China turns a blind eye to labour violations to spur economy

Local governments across China are turning a blind eye to labour violations in an attempt to boost the economy by helping struggling businesses.

Dozens of cities and provinces have recently announced reprieves for “minor” breaches, such as forcing employees to work dangerously long hours or gender and ethnic discrimination during the hiring process.

The relief for employers, according to officials, is aimed at “improving” the business environment and creating a “well-rounded regulatory regime” as President Xi Jinping’s contentious zero-Covid policy weighs on the world’s second-largest economy.

However, the move appears to give greater weight to helping out companies than to Xi’s high-profile “common prosperity” drive to reduce social inequality.

Streets in Shanghai and Beijing are often empty, as the former slowly eases a two-month lockdown and the capital tightens restrictions to stamp out new cases.

The effective immunity offered by local governments accompanies central government efforts to increase lending and tax breaks — the latest of which was announced by the State Council, China’s cabinet, on Monday.

According to bankers and business owners, there is little demand for credit in lockdown-afflicted regions, while tax rebates are often difficult to claim because of conditions set by cash-strapped local governments.

Last month in eastern Jiangsu province, an economic and export powerhouse bordering Shanghai, human resources and social security officials said they would refrain from holding employers accountable for 16 “light” crimes. That included the confiscation of workers’ ID cards to make it harder for them to leave and forcing applicants to pay a fee to apply for jobs.

The initiative, according to a statement from Jiangsu’s human resources and social security department, would help “stimulate entrepreneurship, improve law enforcement and create a stable, equitable and predictable business environment”. Xi, by contrast, has repeatedly warned against the “disorderly expansion of capital” over the past year.

Lawyers and business owners in Nanjing, Jiangsu’s capital, and other regions said judges and arbitrators who had previously ruled largely in favour of workers were now more likely to back employers.

Dave Liu, a Nanjing-based arbitrator, said that over recent months, workers in his jurisdiction had won only about 10 per cent of cases regarding late-wage payments, a sharp reversal from last year when their success rate was almost 100 per cent.

“While the letter of the law hasn’t changed, enforcement is leaning towards employers,” Liu said.

He added that in hard times, workers sometimes had to make a “small sacrifice to protect the greater good”.

“If a company goes under because of overregulation, everyone loses,” Liu added. “The best way to protect employees’ interest is to keep the employer alive.”

Wang Li’na, a marketing assistant in Wuhan, said she struggled to file complaints against her boss about mandatory overtime after officials announced a reprieve for employers who forced staff to work additional hours. “It is ordinary workers rather than bosses that are bearing the brunt of the economic recession,” Wang said.

The owner of a food factory in Zhangzhou, a city in south-eastern Fujian province, said he now could pay employees only a fraction of what he did last year for work-related injuries. “I was once forced to give a newly recruited worker more than Rmb200,000 ($30,000) after he hurt his hand,” said Martin Lin.

Some experts warned that local government support for employers at the expense of workers could undermine another priority for Xi — social stability — as he prepares to begin an unprecedented third term in power this year.

“China’s attempts to revive the economy tend to support business but not workers,” said Mary Gallagher, a China labour expert at the University of Michigan. “This could lead to labour unrest when the economy begins to recover.”

Additional reporting by Tom Mitchell in Singapore

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