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Striking a balance

Sandeep Dikshit

China is attempting to improve the living standards of the displaced as well as ordinary workers while continuing to remain the world's most attractive destination for foreign investment.

AS CHINA accelerates further on the path to economic development, it is encountering a few problems on the way. Foreign companies are resisting the setting up of trade unions on their factory premises and at retail outlets. Besides, rapid urbanisation is dislocating farmers for whom ways have to be found to enable them to make a decent living after their land is acquired for industry.

While setting its sights on an even more dazzling performance over the next five years, China is attempting to find solutions to improve the living standards of the displaced as well as ordinary workers while continuing to remain the world's most attractive destination for foreign investment.

Unlike India where trade unions are absent in industries set up by foreign companies and where the Government has made no effort to pay heed to employee welfare, China is not backing out of welfare commitment despite reservations expressed by corporates. It points to the superior infrastructure and large domestic market made available to foreign companies and feels these must be balanced by ensuring "heshie" or harmony between employers and their Chinese staffers.

"Some investors are not happy [by the insistence on trade unions]," concedes Ma Xuejie, Vice-Director of Shanghai's Pudong New Area. Pudong, or west in Chinese, is across the river from old Shanghai and teems with hundreds of 40-plus-storey skyscrapers. It has attracted $33 billion in investments or more than twice the foreign direct investment received by India in the past 15 years. Fuelled by hectic industrial activity, the gross domestic product of this area has grown 20 per cent annually for the past 10 years. This is twice the growth rate of the entire Shanghai province, the engine of China's incredible growth story.

But officials are modest about this success. Much more remains to be done, they point out. As part of the effort to improve living standards, local governments are insisting on employee welfare at foreign industries. Backed by the All China Federation of Trade Unions, they have entered into negotiations with foreign companies so that they "follow all the rules" and set up trade unions as mandated by local law.

The Wal-Mart case

The most celebrated case, according to Mr. Ma, is that of Wal-Mart, the giant American retail store chain that had scuttled attempts by staffers in other countries to set up unions and welfare associations. The first ever union at Wal-Mart was set up at its outlet in Jinjiang city amidst indignation expressed by its U.S.-based top brass. Employees, supported by Pudong district officials, are trying to convince Wal-Mart's Pudong unit to follow suit, he says.

While asking foreign companies to allow the setting up of trade unions, China is also assuring them of political and operational differences between their unions and those in other countries. In the political sense, the unions are controlled by the Communist Party and are much more responsible. "They are not free as was the case in Poland where they became anarchic over time," points out Mr. Ma.

Operationally, Chinese trade unions aim to achieve "mutual interest" — promising a minimum level of productivity, on the one hand, and protecting "ordinary" employees, on the other. The latter translates into a maximum working week of 40 hours for each employee. "This should be guaranteed. Investors should abide by the law. From the very beginning when they started constructing we were in touch for setting up trade unions," adds Mr. Ma. But they have a long way ahead. Resistance to setting up trade unions is strong. "We will never let a trade union [be formed] here. We are highly professional," says James Lin, the Chief Executive Officer of Infosys China.

The Infosys example

Officials have not contacted this company with 700 employees, 95 per cent of them Chinese, for forming a trade union. But Infosys is paying its social dues through another means. It is sponsoring 100 bright students for a seven-month course in Infosys' India offices — three months of training in Mysore followed by a four-month internship in Bangalore — with no strings attached. "They are not forced to join us but 50 per cent of the first batch became our employees which was a surprise to us," adds Mr. Lin. This approach partly takes care of China's other worry — getting a workforce that is talented and familiar with international practices and business environment.

Rapid urbanisation is another challenge. Facing the brunt are farmers who are the economically marginalised in most industry-rich districts. In Shanghai, their produce accounts for just one per cent of the GDP. But planners are aware of the need to provide other sources of income to farmers whose land is being taken over even though they do not have adequate economic clout. They are being given vocational and professional courses. "The local government will have to take care of this aspect. This has to be shared by the private sector," concedes Mr. Ma. This is one aspect where companies such as Infosys China are proving of help and perhaps for this reason the insistence on unionisation is absent for this company.

Like Shanghai on the east coast, central China too faces the "challenge" of compensating farmers. Spread over 73 square km, the new region of Luyong is a marvel of eight lane roads and gleaming skyscrapers. On the Silk Route from India, it has been built on fertile land irrigated by the Yellow River. "We gave 80,000 RMB per six acres instead of the going rate of 30,000 RMB. With the additional money, the farmers bought flats in the new township and are living where their forefathers had tilled the land," says high-ranking city official and Communist Party leader Fang Shuang Jian.

There were other benefits also. The old City Hall was pulled down and the land converted into a public park. "These moves benefited not just the government but also raised the living standards of the people. The decisions were taken after consultations between the state government, local administration, and the Communist Party. As a result everyone gained," adds Mr. Fang.

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