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Damping Labor's Fires


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DAMPING LABOR'S FIRES

In the boom towns of southern China, worker safety often takes a backseat to fast profits. During the past few months alone, a series of deadly accidents claimed hundreds of lives. In mid-July the government responded, with more than 60 teams of inspectors descending on Shenzhen and halting work at over 1,000 dangerous construction projects. Critics say much more needs to be done. "We've seen one disaster after another," says Winne Tam Pik-yan, executive secretary of the Hong Kong Confederation of Trade Unions. "If they don't take action, there will be many more."

Throughout China, Beijing is facing a labor backlash against its fast-growth policies. In the south, accidents, plant fires, and dismal living conditions have created a tinderbox atmosphere at thousands of new factories put up by foreign investors in recent years. In the northern Rust Belt, shrinking paychecks and threats of unemployment have sparked protests at the huge state-owned companies that are the heart of Chinese industry.

With the labor temperature rising, Beijing is now being forced to act. In the state sector, the government is backing off from ambitious plans to cut subsidies because that would have caused more job losses. Moreover, in recent weeks, Beijing has issued a series of decrees aimed at curbing abuses by foreign joint ventures, which will be forced to organize workers in unions and to abide by new laws regulating child labor. Yet local officials are hesitant to crack down too hard on labor abuses for fear that it may scare off foreign investors and cause even more labor problems.

STRIP SEARCHES. The need for action is clear. In foreign-funded factories, which employ about 6 million Chinese in the coastal provinces, accidents abound. In some factories, workers are chastised, beaten, strip-searched, and even forbidden to use the bathroom during work hours. At a foreign-owned company in the Fujian province city of Xiamen, 40 workers--or one-tenth of the workforce--have had their fingers crushed by obsolete machines. According to official reports, there were 45,000 industrial accidents in Guangdong last year, claiming more than 8,700 lives.

Overseas accounts of factory fires have embarrassed Beijing and forced it to launch a damage-control operation. Last month, after 76 workers died in a Guangdong factory accident, official newspapers and TV provided extensive coverage when President Jiang Zemin visited the survivors. The official press is now highlighting abuses at foreign enterprises in an effort to show workers how much better things are at Chinese-run factories. The government is also singling out Hong Kong, Taiwan, and other Asian investors as the main culprits. "Their emphasis on profits and their cavalier disregard for safety open the door to more accidents," warns Wang Yu-

xian, director of the International Liaison Dept. of the government-run All-China Federation of Labor Unions (ACFLU).

Western diplomats in Hong Kong insist that not all of the transgressors are from outside China. Some of the worst factory owners are mainland Chinese who have set up shell companies in Hong Kong that reinvest in China at a reduced tax rate. Both overseas and mainland Chinese have proved adept at getting around regulations that are supposed to ensure worker rights. Many investors bribe local party cadres, while other officials, eager to attract business to their province, are willing to accept foreign investment at any price.

STRIKES AND SLOWDOWNS. Since decentralization of authority has made it easier for local officials to cut deals with foreign investors, Beijing wants to reassert control by ordering foreign-funded joint ventures to set up branches of its ACFLU. Only 12% of these enterprises now have union branches. The ACFLU, nicknamed a "yellow union" by critics, is notorious for its pliant cooperation with its masters in the central government. Having it in the factories will therefore help Beijing gain influence over management and local government officials. It won't, however, do much for most workers, say labor activists. "Yellow unions are totally useless," says Hong Kong Confederation of Trade Unions Director Tam. "Whenever management negotiates with the union, the union agrees with management."

As it tries to reassert a measure of control over the entrepreneurial south, the central government also must fix the deep-rooted labor problems in the industrial north. State enterprises, which dominate the northern economy, employ nearly half of China's urban population, and half of those companies are losing money. Official statistics put urban unemployment at 5 million this year, a 25% increase over last year. But by other accounts, that figure is too low. According to Han Dongfang, the Chinese labor-union activist exiled to Hong Kong, as many as 50 million workers--or half the total workforce at state factories--are on the verge of unemployment.

For now, Beijing is unwilling to allow many enterprises to go bankrupt for fear of social unrest. The government got a taste of worker anger recently in the northeastern province of Heilongjiang, where some 2 million workers lost their jobs in 1993. According to Hong Kong and diplomatic sources, in March some 100,000 workers took to the streets in the province's two major cities, Harbin and Qiqihaer, to protest pay cuts. In mid-April, China's economic czar, Vice-Premier Zhu Rongji, visited the province and sacked its governor, these sources say. That won't deter workers, who have engaged in unpublicized strikes or slowdowns across China to demand such things as decent wages and better working conditions.

Given the backlash by urban workers, reform of the state sector has not proceeded as swiftly as the leadership had hoped. This year the government was supposed to launch an experiment that would completely revamp the management structure mf 100 state enterprises. Officials say enterprise reform will take place later this year, but as of now, nothing's happened, says Fan Gang, an economics professor at the Chinese Academy of Social Sciences in Beijing. Moves to privatize unprofitable state enterprises or convert them into shareholding companies have also stalled because of government fears that too many state assets will flow into foreign hands.

"WARNING LINE." Beijing hopes to create a social welfare system to ease some of the pressure. On July 1, unemployment insurance became mandatory in Beijing, where labor and management contribute to a fund used to pay off unemployed workers. In some cities, the government is setting up an "unemployment warning line," or an acceptable rate of unemployment. If a locality exceeds that amount, it can tap into newly formed central and provincial unemployment insurance funds. Beijing has also announced a new labor law that was 16 years in the works. Effective next January, the law sets a minimum age of 16 for workers, a minimum wage, and an average workweek to be limited to no more than 44 hours and six days a week.

In this jittery climate, the government is moving to prevent the rise of a Solidarity-type labor movement by suppressing labor activists. Leaders of the League for the Protection of the Working People, an unofficial group of labor activists claiming 120 signatories around the country, have been arrested.

The challenge for China's Communist leaders is to prevent organized unrest from spreading while cooling off the economy to manageable levels. So far, Zhu seems to be orchestrating a soft landing, with economic growth slowing to 11.6% in the first half of this year, down from 13.7% for the same period in 1993. Inflation, too, is dipping from 25.9% to 22.7% in the major cities. And many workers at state enterprises are finding new jobs in the private sector.

But, as the fatal accidents in the south prove, the private sector alone won't solve the labor problems. Tens of millions of rural workers are still streaming to the cities, and millions more urban workers are facing pay cuts and layoffs. For the leadership in Beijing, the pressure of finding enough jobs for the world's largest workforce could leave safety concerns in danger.

CHINESE WORKER WOES

FATAL ACCIDENTS

Dozens of workers have died in fires in foreign-funded factories this year

PAY CUTS

Employees of money-losing state-run enterprises have seen their paychecks shrink by as much as 50%

THREATENED LAYOFFS

Tens of millions of urban workers are underemployed at companies on the verge of bankruptcy

MEEK UNIONS

The official trade workers' organization is controlled by Beijing and rarely stands up for workers

DATA: BUSINESS WEEKJoyce Barnathan, with Matt Forney in Beijing


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