LABOR ISSUES AT THE NATIONAL PEOPLE'S CONGRESS

UNCLAS BEIJING 000682


DEPT PASS USTR FOR KARESH, STRATFORD, LEE
LABOR FOR ILAB - LI, BRUMFELD AND LIPKE
TREAS FOR OASIA/ISA
USDOC FOR 4420/ITA/MAC/MCQUEEN AND DAS KASOFF

E.O. 12958: N/A
TAGS: ELAB ECON EFIN PGOV CH
SUBJECT: LABOR ISSUES AT THE NATIONAL PEOPLE'S CONGRESS

REF: A) Beijing 448
B) Beijing 484
C) Beijing 580


1. Summary: Labor issues, especially unemployment, were
a major theme of the Chinese People's Political
Consultative Conference (CPPCC) and National People's
Congress (NPC) meetings that began on March 3. Senior
government officials cited a severe unemployment problem,
with over 20 million rural migrant workers currently
unemployed and 6.1 million university graduates about to
enter a very weak employment market. Government leaders
said they would continue to implement China's new Labor
Contract Law (LCL),but that it may be necessary to
reduce wages and working hours through the LCL-mandated
collective consultation process in order to preserve jobs
in some enterprises. The government reaffirmed that its
long-term industrial policy is to move away from labor-
intensive industry. The All China Federation of Trade
Unions (ACFTU) is acting as an instrument of government
policy, viewing its role as uniting the labor force
behind the government and Communist Party, and has warned
against activity that "in the name of rights protection,"
would "destroy the unity of migrant workers." End Summary.

A SERIOUS UNEMPLOYMENT SITUATION
--------------


2. Yin Weimin, Minister of Human Resources and Social
Security (MOHRSS),described China's unemployment
situation since the onset of the global financial crisis
as "severe" at a March 10 press conference at the NPC,
and said recovery is not yet evident. Yin said migrant
workers from rural areas were the group most affected and
he offered the following statistics: of 140 million rural
migrants working in urban areas, about 50% (70 million)
returned to their home towns before the Chinese New Year
holiday in January. This was 10% higher than in normal
years. After Chinese New Year, about 80 percent (56
million) of these workers set out again to seek wage
employment in urban areas. Yin said about 45 million
have found jobs, while 11 million remain unemployed.
(Note: Depending on how one defines unemployment, this
suggests a current unemployment rate for migrant workers
of 25-35%, but government sources continue to cite 20-25
million as the estimated number of unemployed migrant
workers. End note.) Yin also described the job market
for college graduates as "grim" with 6.1 million new
graduates about to join a weak job market, and reiterated
policies the government is taking to promote graduate
unemployment (ref A).


3. Yin said that January and February had seen a net 1%
increase in urban job creation, but that is too soon to
say whether this indicates a recovery. He noted the
sharp net loss of urban job opportunities in October (by
840,000 positions),November (550,000 positions) and
December (380,000 positions) and said that a MOHRSS
survey of enterprises in 15 target cities found that 40%
were reducing their workforce, suggesting a total
reduction in urban job opportunities of about 5% in
enterprises nationwide since the beginning of the 4th
quarter of 2008.

STICKING WITH THE LABOR CONTRACT LAW
--------------


4. In response to rising unemployment, the central
government has reportedly given local labor bureaus
flexibility not to enforce certain provisions of the
year-old LCL if it will result in job loss (ref B).
Labor bureaus are using article 41 of the LCL, which
outlines procedures for handling mass lay-offs, to
negotiate lower wages and working hours in troubled
enterprises that agree not to lay-off their workers. At
the March 10 NPC press conference, however, MOHRSS
Minister Yin Weimin, denied that the government had
relaxed enforcement of the Labor Contract Law or other
labor regulations. He noted that MOHRSS and the NPC had
each conducted separate studies of the implementation of
the Labor Contract Law and found that it has effectively
improved the protection of workers' rights.


5. Since the concurrent CPPCC and NPC meetings began on
March 3, several other senior government officials have
vigorously defended the LCL. NPC Secretary General and
Chair of the NPC Foreign Affairs Committee, Li Zhaoxing
told the press on March 4 that the global financial
crisis, not the LCL was responsible for the difficulties
some Chinese employers now face, and that full
implementation of the LCL was the right long-term
strategy to protect workers interests. Xin Chunying,
Deputy Director of the NPC Standing Committee's
Legislative Affairs Commission, quashed speculation at a
March 9 NPC press conference that the NPC may revise or
repeal the LCL.


6. Zhang Mingqi, Vice-Chairman of the ACFTU also noted
at a separate NPC press conference on March 9 that the
LCL, had had a positive effect in preserving jobs in
troubled enterprises. Zhang also said that the ACFTU
opposed the idea of lowering or eliminating minimum wages,
noting that the minimum wage is intended to guarantee a
basic livelihood. Eliminating the minimum wage, he said,
would not solve the problems of troubled employers, but
would create new problems for workers.

NOT RETHINKING ECONOMIC POLICY
--------------


7. At the March 10 NPC press conference, journalists
asked Minister of Industry Information and Technology
(MIIT) Li Yizhong whether the government is reconsidering
its policy to move China away from labor-intensive
industries. Li acknowledged, that in the near term, the
government is concerned about the closure of large
numbers of labor-intensive, export-oriented enterprises.
He noted that 7.5% of small and medium-sized enterprises
in China's export-oriented coastal regions had either
suspended production or gone out of business since the
global financial crisis began. But Li denied that the
government had changed its policies to promote the
transition to higher-value added industries and services.


8. Li said the government's policy was to ensure
continued industrial growth and protect jobs. He
referred to portions of the Government Work Report,
delivered by Premier Wen Jiabao on March 4 (ref C) that
called for industrial consolidation to absorb troubled
enterprises. (Note: The Work Report itself also states
that "no government investment will be made in the
regular processing industries" and that "we need to
support non-governmental investment in areas favored by
state industrial policies and encourage enterprises to
increase spending on research and development and
technological upgrading...").


9. ACFTU Vice-Chairman Zhang Mingqi also responded to
press inquiries about industrial policy. At the ACFTU's
March 9 NPC press conference, Zhang said the ACFTU
supports policies to upgrade industry, such as Guangdong
Province's Double Transfer Policy, but that employers
should either provide training to workers so that they
can keep their jobs through the industrial transformation,
or compensate workers who lose their jobs.

GOVERNMENT INTERVENES IN INDUSTRIAL RELATIONS
--------------


10. As a matter of policy, the government is now using
its power to regulate labor relations to preserve jobs,
even if it means reducing wages or working hours (ref B).
The Government Work Report addressed this point clearly,
stating that the government will "help enterprises that
are in difficulties to prevent layoffs by renegotiating
wage levels with their employees, adopting flexible
employment and work hours, or providing job training for
them." MOHRSS Minister Yin Weimin explained at the NPC
press conference on March 10 that this is consistent with
the LCL. The global financial crisis, he said, presented
new problems in implementing the LCL. While "we must
implement the Law in a fair and comprehensive way, we
must also address the difficulties our businesses face."


11. The ACFTU is playing its part in carrying out this
government policy. Zhang Jianguo, Director of the
ACFTU's Collective Contracts Department, told
participants in the ACFTU's March 9 NPC press conference
that the global financial crisis has caused great
hardship, but that the LCL's provisions regarding
consultations on mass layoffs provide a way to deal with
this hardship. Zhang Jianguo said it may be necessary to
discuss wages to keep some employers in business. ACFTU
Vice-Chairman Zhang Mingqi said consultation on wages at
troubled enterprises was a core feature of the ACFTU's
new "Common Agreement Campaign" (ref B),and that in many
cases, these consultations have resulted in agreements
not to cut staff or wages.

THE ROLE OF THE ACFTU
--------------


12. The ACFTU, which is accountable to the Communist
Party, not to its members, and has no elected leadership,
is acting as an instrument of government policy.
According to knowledgeable Embassy contacts, these
policies were coordinated in late 2008 through the
national Tripartite Commission on Labor Relations.
Through the "Common Agreement Campaign," the ACFTU is
playing an active role, mostly in state-owned enterprises,
negotiating or renegotiating collective contracts that
seek to balance the interests of employers and employees
and prevent job loss. The ACFTU is also using its own
resources to provide vocational training, legal
assistance, small business loans and economic subsistence
benefits to unemployed migrant workers.


13. At its March 9 NPC press conference, ACFTU also
trumpeted a campaign entitled "In the Same Boat, Helping
Each Other to Maintain Economic Growth and Foster Social
Development," which consists of work skills competitions
and other social activities to raise awareness about the
need to increase labor productivity to prevent job loss
during difficult economic times. ACFTU Vice-Chairman
Zhang Mingqi justified the ACFTU's role, noting that the
ACFTU's constitutional mandate was to maintain unity in
China's labor force. Zhang Mingqi went on to add that
"there are some people who, in the name of rights
protection, will seek to destroy the unity of migrant
workers. We oppose this kind of behavior, and remind all
of our unions to be vigilant against this danger."

PICCUTA