How Chinese economic wobbles hit workers

Submitted by AWL on 2 December, 2014 - 6:00

At the end of November, two Chinese government researchers published an estimate that over the past five years US$6,800 billion of investment in China has been wasted on bridges to nowhere and homes and offices with no one in them.

The estimate is disputed, but few doubt that huge excess capacity has been built. The Chinese government is trying to slow down the investment surge gently, and producer prices in China have been deflating since mid-2011.

The Chinese economy has a big build-up of debt, including debt whose counterpart is assets currently unused and maybe likely to be unused for some time. Some economists think that this accumulation of debt poses the risk of an economic crisis in China.

What would a crisis — or even a government-planned slowdown — mean for the greatly-expanded Chinese working class?

Anita Chan, a researcher into Chinese labour conditions and author of China’s Workers Under Assault: Exploitation and Abuse in a Globalizing Economy (2001), spoke to Martin Thomas.

AC: The construction sector has been booming for 20 years. Look at the highways, look at the express trains — they have all been constructed in the last ten years. Look at the new commercial and residential buildings over the last 30 years. China has been a leading builder for a long time.

In 2008, as part of the “stimulus plan”, China invested a lot of money. To offset the economic crisis, money was allocated to lower-level state and regional governments. These lower-level government authorities just keep on building!

The construction sector is staffed by male migrant workers. They come in groups from the villages, they do construction projects, then they go back. They are being terribly exploited. Occupational health and safety is almost non-existent.

The pattern has been for construction workers to be owed a lot of back pay. They would regularly have protests about back pay in the couple of months before Chinese new year because they are often paid at the end of the year. There were many cases of construction workers climbing to high places and protested by threatening to commit suicide.

The government responded to this by cracking down on non-payment. They didn’t want the bad publicity. The situation has improved moderately in this respect because of government intervention.

MT: We don’t see many reports of strikes in construction. Why is that?

AC: Construction workers are very mobile. They are usually peasants coming out in gangs headed by a relative or friend. Even if they stop working, it will be only a very localised incident, on a construction site. Research on strikes in China tends to focus on south China. For one, that’s because lots of the researchers are based in Hong Kong, close to Guangdong.

Guangdong province also has the highest concentration of foreign-run factories and supplier factories for multi-national companies. The Asian foreign-funded sector tends to be the most exploitative. You get this phenomenon in Vietnam too, in the supplier factories in Ho Chi Minh City.

Labour unrest is disproportionately concentrated in the supplier factories for multinationals. Researchers cannot keep up with the number of incidents and statistics for this unrest. Workers on one or two production lines can go on strike for a couple of days. Is that a strike? Local governments do not release figures on number of collective protest actions. Even if they have some figures, they are not reliable since they may not be aware of a strike unless employers called them or workers began taking street action. So there is no real way of knowing all the facts. Local government has no incentive to record protests, because it does not reflect well on them to upper level governments.

Are protests in the construction sector included in the government figures? I don’t know. You can’t trust the figures.

MT: Economists are discussing the government’s attempt to restrain the growth of credit, and the possibility of a crisis developing if that restraint bursts the bubble of expanded credit from recent years. Either of those factors could lead to a big slowdown in construction and huge lay-offs among China’s 45 million construction workers.

AC: The size of local government building projects and contracts is vast. Yet lots of these buildings are empty.

All universities now in China have new campuses outside the cities — enormous, unbelievably large campuses. They get the land for free, and the bigger the project, the more corruption money you can get from a building project.

Many empty buildings have been thrown up for no purpose. Whole ghost cities have been built that no-one lives in.

The money comes from the banks. So if the government says to the banks, “don’t give money to local government to build useless things”, there will be a slowdown.

MT: And the 45 million construction workers?

AC: They are peasants. They will go home and work the land. While working on the projects they live on the construction sites or nearby ramshackle structure. When there is no work, they go home. To the government, that is not a big issue.

In the past 15 years, the Chinese government has started to take better care of the countryside. They have instituted a series of reforms. Since the mid-2000s, there have been no tuition fees, no agricultural tax, and social insurance and medical insurance — on a low level, to be sure — have been offered to rural people. By rural standards, this is good. The situation in the countryside has improved.

For some peasants, going to look for work isn’t always the best option. They weigh the pros and cons to see whether they can really make money by joining a construction gang. Rural poverty is less visible and not as desperate as urban poverty.

MT: Some reports indicate that construction workers are low-paid compared to factory workers.

AC: If the wages are really paid, and not owed, as is common with sub-contractors, then the wages are not terribly low in comparison. Per day, some construction workers make more than many factory hands.

It is hard work. But it is seasonal. Building workers are quite used to that. They get tired, they go home to their village for half a year take a rest and then they come out again.

MT: In recent years, there has been a big rise in the number of agency workers, to something like 60 million. Where are they found? What are their conditions? If there is a crisis or a planned economic slowdown, are they likely to be the first in line to lose their jobs and suffer?

AC: I would say yes, especially in the state sector. They hire a lot of agency workers. So you have core workers, and then more-flexible agency workers. These days, it is like in the USA.

In China, there is a tradition about providing for the workers, a legacy from the previous era. Politically, things were bad — but workers did enjoy benefits. Many “core” workers continue to enjoy those benefits.

Agency workers do not. They are the flexible ones. When times are bad, they go.

In the non-state sector, they maintain a core of workers in certain positions. But generally agency workers are hired everywhere.

In banking, they hire so many agency workers — tellers, cashiers, those who do the routine work – that can be up to 80% or so in some banks.

It’s different in different sectors. In the private manufacturing sector, there are agency workers. In Guangdong province, since the majority of the workers, often 100% are migrants employment is alrady quite flexible. They sign one or two-year contracts.

Employers don’t need to hire through agencies because these contracts are so short-term anyway. They can recruit directly by sticking up hiring notices outside the main gate of the factory. If there is a shortage they can go to the agencies. Some use both methods.

A few years ago the ACFTU did some research and found there were 60 million agency workers. That was the official figure several years ago. By means of the revised labour contract law, the government tried to control the number of agency workers. But in fact employers have wound up employing more agency workers.

Agency companies have to function like an ordinary company. If a worker signs two contracts, the third contract must be permanent. Obviously agency firms avoid that. And the government doesn’t really monitor agencies, so the problem is not really resolved.

MT: Are agency workers used to break strikes?

AC: Not that I have heard of. Strikes in China are not like strikes in Australia or England. It is very spontaneous. 10% or 20% or 50% of the workers go on strike but the others don’t want to. There is no such thing as a picket line or collective bargaining. There are no rules about picketing or whether a strike is protected or not protected. Legally, strikes are not illegal. It is not mentioned in the labour law. A worker cannot be charged for going on strike. If strikers are arrested, it is for other reasons, like obstructing the street or instigating trouble. But they these are universal excuses in all countries to suppress strikes.

You have a strike, after a while everyone goes back to work, they fire the leaders if they can find them, and that’s the end.

The way that factories used to hire in Guangdong was to stick up a poster at the main gate, and people would come every day. That’s still how they are able to recruit at Foxconn.

MT: So they wouldn’t need to deploy agency workers — they could just hire replacement workers directly. Construction workers in the cities have no status under the household registration system. What about agency workers?

AC: Agency workers can be locals. It depends on the place.

MT: You have researched Wal-Mart’s operations in China. How have things changed in recent years with that?

AC: Things have got worse. Wal-Mart stores have over-expanded. In some cities, some stores have never really made money in recent years. Wal-Mart are closing stores, and are trying not to pay compensation. There have been some issues over that.

Wal-Mart workers just don’t have overtime. Not that overtime is great! But when wages are very low, and you don’t have overtime, you cannot make a living. Overtime rates in China are quite high — 100% more than the normal wage for weekends, and three times more for holidays.

There are a lot of part-time workers, who cannot enjoy the same benefits. Wal-Mart will make you work up to a certain threshold of hours, but not beyond, so that you are not considered full-time and you are exempted from benefits.

Wal-Mart saves money by not having overtime, and by having a lot of part-time workers. There is a lot of casual work. The shifts are very irregular at Wal-Mart.

On paper, Wal-Mart pays minimum wage. But after certain deductions, it comes out as lower than minimum wage.

A lot of housewives who cannot work full-time because of children take jobs in Wal-Mart as part-time workers. But the hours are very irregular.

In factories, wages are higher and you get a lot of overtime. On the other hand, Wal-Mart will not owe workers wages and fail to pay them on time, like construction employers might. Wal-Mart will pay medical insurance, and so they don’t break the law in that respect.

MT: There have been reports of the ACFTU being more willing to assert itself, in particular in foreign-owned enterprises. Is that the case?

AC: I came back from a conference with NGOs in the Shenzhen region three weeks ago and the situation is very bad. They think that the ACFTU is not doing much. The ACFTU has set up a legal aid office in the trade union building, but the workers generally don’t trust it. If you go to the ACFTU, they don’t do anything. That’s what the NGOs told me.

The Guangzhou trade union was generally seen as quite good because they had quite a reformist chairperson, Chen Weiguang, who you will hear a lot about, but he retired a year ago and nothing is happening now.

Because Wal-Mart tries to avoid violating the law, some Wal-Mart workers are quite old — they are in their 40s. I recently met some of them in South China. Wal-Mart is trying to get rid of them so that they will not have to pay social security. The workers are trying to get organised over the internet, in order to fight Wal-Mart.

Some of their activists are in touch with American Wal-Mart workers, which in China is a very dangerous, very risky thing to do.

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