In this environment it is unsurprising that the Labor Contract Law (LCL) and other progressive Chinese labor legislation of 2008 have come under renewed assault. From the beginning, foreign business associations, such as the American and EU chambers of commerce, along with Chinese businesspeople, like CPPCC delegate and paper tycoon Zhang Yin, have opposed or called for amendments to the LCL. In April last year, soon after the law’s enactment, Stanley Lau, deputy chairman of the Federation of Hong Kong Industries, complained that “the law requires too much of companies too soon." And at the end of 2008 and early months of 2009, some authorities began listening.
In January, Guangdong province put forward a much-criticized set of “opinions” reining in the ability of law enforcement to detain factory bosses or freeze their bank accounts for small offenses, while in November the country’s top labor official allowed local governments to delay planned minimum wage increases and reduce social security payments by companies. There is anecdotal evidence circulating online, furthermore, that suggests local governments are turning a blind eye to a variety of labor abuses as long as factories don’t lay off their workers. I imagine the prevalence of this last problem varies considerably from province to province and city to city.
However, as ILRF’s Executive Director, Bama Athreya, noted during testimony to the Congressional-Executive Commission on China last week (a summary of her comments is available here), labor costs are a small part of production costs in export processing zones like those in China, the Philippines, Mexico and elsewhere—and are nothing compared to the impact on these factories of a drop in foreign demand for their exports. For example,Newsweek reports that toy exports from China to the U.S. were down even before the financial crisis started to deepen: