China to foreign companies: Join the party!

Unions—and the state—knock on the doors of multinationals in Beijing

The Economist

Hong Kong–IN LATE April the human-resources departments of many multinational companies with offices in the district of Chaoyang, global firms’ favourite part of Beijing, began receiving text messages. These messages emanated from the local district offices of the All-China Federation of Trade Unions, the country’s monopoly union organisation, which is closely aligned with the Communist Party. They were brief: an investigation would be carried out into the companies’ operations, and a limited amount of information was requested. A close reading, however, revealed several oddities.

The union federation sought information about salaries—not the total or average, as is common—but by various managerial categories. The information was to be supplied as part of an “investigation”, a rarer and more serious affair than a mere “inquiry”. And the requests contained oblique references to a mysterious form from which the questions were drawn.

Companies on the receiving end made reciprocal inquiries, which led to a bit more clarity. Some are drawing their own conclusions. “It is a preliminary step in a drive to unionise the employees of multinationals,” says Lesli Ligorner, a lawyer in China with Paul Hastings, an international law firm. That would be consistent with China’s current policies: Hu Jintao, the country’s president, has often said it is necessary to bring multinationals’ Chinese operations within the union fold to promote his vision of an harmonious society. Even so, it marks a shift: big companies have hitherto been welcomed for providing foreign capital and expertise, and spared intervention of this sort. Unionisation drives have largely been confined to industrial hubs which have a history of activism, such as Guangdong on the southern coast and Tianjin, east of Beijing…

…Many companies are delaying anyway, hoping to avoid a greater inconvenience than the payroll charge. Another consequence of unionisation is that representatives of the workers must be included among the senior executives determining corporate strategy and the terms and conditions of employment. These are defined so broadly that they even encompass the relocation of a company’s headquarters.

Because the representatives must be approved by the union federation, they are likely to be tied, directly or indirectly, to the Chinese government. So unionisation brings the state into management. What this sort of collaboration will mean for the running of the company and the protection of trade secrets is an open question…

Read the entire article at The Economist.

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