P 170524Z MAR 09
FM AMEMBASSY BEIJING
TO SECSTATE WASHDC PRIORITY 2908
DEPT OF LABOR WASHDC PRIORITY
INFO DEPT OF TREASURY WASHDC
USDOC WASHDC
CHINA POSTS COLLECTIVE

UNCLAS BEIJING 000682 
 
 
DEPT PASS USTR FOR KARESH, STRATFORD, LEE 
LABOR FOR ILAB - LI, BRUMFELD AND LIPKE 
TREAS FOR OASIA/ISA 
USDOC FOR 4420/ITA/MAC/MCQUEEN AND DAS KASOFF 
 
E.O. 12958: N/A 
TAGS: ELAB ECON EFIN PGOV CH
SUBJECT: LABOR ISSUES AT THE NATIONAL PEOPLE'S CONGRESS 
 
REF: A) Beijing 448 
B)  Beijing 484 
C)  Beijing 580 
 
¶1.  Summary:  Labor issues, especially unemployment, were 
a major theme of the Chinese People's Political 
Consultative Conference (CPPCC) and National People's 
Congress (NPC) meetings that began on March 3.  Senior 
government officials cited a severe unemployment problem, 
with over 20 million rural migrant workers currently 
unemployed and 6.1 million university graduates about to 
enter a very weak employment market.  Government leaders 
said they would continue to implement China's new Labor 
Contract Law (LCL), but that it may be necessary to 
reduce wages and working hours through the LCL-mandated 
collective consultation process in order to preserve jobs 
in some enterprises.  The government reaffirmed that its 
long-term industrial policy is to move away from labor- 
intensive industry.  The All China Federation of Trade 
Unions (ACFTU) is acting as an instrument of government 
policy, viewing its role as uniting the labor force 
behind the government and Communist Party, and has warned 
against activity that "in the name of rights protection," 
would "destroy the unity of migrant workers." End Summary. 
 
A SERIOUS UNEMPLOYMENT SITUATION 
-------------------------------- 
 
¶2.  Yin Weimin, Minister of Human Resources and Social 
Security (MOHRSS), described China's unemployment 
situation since the onset of the global financial crisis 
as "severe" at a March 10 press conference at the NPC, 
and said recovery is not yet evident.  Yin said migrant 
workers from rural areas were the group most affected and 
he offered the following statistics: of 140 million rural 
migrants working in urban areas, about 50% (70 million) 
returned to their home towns before the Chinese New Year 
holiday in January.  This was 10% higher than in normal 
years.  After Chinese New Year, about 80 percent (56 
million) of these workers set out again to seek wage 
employment in urban areas.  Yin said about 45 million 
have found jobs, while 11 million remain unemployed. 
(Note: Depending on how one defines unemployment, this 
suggests a current unemployment rate for migrant workers 
of 25-35%, but government sources continue to cite 20-25 
million as the estimated number of unemployed migrant 
workers.  End note.) Yin also described the job market 
for college graduates as "grim" with 6.1 million new 
graduates about to join a weak job market, and reiterated 
policies the government is taking to promote graduate 
unemployment (ref A). 
 
¶3.  Yin said that January and February had seen a net 1% 
increase in urban job creation, but that is too soon to 
say whether this indicates a recovery.  He noted the 
sharp net loss of urban job opportunities in October (by 
840,000 positions), November (550,000 positions) and 
December (380,000 positions) and said that a MOHRSS 
survey of enterprises in 15 target cities found that 40% 
were reducing their workforce, suggesting a total 
reduction in urban job opportunities of about 5% in 
enterprises nationwide since the beginning of the 4th 
quarter of 2008. 
 
STICKING WITH THE LABOR CONTRACT LAW 
------------------------------------ 
 
¶4.  In response to rising unemployment, the central 
government has reportedly given local labor bureaus 
flexibility not to enforce certain provisions of the 
year-old LCL if it will result in job loss (ref B). 
Labor bureaus are using article 41 of the LCL, which 
outlines procedures for handling mass lay-offs, to 
negotiate lower wages and working hours in troubled 
enterprises that agree not to lay-off their workers.  At 
the March 10 NPC press conference, however, MOHRSS 
Minister Yin Weimin, denied that the government had 
relaxed enforcement of the Labor Contract Law or other 
labor regulations.  He noted that MOHRSS and the NPC had 
each conducted separate studies of the implementation of 
the Labor Contract Law and found that it has effectively 
improved the protection of workers' rights. 
 
¶5.  Since the concurrent CPPCC and NPC meetings began on 
March 3, several other senior government officials have 
vigorously defended the LCL.  NPC Secretary General and 
Chair of the NPC Foreign Affairs Committee, Li Zhaoxing 
told the press on March 4 that the global financial 
crisis, not the LCL was responsible for the difficulties 
some Chinese employers now face, and that full 
implementation of the LCL was the right long-term 
strategy to protect workers interests.  Xin Chunying, 
Deputy Director of the NPC Standing Committee's 
Legislative Affairs Commission, quashed speculation at a 
March 9 NPC press conference that the NPC may revise or 
repeal the LCL. 
 
¶6.  Zhang Mingqi, Vice-Chairman of the ACFTU also noted 
at a separate NPC press conference on March 9 that the 
LCL, had had a positive effect in preserving jobs in 
troubled enterprises.  Zhang also said that the ACFTU 
opposed the idea of lowering or eliminating minimum wages, 
noting that the minimum wage is intended to guarantee a 
basic livelihood.  Eliminating the minimum wage, he said, 
would not solve the problems of troubled employers, but 
would create new problems for workers. 
 
NOT RETHINKING ECONOMIC POLICY 
------------------------------ 
 
¶7.  At the March 10 NPC press conference, journalists 
asked Minister of Industry Information and Technology 
(MIIT) Li Yizhong whether the government is reconsidering 
its policy to move China away from labor-intensive 
industries.  Li acknowledged, that in the near term, the 
government is concerned about the closure of large 
numbers of labor-intensive, export-oriented enterprises. 
He noted that 7.5% of small and medium-sized enterprises 
in China's export-oriented coastal regions had either 
suspended production or gone out of business since the 
global financial crisis began.  But Li denied that the 
government had changed its policies to promote the 
transition to higher-value added industries and services. 
 
¶8.  Li said the government's policy was to ensure 
continued industrial growth and protect jobs.  He 
referred to portions of the Government Work Report, 
delivered by Premier Wen Jiabao on March 4 (ref C) that 
called for industrial consolidation to absorb troubled 
enterprises.  (Note: The Work Report itself also states 
that "no government investment will be made in the 
regular processing industries" and that "we need to 
support non-governmental investment in areas favored by 
state industrial policies and encourage enterprises to 
increase spending on research and development and 
technological upgrading..."). 
 
¶9.  ACFTU Vice-Chairman Zhang Mingqi also responded to 
press inquiries about industrial policy.  At the ACFTU's 
March 9 NPC press conference, Zhang said the ACFTU 
supports policies to upgrade industry, such as Guangdong 
Province's Double Transfer Policy, but that employers 
should either provide training to workers so that they 
can keep their jobs through the industrial transformation, 
or compensate workers who lose their jobs. 
 
GOVERNMENT INTERVENES IN INDUSTRIAL RELATIONS 
--------------------------------------------- 
 
¶10.  As a matter of policy, the government is now using 
its power to regulate labor relations to preserve jobs, 
even if it means reducing wages or working hours (ref B). 
The Government Work Report addressed this point clearly, 
stating that the government will "help enterprises that 
are in difficulties to prevent layoffs by renegotiating 
wage levels with their employees, adopting flexible 
employment and work hours, or providing job training for 
them."  MOHRSS Minister Yin Weimin explained at the NPC 
press conference on March 10 that this is consistent with 
the LCL.  The global financial crisis, he said, presented 
new problems in implementing the LCL.  While "we must 
implement the Law in a fair and comprehensive way, we 
must also address the difficulties our businesses face." 
 
¶11.  The ACFTU is playing its part in carrying out this 
government policy.  Zhang Jianguo, Director of the 
ACFTU's Collective Contracts Department, told 
participants in the ACFTU's March 9 NPC press conference 
that the global financial crisis has caused great 
hardship, but that the LCL's provisions regarding 
consultations on mass layoffs provide a way to deal with 
this hardship.  Zhang Jianguo said it may be necessary to 
discuss wages to keep some employers in business.  ACFTU 
Vice-Chairman Zhang Mingqi said consultation on wages at 
troubled enterprises was a core feature of the ACFTU's 
new "Common Agreement Campaign" (ref B), and that in many 
cases, these consultations have resulted in agreements 
not to cut staff or wages. 
 
THE ROLE OF THE ACFTU 
--------------------- 
 
¶12.  The ACFTU, which is accountable to the Communist 
Party, not to its members, and has no elected leadership, 
is acting as an instrument of government policy. 
According to knowledgeable Embassy contacts, these 
policies were coordinated in late 2008 through the 
national Tripartite Commission on Labor Relations. 
Through the "Common Agreement Campaign," the ACFTU is 
playing an active role, mostly in state-owned enterprises, 
negotiating or renegotiating collective contracts that 
seek to balance the interests of employers and employees 
and prevent job loss.  The ACFTU is also using its own 
resources to provide vocational training, legal 
assistance, small business loans and economic subsistence 
benefits to unemployed migrant workers. 
 
¶13.  At its March 9 NPC press conference, ACFTU also 
trumpeted a campaign entitled "In the Same Boat, Helping 
Each Other to Maintain Economic Growth and Foster Social 
Development," which consists of work skills competitions 
and other social activities to raise awareness about the 
need to increase labor productivity to prevent job loss 
during difficult economic times.  ACFTU Vice-Chairman 
Zhang Mingqi justified the ACFTU's role, noting that the 
ACFTU's constitutional mandate was to maintain unity in 
China's labor force.  Zhang Mingqi went on to add that 
"there are some people who, in the name of rights 
protection, will seek to destroy the unity of migrant 
workers.  We oppose this kind of behavior, and remind all 
of our unions to be vigilant against this danger." 
 
PICCUTA