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Two events in China in December 2004 indicate that Chinese authorities are repudiating the corporate social responsibility (CSR) movement that has been going strong in China during the past few years.
The first incident occurred on 2 December when the Chinese leadership suddenly cancelled an international conference in Beijing on 'Socially Responsible Investment in China and North-East Asia - The Role of the OECD Guidelines for Multinational Enterprises'. The conference had been jointly organized by the OECD and China's State Council's Development Research Center and was to be attended by government, corporate and trade union delegates from around the world. A last minute about-turn decision to cancel such an important conference, just ten days before it was convene, could only have come from the uppermost levels of the Chinese leadership.
The timing of the announcement was particularly annoying to many of the foreign trade-union delegates, because they were already on their way to Asia to attend a leadership conference of the International Confederation of Free Trade Unions (ICFTU). The ICFTU, mired in a cold-war mentality, has refused to let the Chinese official trade union, the ACFTU, into the international trade-union club. But this time there were signs of a rapprochement. John Sweeney, president of the AFL-CIO, was scheduled to head a high-powered ICFTU delegation, containing the heads of several other Western union federations, to meet with the ACFTU following the OECD conference. The ACFTU has been eager to be welcomed into the fold of the 'brotherhood' of the international trade union movement, and the meeting in Beijing would have been a breakthrough.
Such hopes were dashed by the sudden Chinese government announcement. On top of cancelling the OECD conference, it also cancelled all of the delegates' visas, making it impossible for the ICFTU delegates to visit China, let alone meet with their Chinese counterparts.
The second incident took place on 7 December. The British Consulate in Guangzhou held a conference in the poshest hotel in Shenzhen, the city that is the hub of southern China's export drive. The title of the conference was 'The UK and the Greater Pearl River Delta: Developing Corporate Social Responsibility Together.' The conference started with the standard PR pep talk about how Western corporations are socially responsible, that they wanted their supplier factories to be likewise, that this is a win-win prospect, etc. The audience, most of whom have attended many such conferences on CSR, sat there politely.
The tone of the conference took a turn when Chen Ying, the Deputy Director General of the Chinese Enterprise Confederation (CEC) came to the podium. The CEC is China's peak employers association and represents China's employers in the ILO. Though the organization was only set up in the 80s, and is still very much under the wing of the Chinese government, the confidence of its mission was embodied in Ms Chen. She told the audience in no uncertain terms that there are about a thousand separate corporate codes of conduct in the world, so foreign corporations instead should abide by the Chinese labour laws. But because the laws are not yet perfect, the CEC, together with twenty government departments, is now developing its own CSR standards. The message: we Chinese are saying 'no' to your foreign-imposed CSR standards. The OECD's CSR guidelines are obviously among these unwanted foreign standards.
To be sure, the Chinese Labour Law is good by international standards. It contains provisions on minimum wages and maximum work hours, prohibits factory labour under the age of sixteen, etc. One serious problem in the foreign-funded factories inside China has been excessive overtime work, and the Chinese law sets a 49-hour week as a maximum, whereas in most corporate codes the maximum is a 60-hour week. The crux of the problem in China is in the law's implementation it is almost universally ignored by enterprises, with the blessings of local governments. The consequence is that workers toil for more than 60 hours a week in most of the subcontractors' factories.
The next speaker, representing a Chinese NGO that is hired by Western corporations to do CSR monitoring of labour conditions in the local supplier factories, came out in defence of CSR, arguing that the subcontractors who comply with CSR will attract more corporate orders. They therefore need not worry about the higher cost of improved labour standards. Suddenly a middle-aged man shot up from among the audience, pointed a finger at the speaker, and shouted, 'That is bullshit! CSR costs us money. We have to talk about costs.' He was a factory owner and his outburst articulated the frustrations and anger of supplier factory owners in China. Due to competitive pressures, suppliers like him feel squeezed by the Western corporations in the prices they receive for their products and at the same time are pushed to improve labour conditions. Others in the audience -presumably factory owners - applauded his statements.
The CSR Debate in China
The CSR movement was introduced into China in the mid-1990s. It originated with the anti-sweatshop movement in the developed countries, which accused brand-name Western corporations of turning a blind eye to dangerous, inhumane conditions in the factories around the world that make merchandise for them under contract. To ward off the criticism, many Western companies have adopted 'corporate codes of conduct,' demanding compliance to a minimum set of standards by their sub-contractors in China and in other developing countries. Many of the Western companies have hired corps of monitors and auditors to police the subcontractors' factories, threatening monetary penalties or cancelling orders if factory managements violate their codes.
The factories in China gradually have learned to trick the monitors, developing elaborate double bookkeeping, and coaching workers on what to say to monitors. In turn, many of the Western corporations have moved on to a new stage: paying trainers to go into the subcontractors' factories to educate workers in their labour rights. There are no official statistics, but based on the large number of organizations, including the official All-China Women's Federation in Guangdong, that have been hired to provide 'workers training,' it appears that a fair portion of the more than 10 million migrant factory workers in south China have had at least a couple of hours of this consciousness-raising exercise. Nevertheless, recent China's Statistical Bureau statistics show that the wages of migrant workers in South China's Guangdong province have been progressively dropping over the last ten years, and that the hourly pay of most are below the legal minimum wage. CSR activities have not raised labour standards. Notably, though, workers' awareness of their rights is on the rise. In the past few years, the number of migrant factory workers filing lawsuits against employers over an array of labour violations has increased dramatically.
For several years the Chinese press was silent on the issue of CSR, but as the CSR activities spread, it has recently been reported on and heatedly debated in the newspapers. Some articles see CSR as a good thing, helping to improve the working conditions of the migrant factory workers. Others lambaste CSR as a foreign scheme to price China out of the cheap labour market. Nationalistic writers have joined the attack, describing CSR as an example of foreign intervention.
Closer at hand, some of the local governments and official trade-union officials in south China have become habituated to CSR activities, and recognize these can help soften the most exploitative labour practices. But in December 2004 the verdict from the very top of China's political system came down in no uncertain terms: not even the OECD is to talk about CSR and improving labour standards on Chinese soil. As declared by Ms. Chen Ying, we have our own laws and China is developing its own labour standards.
The cancelled conference is a missed opportunity for all parties to sit down to iron out their differences. Had it been able to convene, the central government might have acknowledged a need to upgrade its enforcement mechanisms, and the OECD countries' employers' representatives might have been obliged to recognize a need for the brand-name corporations to help pay for improved labour standards. And the ICFTU delegation could have met with the ACFTU and hopefully would have come up with a preliminary agreement over cooperation among the trade unions. One example of the potential for such cooperation could have been over the issue of unionising Wal-Mart retail outlets around the world. Just a month ago Wal-Mart surrendered to the ACFTU's pressure and agreed to allow the establishment of workplace unions at all of its stores in China. This is the first time anywhere in the world that Wal-Mart has made concessions to a trade union (in this case because the ACFTU has the support behind it of the Chinese government). An international trade union effort to target Wal-Mart could have been a first step in the right direction.
WATCHPOINT: In January 2005, Wal-Mart initiated a media campaign in the US to counter charges it takes advantage of its US workers and stifles competition.
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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