China Slams the Brakes, Maybe

Chinese officials are now contemplating a new labor rights code that just might seriously slow rising global inequality. But the code faces some enormously powerful — made-in-the-U.S.A. — opposition.

October 16, 2006

Can a "harmonious" society tolerate a vast chasm between the rich and everyone else?

The leadership of the Chinese Communist Party has apparently concluded, after years of winking at what may be the world's most rapidly growing economic divide, that harmony and inequality just don't mix. That leadership is finally taking steps to brake the workplace exploitation that's driving China's furiously growing economy.

But this braking is sparking some intense opposition — from a powerful phalanx of big-time American corporations. These companies are threatening to shut down their extensive Chinese operations should China's top officials adopt a draft new law that increases labor rights for Chinese workers.

China's ruling elite, consequently, now faces a choice that could determine levels of global inequality for years to come.

That elite can choose to placate global corporate giants with operations in China — or challenge them. The pressure to placate will be enormous. Wal-Mart, Nike, and other major U.S. companies active inside China currently generate two-thirds of the products China exports to the rest of the world.

But the pressure on Chinese leaders to resist this corporate power — and “control the income gap” — has become a key factor in China's political equation. Chinese worker protests against an economic status quo that boasts 15 billionaires and 200 million people struggling to get by on less than $1 a day have been escalating.

Last year, 87,000 "mass protests" took place inside China, up from just 10,000 in 1994. And that has Chinese officialdom deeply worried.

A generation ago, the leadership of the Chinese Communist Party abandoned the "class struggle," embraced the market, and declared that "to get rich is glorious." Now that leadership sees widening inequality as chief among the "contradictions and problems that impair social harmony."

Chinese officials, explains Qin Xiaoying, an analyst with the China Foundation for International and Strategic Studies, "know well that it is dangerous when the disparities and differences become too wide to be bridged, and threaten to disrupt the social fabric."

That fabric is stretching — at an incredible rate — as more and more wealth concentrates at the top of China's economic ladder. The latest annual China Rich List, released last week by the Shanghai-based Hurun Report, counts 500 Chinese nationals worth at least $100 million.

The first China Rich List, published just eight years ago, counted only 50 Chinese affluents worth over $6 million.

This past spring, in a surprising move to start narrowing the widening "disparities and differences" that now define and disfigure China, Chinese officials unveiled a "Draft Labor Contract Law" and openly asked for public comment on it.

The new draft law offers Chinese workers what one international union rights group, Global Labor Strategies, calls a "modest" package of workplace job protections.

The proposed new law, Global Labor Strategies notes in a report released last week, does give workers more of a right to negotiate over workplace policies and procedures. But the proposal does not "provide Chinese workers with the right to independent trade unions with leaders of their own choosing and the right to strike."

U.S. corporations are seething anyway. The American Chamber of Commerce in Shanghai, a powerhouse that includes 150 Fortune 500 companies, has filed 42 pages worth of objections to the draft law.

These pages carry a not-so-veiled warning. The adoption of the new labor standards, the American Chamber of Commerce informs the Chinese government, just might "negatively impact” China's “appeal as a destination for foreign investment."

This corporate offensive against the draft labor code makes a mockery of the argument — frequently invoked by Wal-Mart and other U.S. corporate giants — that the American corporate presence in China is building a respect for basic democratic values.

"By opposing a labor contract reform law that would elevate labor and human rights standards," notes Global Labor Strategies, "American and other foreign corporations are aggravating the very conditions they claimed they would ameliorate."

But the impact of the battle over the new Chinese labor code, adds Global Labor Strategies, goes beyond China. The U.S. corporate attack on the draft code — if successful —- will "hurt not only Chinese workers, but workers around the world who are put into competition with them."

The new Chinese labor code could go into full effect as early as next March. Whether the code does go into effect, says Global Labor Strategies, will depend in part on how much pressure American labor groups can place on U.S. corporations to "reverse their opposition to the draft labor code."

For those "who represent American workers in union halls and the halls of Congress," the group concludes, the coming face-off over China's draft labor code offers a pivotal opportunity "to draw a line against the race to the bottom."

A race that in China, and around the world, only enriches those already at the top.

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