into the central and western parts of China are highly exploitative. Different to the fluid migrant workers who are attracted to the areas along the east coast, the factories in the central and western areas mainly attract local people, which are limited in number with a high turnover rate. In order to ensure a stable labor supply, companies will rely on the government’s administrative orders for recruitment. And in order to attract investment, the government wants to ensure that the company’s recruitment issues are solved within the agreements made. For example, in Chengdu a portion of the civil servants have to be responsible for some of the recruitment quota for the Foxconn iPad factory, and if they fail they have to go work in the factory. The most extreme case of this was when the education department demanded that vocational colleges send their students to intern at the enterprises or they wouldn’t be able to graduate.

There have been many scholarly as well as journalistic articles written about, exposing these compulsive internship practices as a main source of the labor. Compared to recruiting from society, the costs of having interns is far lower because the enterprise doesn’t need to pay a minimum wage according to labor laws or organise social security. At the same time they can transfer management to school teachers. The students are in a weaker position because they are not training their skills through their internships, instead they could get their pay docked and they may have to work overtime, etc. In this context, forced labor in the Xinjiang ‘re-education camps’ is the extreme version of making students work, and it is all in the name of economic development. The government is not using pricing leverage, but rather administrative orders when it comes to market-based employment to maintain the low labor costs in manufacturing.

‘Machine Substitution’

Technological adjustment points to the enterprise implementing a huge innovation in the process, bringing in technology for increased labor efficiency and changing the way production is organized, for example using robots to solve the problem of decreasing profits as well as labor control. In the history of the development of the auto industry, the manufacturers of the different countries have, on different levels, automated labor-intensive tasks in varying degrees in order to cope with the rising labor costs and the labor movement.

Robotic process automation on the automotive industry. Image by Lenny Kuhne at Unsplash.com under CC license.

In 2015, China issued the “Made in China 2025” strategic plan, demonstrating its ambition to upgrade industry and technology. Industrial automation was of vital importance to realizing the goal of becoming a manufacturing power, and hence local governments and enterprises rolled out plans to replace people with industrial robots.

According to data from the International Federation of Robotics, China surpassed Japan as the world’s leading market for the use of industrial robots in 2013, and by 2019 the country’s installed capacity of industrial robots reached 783,000 total units. The automotive, electronics, and home appliance industries had a relatively high and growing rate of industrial robot use. Volkswagen declared about its plant in Foshan, “The paint robot in the workshop makes the automation rate of the topcoat line reach 100%.” When the flow of migrant workers toward the southeast coastal region was restricted in 2020 by transportation closures and quarantine measures under the influence of Covid-19, companies accelerated the pace of automation. Data from MIIT shows that during the first ten months of 2020, industrial robot production exceeded 180,000 units, a year-on-year growth of 21%, reflecting an inescapable trend toward automation among companies in the manufacturing sector. For example, in 2014 the government of Dongguan, long a signifier of ‘the world’s factory’, established funds for replacing humans with industrial robots, offering subsidies to companies that utilized robots. Data from 2017 shows that local enterprises added at least 70,000 units of new equipment and shed an estimated 190,000 jobs.

However, although the use of robots has been strongly supported by subsidies, the effects of technological unemployment resulting from automated production have been deliberately overlooked. At a national level, ambitious automation policies rarely have corresponding discussion or policies for laid-off workers. As far as local governments are concerned, it is impossible for migrant workers to enjoy unemployment funds or benefits such as career re-training in the area their jobs were located. Official data shows that although China’s unemployment insurance fund has grown to an accumulated 600 billion yuan, only 2.2 million people receive unemployment relief annually, a benefit rate of 1.1%. During the national production shut down in the first two months of 2020, only 2.19 million people received 6.1 billion yuan in unemployment compensation. Moreover, urban governments were able to reduce financial investment in social order and public services as large numbers of migrant workers left cities and returned to rural areas.

Unemployment caused by technical adjustments has become China’s new social-economic challenge, affecting in particular older persons, the less well-educated, the under-skilled and women in a highly negative fashion. Due to ageism, gender bias, learning ability, and other restrictions, these workers have practically no chance of achieving upgraded skills through either internal or external career training that will enable them to return to the labor market.

Product adjustment refers to capital entering emerging, creative, and higher value-added production to squeeze out more profit. In recent years, product adjustment in the automotive industry has primarily meant the shift from gas to electric; China has the opportunity to use its advantages in battery production to become a leading power in the New Energy Vehicle sector.

Batteries are the key component in NEVs (New Energy Vehicles). On the production side, power battery companies use complex processes to turn raw materials into battery packs, which they then supply to vehicle manufacturers. Currently, Chinese companies occupy a leading, almost monopolistic position in the area of raw material mining and battery production; Chinese companies command an 80% share of the market for processing cobalt concentrate and Contemporary Amperex Technology (CATL) has led global shipments of power batteries for several years running.

Further study is required to determine the possible influence the rise of New Energy Vehicles and supply chains in China will have on the global labor market. One thing is certain: the leading position of Chinese enterprises in the new energy sector is aided not only by large government subsidies but by production efficiencies resulting from an unregulated labor system. For example, despite CATL’s high degree of automation, overtime work is a regular occurrence for its basic work force, leading to a high rate of turnover. The accusations of rights violations often directed at China’s raw materials companies are due to serious child labor problems in the cobalt mines of Africa.

Chinese enterprises are prepared to bring the exploitative factory regime they use at home overseas: no contracts or insurance payments, wages lower than the nationally-regulated minimum...

Exporting China’s Labor Exploitation System

For quite a few years the Chinese government has been putting considerable energy behind its ‘Go Out’ policy, the Belt and Road Initiative in particular. Chinese overseas investment has gradually expanded from infrastructure, energy and mining into manufacturing sectors such as clothing, shoes and electronics, and privately-owned companies are now investing alongside state-owned enterprises, reflecting a ‘race to the bottom’ in which Chinese manufacturing capital seeks out regions where labor costs are lowest.

At the same time, Chinese enterprises are prepared to bring the exploitative factory regime they use at home overseas: no contracts or insurance payments, wages lower than the nationally-regulated minimum, piece-based wages to encourage overtime, extended working hours, compulsory holiday work, no overtime payments, at-will dismissals, and a ban on labor unions. These labor rights infringements often trigger labor conflicts and even spark worker unrest. Numerous reports have appeared in the local and international press, and this writer has heard multiple accounts of African union leaders complaining about illegal activity on the part of Chinese companies. Shougang, a Chinese SOE, acquired the Peruvian mining company Hierroperu S.A. in 1992, where large-scale strikes and violent encounters began occurring every year beginning in 1996. In Romania, several hundred Chinese construction workers petitioned outside the Chinese embassy in 2009 to protest against an agency withholding their wages.

A classic case of China’s export of its ‘migrant worker production system’ is the construction sector. According to China’s Ministry of Commerce statistics, by the end of 2019, China had sent more than 10 million workers abroad (not including, of course, data from illegal agents, 40% of which were in construction.) Domestically, the primary employment model is the subcontracting system, in which the majority of construction workers lack labor contracts, are paid at the end of the year, and are not compensated for work injuries. This is the system that SOEs have brought overseas. In 2015, this writer interviewed a number of Chinese workers who had worked in Africa to learn about local labor conditions. Working in Africa is typically facilitated by an agency that acts as a services company as well as a private contractor, which means that workers sign an agreement with the agency, not a labor contract with the construction company. Terms are usually 20 months, during which time they cannot return to China. If they do so, they are responsible for the plane ticket.

The visa they obtain upon arrival in Africa is ordinarily a half-year tourist visa which is renewable upon expiration. When they return home after their work term is up, they must bribe police or customs officials at the airport to obtain a legitimate exit visa. During their time in Africa they reside on a construction site that is walled in on all sides with an armed guard posted at the gate. Workers are not usually let out, although in the daytime they can go in groups to the entrance to buy commodities at a market set up by locals. At night, they are strictly prohibited from leaving the compound. Workers enjoy no weekends or vacations during their time in Africa; at most they receive a day off for traditional Chinese holidays such as the Spring Festival. Asking for time off is usually not allowed.

Wages differ according to the type of work. Working at height commands the highest wages due to the high risk factor, while menial work is paid relatively poorly. The pay standard is in the range of 250-300 yuan for every nine-hour day; sometimes there can be 2-3 hours of overtime which is accounted separately. Wages in Africa are 1.75 times those in China, which is why so many migrant workers are willing to pay agency fees of 20,000-40,000 yuan to go abroad for work. But actual conditions overseas are often different from those stipulated in the agreement. Wages on the worksite are paid out seasonally, but never in full: only around 70% will be transferred to a Chinese bank account. Sometimes wages will be delayed. Workers who strike in protest against unpaid wages will ultimately be terminated and deported back home.Worse, there is no social insurance during the employment period. Before departing for Africa, the worker will reach an agreement with the agency for an amount to be paid in compensation in the event of a work injury. Death results in a one-time payout of 650,000 yuan, with no possibility for an investigation by family members. The workers interviewed said that work-related injuries or deaths occurred on their own or neighboring work sites.

A calls for helps Weibo post by oversea Chinese workers in Nigeria.

After the outbreak of Covid-19 in 2020, China’s overseas migrant workers were called ‘silent victims’ by a report released by China Labor Watch in April, due to the Chinese government’s rollout of the world’s toughest circuit breaker measures for passenger flights as a means of restricting air travel to China. Workers on many Belt and Road projects were unable to afford the high price of an air ticket, nor could they provide the unrealistically stringent test report required by the government, so they were forced to remain on the work site in awful living conditions with no access to treatment for illness or injury. A large number of calls for help have been posted to Chinese social media by Chinese workers across the world.

As a Shanghai Law Society report concluded in 2018, the harm to Chinese overseas labor rights is manifested in the following ways: 1) Fraudulent information during recruitment; 2) Non-fulfillment of rights stipulated in the contract, such as violations of the minimum wage, delayed wages, extended hours, and no overtime compensation; 3) Restrictions on personal rights, such as restricted personal liberty, passports held for ‘safekeeping’, physical attacks against protestors, and forced repatriation; 4) Lack of social rights, including no social insurance in the host country and an inability to join unions; 5) No effective guarantee of personal safety; 6) No guarantee of the dignity of life, such that workers are treated contemptuously, or subjected to physical or verbal abuse. The authors of the report call for Chinese policies to gradually be elevated to international labor standards.

When China used its cost and scale advantages to become the main producer of global goods and western nations began to taste the fruits of deindustrialization, their enormous reliance on China’s products and market became a bargaining chip between China, European and American countries in the areas of human rights and geopolitics.

Why China’s Labor Rights Matter

In the tide of neoliberal deregulation over the past few decades, European and American multinational capital found huge commercial success in the pursuit of low cost of production, which to a large degree has relied on China’s apparently limitless supply of highly disciplined migrant workers (who, ironically, are to a certain extent the legacy of a socialist planned economy). From this perspective, China’s exploitative labor system can be viewed as a disguised subsidy for multinational corporations. European companies in China have always sought entry to broader markets and more equal competition but have never been motivated to change the existing exploitative labor regime; some corporate representatives have even claimed that this is simply China’s ‘way of living’. However, when China used its cost and scale advantages to become the main producer of global goods and western nations began to taste the fruits of deindustrialization, their enormous reliance on China’s products and market became a bargaining chip between China, European and American countries in the areas of human rights and geopolitics.

As opposition among global human rights and labor organizations to forced labor in Xinjiang ‘re-education camps’ surged, China’s labor rights became a global economic, social, and political issue, prompting multinational companies to take a more careful look at whether forced labor is part of their supply chain. In the post-Covid era, a consensus has formed in Europe and America to reduce the dependence on China for the supply chains of critical goods; multinationals can no longer simply arrange their suppliers solely on the basis of cost, but must diversify their risks. For European multinationals, this means pushing for China’s ratification and implementation of the ILO’s core conventions so that protecting the economic and social rights of Chinese workers is not only a moral responsibility but a long-term benefit as well.

First, the dramatic transformation of China’s demographics means that the population dividend driving its economic growth is no longer sustainable. To maintain the competitiveness of its supply chain, China is not only making substantial investments in industrial upgrades and technological innovation, it is also allowing for the destabilization of the labor market. Student workers, temps, and ethnic minority workers have expanded rapidly in recent years, and these forms of employment are characterized by a degree of coercion, deception and a lack of guarantees for workers’ basic legal rights. Such measures further reduce a business’s production costs, but they also lead to the deterioration of labor rights for migrant workers, triggering crises that are detrimental to stable labor relationships at European companies and their suppliers.

Second, if a multinational company’s supply chain in China is accused of using sweatshops or forced labor, it will face serious moral condemnation and pressure from public opinion, harming its image as a responsible corporate citizen and possibly exposing it to legal risk. The world’s clothing industry faces just such a problem. A shipment from the Japanese brand Uniqlo was seized at customs in May because it violated a US ban on the use of Xinjiang cotton.

Third, as the German Supply Chain Act points out, companies that are subject to checks by trade unions and who enact high human rights standards may be placed at a competitive disadvantage. For this reason, when multinational capital enjoys the advantage of low human rights in China, more European local enterprises might be faced with the inability to compete with cheap Chinese-made products and Chinese companies in Europe or tertiary markets.

Many Chinese scholars and legal professionals do in fact start off from the standpoint of economic and social sustainability and support integration with the ILO’s core conventions, although it is difficult to state so publicly at the present time. Similarly, due to China’s lack of independent trade unions and its harsh restrictions on NGO activity, raising China’s labor standards to a large extent relies on transnational advocacy, of which one excellent example is the campaign against sweatshops that targeted Apple and Foxconn. From this standpoint, European society, economic circles, labor and civil organizations should work more actively to push China to sign and implement higher standards of labor.

Author

Xu Hui

Xu Hui is a sociologist who has done extensive fieldwork on migration and labor in China. He is currently pursuing a PhD at Friedrich Schiller University Jena.