beyondbrics

The official Communist Party-controlled trade union in Beijing has scored a coup in its collective bargaining campaign against foreign-invested enterprises, according to reports from Chinese state media.

The Beijing municipal federation of trade unions has convinced more than 100 foreign companies in the Chinese capital to pay their employees no less than 1.5 times the city’s statutory minimum wage of Rmb1,160 ($177).

Foreign companies that have agreed to the wage rule include Pizza Hut, Siemens, Nestlé and many others but companies like Carrefour and Wal-Mart, which employ large numbers of low-wage workers, have not participated in the negotiations and are not affected by the new rule.

In their eagerness to please the city government, which has the power to make doing business here very difficult, it seems foreign companies that already pay relatively high wages have decided this is a smart concession to make.

But with statutory minimum wages rising across the country at around 20 per cent a year at the moment and expectations this will continue, they may feel differently in a year or two.

“As part of the government’s wealth redistribution plan it is raising minimum wages across the board,” said Ren Xianfang, an analyst at IHS Global Insight. “For foreign companies they will probably come under even greater wage pressures than domestic companies because the government seems to think they should pay more.”

China does not allow independent labour unions and the official unions are essentially branches of the Communist Party. In recent years, the government has pushed hard to expand the official union presence inside foreign-invested companies, some of which have resisted.

Now that the capital has set an example, analysts believe other Chinese cities with large foreign business communities, such as Shanghai and Shenzhen, will soon follow suit and introduce similar wage bargaining with foreign companies.

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China’s inner landscape changes, FT
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Guandong raises minimum wage by 20% amid China inflation fears, FT
Chinese companies struggle to find workers, FT