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The Peoples Republic of China (PRC) is governed by a single authoritarian party, the Communist Party of China (CPC). With a population of over 1.3 billion people, it also has one of the world's largest labour markets. China is a rapidly growing economic power which has recently opened its doors to the world during the last few decades. After the founding of PRC in 1949, the CPC created the foundations of the employment relations in the 1950s. Due to increasing unemployment rates, China made many changes to the economic system and a new 'open door' policy was developed to encourage investments in order to catch up with other Asian economies, such as Japan(Zhu and Warner, 2000).
In its thirty years economic reform, the major employers of PRC workers changed from state-owned enterprises (SOEs) to privately owned enterprises and multinational companies(Jie, 2007). There were mass changes made to employment and industrial relations which lead to a meeting point between socialist climate of the Communist party and the capitalist climate ('free market') of the globalized economy(Molnar et al., 2008, Zhu and Dowling, 2002).
China has become one of the global leaders in the global manufacturing (i.e. textile, electronics, electrical), import and export industry (Winters and Yusuf, 2007). It is only second to the United States in the growth of world imports and exports (Winters and Yusuf, 2007).
In the recent times, private enterprises and multinational companies are growing in dominance over the vast employment market opportunities to take advantage of cheap labour cost(Wang et al., 2009).
With the growing prowess of China as an industrial economic giant and its large labour workforce, it is important to understand its employment relations in relation to the state, employers, and unions. Furthermore the issues challenging its current employment relations and the future of its current system will be discussed in this paper.
The role of the state in the Chinese system of employment relations
Compared to most manufacturing nations, such as India and South Korea, which are democracies, China's authoritarian government is politically unique in the sense that absolute hold on political control is most likely to be dependent on economic stability (Bensidoun et al., 2009)
Under the single party political system, the CPC assumes absolute power and legitimacy as state legislator and central economic manager under Article 67 of the Chinese Constitution (Zhu and Warner, 2000).
Understanding the communist philosophy behind the CPC is essential as economic policies are made for the purpose of achieving political stability which feedbacks into the loop of economic growth. There are no specialised labour tribunals or ombudsman in China. Labour disputes are undertaken in the PRC civil court system and rulings are not used as precedents as a whole for change in employment relations legislation (Fang Lee, 2008, Jie, 2006). The authoritarian communist nature of the PRC is Marxist in origin where workers have to share the communal labour of production and their rights are inferior that to the CPC's interest(Zhu and Dowling, 2002). However the state interests are assigned as part of the worker's individual interest in unity to justify the state's power over individual employment rights (Ying and Warner, 2005).
From the founding of the state to the early 1990s, the CPC created a lifelong employment system which was practiced in SOEs and collective-owned enterprises (COEs) which was reduced due to overstaffing, skill mismatching and productivity stagnation(Zhu and Warner, 2000). Due to the reduction of SOEs and COEs , as well as the growing numbers of privatised enterprises, a gradual change in economic policy was made to replace the system with a contractual system of early retirement, social insurance, enterprise dismissal policies and work contracts where there was a minimal effort to empowering workers (Jie, 2006, Shen, 2007). The Labour Law of China (1995) established a system for employment relation which includes the Labour Contract Law. This was established as contracts were found to form the largest complaints by employees, especially short-term contracts that increase job insecurity (Kan, 2008). However there is difficulty for employees to prove their situation.
Despite such implementation, worker's rights, in terms of most democratic nations, still do not exist the same way as the PRC. Labour-related rights and protections for workers are not effectively developed in PRC, even though social and economic reforms are made.
The role of unions in the Chinese system of employment relations
The All China Federation of Trade Unions (ACFTU) was established by Article 10 of the Trade Union Law (amended in 2001) as part of economic reforms. It is the only legitimate trade union in China which has legislated protections. Under the legislation, trade unions are treated as voluntary worker's organisation with very limited rights. For example, the union can only voice its objections to working conditions and no other further powers, such as a strike, can be used against the employer(Lu et al., 2010). The only choice given to the worker is whether they want to join a ACFTU affiliated union or not (Zhu and Warner, 2000).
There is no separation of power between the state or the ACFTU and therefore the independence and power to represent the workers is questionable especially when the state is the employer. Consultation is undertaken by government representatives (i.e. Labour Ministry), union representatives (ACFTU) and industry representatives (i.e. Chinese Directors' Association) in accordance to the International Labour Organisation (ILO) Tripatite Consultation Convention which China is also a signatory to (Shen, 2007, Zhu and Warner, 2000). Below the state level, equivalent subordinate government authorities (Labour Bureau), employers (Enterprise Directors' Associations) and ACFTU affiliated unions form the appropriate provincial, city or county level consultation system (Zhu and Warner, 2004, Zhu and Warner, 2000).
However the consultation style differs in comparisons to the other signatories such as United Kingdom and Australia where all parties are assumed to be independent. The main difference is that the consultation parties in China are actually part of the State under the communist policy where each party is empowered to drive decisions (Ying and Warner, 2005). This opposes the main principle of open dialogue and negotiation in the workplace without prejudice of the ILO Tripatite Consultation Convention.
The ACFTU also ratifies labour contracts without engaging worker input into bargaining for their rights at the worker's expense and negotiations are actually carried out by local CCP departmental branches to facilitate the overall state's interest. At its worst, ACFTU may even have officials representing the employer to contest the workers' disputes which is counterproductive to China's employment relations (Fang Lee, 2008). In addition, despite its legislated powers, the ACFTU cannot enforce its views on employers for the sake of an individual worker which meant that worker's rights under legislation is still minimally protected , than an individual, under the collective nature of all the workers represented by the ACFTU.
The role of the employers in Chinese system of employment relations
In the current system, the state is the major employer even though it has lost its dominance through economic reforms and privatisations of SOEs and COEs, as well as private and foreign investors(Fang Lee, 2002). The SOEs and COEs significantly reduced their employees to a quarter of workers since the 1970s with the growth of domestic privately-owned, foreign-owned businesses and investments, self-employed businesses and village/township enterprises(Fang Lee, 2008). SOEs and COEs underwent restructure by the CPC in which some were privatised or downsized based on performance. State employers have reduced provision of employment benefits(Zhu and Warner, 2000).
The more recent forms of capitalist-like businesses entering China, such as multinational corporations and joint ventures (i.e. Suzhou Industrial Park) created a new employment climate for employees in China. Contractual fixed term agreements with such businesses, meant higher wages under the terms of investment by the CPC but with increased job insecurity (especially for aged workers) and lower social security provisions than the State employer (Ying and Warner, 2005). Collective bargaining under ACFTU is cautiously approached by MNCs because it may affect their manpower operations outside of China. Employee and Union involvement has the lowest participation rate in such foreign or joint enterprises(Fang Lee, 2002).
Smaller domestic privately-owned and self employed businesses have more flexibility in the management of their employees where the disadvantage of being employed there was long working hours and no union recognition with employees having the weakest bargaining power resulting in higher than usual turnover rates(Fang Lee, 2005). Even though employment law requires provision of social and workplace provisions, it is very minimal(Fang Lee, 2008).
The issues that challenge the system of employment relations in China
The state-driven ACFTU is influenced by the state which means that the negotiation for employment conditions by workers as a collective are little but effective, compared to other signatories of the ILO Tripatite Consultation Convention (Lu et al., 2010). The ACFTU links the CPC and workers through functions, unlike other signatories, such as providing opinions or feedback on planning processes and organizing recreational time for workers. This is expected as the state interest ranks above the individual worker's right which is part of the communist Marxist and authoritarian philosophy of the PRC (Ying and Warner, 2005).
Labour disputes are settled in accordance with ACFTU. Disputes are differentiated into individual and collective (more than two employees with the same reason for the disputes). Disputes can be related to salary, health and social insurance, termination or alteration of the employment contract, and occupational health and safety issues(Fang Lee, 2002, Fang Lee, 2008, Jie, 2008).
There are three stages in resolving any disputes in employment relations. These three stages are mediation, arbitration and litigation(Jie, 2008, Fang Lee, 2008). Mediation is the first step of resolution where the dispute is mediated by a committee consisting of representatives of the employer, employee/s and the trade union or an official party member i.e. civil servant(Jie, 2008). Any agreement made in mediation is legally binding. Failing to adhere to the agreement made provides the afflicted party to apply to the labour dispute committee for arbitration(Jie, 2007). At enterprise level, arbitration can be accessed without the need for the final mediation agreement if it is likely that mediation will fail.
If arbitration fails, then the litigation stage will be undertaken at the local civil court(Jie, 2007). Unlike countries like Australia or the United Kingdom with specialised labour tribunals, the local PRC civil courts can preside over overseas PRC citizens and their dispute with an offshore company; and have the power to render a final decision regarding disputes, such as freezing company assets, without consultation or approval from the ACTFU or the CPC (Jie, 2008) . However due to poor resourcing and capacity , the local civil courts are often reluctant to take on labour disputes (Jie, 2008).
Moreover, the endemic problem in current business relations, known as 'guanxi' (loosely translated as personal connection/relationship), is unique and a norm in China's environment; and stems from history of clanship-like connections as a required cultural function, may lead to undue influence, bias and even at worst, corruption (Zhu and Warner, 2000). Managers, business leaders or even workers may have a personal connection to the larger political network and may use it to influence decisions made by the ACFTU, court officials or even government officials at the expense of the workers who may be less 'connected'(Kan, 2008). That poses a large potential stumbling block to fair employment relations in China.
The future of the system of employment relations in China
Official labour dispute statistics may often be an under-representation of actual discontentment amongst the workers because of the various methods used by workers seeking to resolve their disputes with employers (Fang Lee, 2008, Jie, 2006). These mechanisms may be legal (i.e. mediation, litigation) or illegal (i.e. street protests and demonstrations, strikes at the workplace(Jie, 2008)). It could also be as formal or informal as writing letters or signing petitions (Fang Lee, 2008). Improvements in the labour dispute statistics may assist in the decision making of the CPC and ACFTU for future considerations.
Industrial action or freedom to form a non-state affiliated union has no legitimacy under the PRC law and civil court system. Furthermore, the courts are not equipped like their counterpart signatories with specialist knowledge of labour law to process labour disputes(Jie, 2008). Workers are at a disadvantage under this system(Fang Lee, 2008). Due to the minimal provisions in the Chinese social welfare or in employment for workers, workers have little to lose if they actually lose their jobs. The more disadvantaged groups of workers tend to be from the rural areas of China with little to lose, they may conduct a series of actions ranging from legal to illegal ones to seek a resolution to their dispute(Wang et al., 2009). A balance or compromise between the workers and state needs to be reached in order to facilitate a more peaceable employment relations resulting in workers' satisfaction and reducing exploitation of their workers.
Running a centralised system with regional and local representation in a vast country, such as the ACFTU in China, has its problems at local areas. There was a case of McDonald's and KFC accused by the local media of exploiting local workers in relation to minimum wages and maximum wages. It became a national media campaign resulting in the involvement of ACFTU which instructed local ACFTU affiliated unions to negotiate with the MNCs which had no union branches(Kan, 2008). It became a complicated case when several local labour bureaus investigated and came out with different results(Kan, 2008). One provincial level union found violations while the other in another province did not(Kan, 2008). There was no resolution to this issue on a national level while on local level, there was differing actions taken by the local government on the two MNCs. There is no unity in resolving issues with erring MNCs except on a local level. This poses a dilemma in creating a uniform policy of fair employment relations which has to be considered in future.
As China evolves in its current economic growth and the increasing entry of private and foreign investments into its current labour market, the employment relations in China is becoming more complex. There are many issues to consider especially in terms of cultural social construct of the political and business system; legislative system (civil courts instead of specialised labour tribunals); a state controlled trade union (ACFTU); and lack of workers' input into the collective bargaining system. As economic stability is linked to political control and stability in China, change is required for employment relations from the top level of government to the common worker. There is difficulty due to the potential 'connections' network of managers to the political leadership which may result in undue influence of the employment relations process at the worker's expense. As the authoritarian political system does not allow individual participation, unlike democratic industrialised nations, a compromise needs to be found between both parties (the government and the collective group of workers). The legislative system also needs a specialised labour system instead of a general civil court system, with the capacity to cope with the current labour market. In addition, ACFTU needs to work from the ground up (instead of focusing on the state's interest as a priority over the workers) as a collective group to enforce bargaining on employers instead of ratifying contracts without input from their workers.
Progress in improving current employment relations to that of democratic industrialised nations is envisaged to be slow due to the political and workplace culture climate but employment relations in China is continuing to evolve to reflect the ever changing diversity of the Chinese labour market and its current rapid economic growth.