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Government Steps Up To Labor’s Demands

Why the Yue Yuen Shoe Factory Strike Was Important

On April 14, most of the 40,000 workers at the Dongguan Yue Yuen shoe factory—supplier to Nike, Adidas, and other international brands—began what would become a two-week work stoppage. While there are thousands of strikes in China every year, the Yue Yuen action broke the mold by attracting an unprecedented show of government support for worker demands.

Rooted in grievances over illegitimate labor contracts, concerns about a factory relocation, and unpaid mandatory contributions to their pensions—a safety net akin to America’s Social Security—labor experts say the Yue Yuen action was the largest private sector strike in modern Chinese history. Not only was it bigger, but it lasted much longer than typical Chinese strikes, which often are resolved or suppressed within a couple of days. Unions in Dongguan City and the Guangdong provincial capital Guangzhou intervened, international media covered the conflict, and solidarity protests broke out both in a neighboring province and around the world. The strike cost Yue Yuen $27 million, a loss that could more than double if the factory is forced to make good on unpaid pension contributions.

The strike ended on April 28 without a clear resolution, as the company and local security forces pressured workers to return to their jobs, according the Beijing-based non-governmental organization Chengbiancun. However, union and other government officials made public statements generally supportive of the workers’ position and called for an election of worker representatives.

Notwithstanding its record-breaking size and duration, the Yue Yuen strike reflects the current overall landscape of China’s labor movement, which, though increasingly active, does not yet have the organizational capacity needed to coordinate a strike that results in lasting powers of collective bargaining.

The latest official statistics available show the number of labor disputes in China rose to nearly 700,000 in 2008 from 48,000 in 1996. Labor unrest has grown as economic resources are diverted away from China’s coastal regions, tightening the labor pool in manufacturing centers along the Eastern seaboard. Against this backdrop, a decade of grassroots labor law education—especially in the Pearl River Delta—has helped build workers’ awareness of their rights and bolster their willingness to defend those rights in the courts and on the streets.

This rights defense consciousness was evident during the Yue Yuen strike, which was initiated by veteran workers concerned about their pensions and later became factory-wide action involving workers of all ages. A week in, the strike inspired a rare case of cross-regional labor solidarity, when thousands of workers staged a protest in another Yue Yuen factory in neighboring Jiangxi province, according to the NGO Chengbiancun. Emboldened by their strike’s durability and the attention it drew, Dongguan Yue Yuen workers even demanded a 30 percent pay hike, a demand above and beyond what the law mandates.

Despite a growing awareness of labor rights, Chinese strikes typically lack effective organization and are short-lived and isolated. Chinese law prohibits unions operating independent of the All-China Federation of Trade Unions (ACFTU), whose chapters are usually subordinate to local political interests and thus business interests. Union law says that the ACFTU should have a chapter in every factory with at least 25 employees, but it rarely does. Even in factories with a union, its chairman is most often management-appointed and largely inactive in the defense of labor rights. Hundreds of investigations by China Labor Watch, a U.S.-based monitoring group, found that most factories didn’t have a functioning union. As a result, worker grievances often are left to fester.

The Yue Yuen strike lacked central organization. This prevented the company and security forces from targeting and suppressing organizers. In contrast with many previous actions in China, no particular individual or group stepped forward to claim leadership. As a result, negotiation between the Yue Yuen workers and management was more difficult. Without worker representatives to call company officials to the negotiation table, the union surveyed Yue Yuen’s workers in order to understand their demands.

Workers overcame some limitations of their weak formal organization by using social media. Early on, striking laborers shared information via online chat groups on Tencent QQ, the nation’s largest instant messaging platform. A protest of thousands at Yue Yuen took place on April 5. In the ensuing week, word spread among workers that the factory might be closing without paying years of overdue retirement benefits, leading to the largest movement on April 14.

Worker pensions in China are by law supposed to be paid into a fund each month by both employees and employers. Employees ultimately enjoy access to these funds after they retire. In the past, migrant workers generally did not want to pay into retirement funds because they could not transfer the money from where they worked back to their home regions.

At the very end of 2009, China’s State Council released a new set of rules which allowed migrant workers to transfer their retirement benefits across provinces. In the past few years, more and more migrant workers at private companies have tied demands for unpaid retirement benefits to a rising number of labor actions. China Labour Bulletin’s Strike Map , which tracks hundreds of actions annually, shows an uptick in pension-based strikes in the past three years. The Yue Yuen strike is the largest action to date premised on such a grievance.

While the Yue Yuen strike reflects the landscape of Chinese labor politics, it also has the potential to change that landscape.

Since 1997, all employers must, by law, pay into employee pensions. But the reality is that coverage is far from universal. In 2011, more than 70 percent of migrant workers in China’s core manufacturing regions said that their company did not provide pensions. In more than 400 factory investigations over 14 years, China Labor Watch has seldom discovered a company that pays into worker pensions in accordance with the law. Though Yue Yuen's workers are not the first to strike for unpaid pensions, the size and duration of their strike forced the government to deliver an unprecedented response.

In a document released on April 24 by the Dongguan City chapter of the ACFTU, the Dongguan Social Security Department announced that Yue Yuen had broken the law by failing to pay years of pension contributions. The next day, the spokesperson for the national-level Ministry of Human Resources and Social Security, Li Zhong, told a press conference that the Dongguan Yue Yuen shoe factory had “indeed not accurately reported social insurance payments,” or yǎnglǎo bǎoxiǎn (养老保险) and shèhuì bǎoxiǎn (社会保险)—what the pension contributions are called in Chinese. Taken together, these responses bolstered the Yue Yuen workers’ demands for their unpaid pensions. Based on information provided by Yue Yuen workers after the strike, the company will begin to make pension contributions in arrears in June, provided the workers themselves make commensurate payments.

Moreover, the government’s response seems to set a precedent that could be applied by other workers who have been refused benefits by their employers. On May 1, China’s Labor Day, 1,200 Shenzhen-based workers at 101 companies, including at factories belonging to telecommunications parts manufacturers such as Foxconn and Huawei, signed a joint statement expressing support for the Yue Yuen strike. The workers demanded that the Shenzhen government quickly publish specific rules on how their workers’ retirement benefits should be repaid “in order to alleviate labor disputes that are intensifying day by day.” The statement and a photo of the signatures on it were published on a Weibo microblog by a user with a handle that translates to “can’t take it anymore” and also sent to the Shenzhen Social Security Department, to the Shenzhen chapter of the ACFTU, and to a number of local labor NGOs. The microblog message was forwarded over 200 times.

Historically, the ACFTU has largely failed to fulfill its role as a labor rights defender. As it did in the Yue Yuen strike, a local ACFTU chapter normally enters a labor dispute only after the action escalates, playing catch-up to find a resolution that will quell unrest. But in April at Dongguan Yue Yuen, the local branch of the ACFTU went further, openly calling for Yue Yuen worker representatives to be elected, an action that it said it would help coordinate. The strength of the Yue Yuen strike gave the ACFTU the leverage to call for legitimate factory-level labor organization and collective negotiation in the future.

The open support for the Yue Yuen workers’ position by the union and by Social Security Department officials indicates that the strike encouraged a shift in the government’s position on labor. Ever since the Chinese Communist Party’s Reform and Opening in 1978, local politicians have been graded largely on their ability to deliver economic growth. As has been widely documented, a one-sided emphasis on growth has led to imbalances, such as deep social inequality and environmental degradation. During disputes, business interests typically overshadow labor interests. The courts tend to split collective lawsuits into individual cases, making the process more costly for individual plaintiffs. Security forces often suppress strikes and demonstrations before resolutions are reached, and any deals struck are usually done so between companies and government officials behind closed doors.

The first days of the Yue Yuen strike seemed to follow a similar script when riot police violently dispersed workers during a march toward the Dongguan city government building. Two labor activists were detained for aiding the striking workers. One is still in custody. But security forces seemed less intent on ending the massive labor action than containing it within the factory premises, allowing it to continue for 14 days. Moreover, the government did not emphasize the criminality of the strike.

While it would be an overstatement to call this a sea change, the Yue Yuen event suggests that the government is shifting toward a fairer balance between the interests of labor and business, spurred on in part by labor action. Another sign of a change in Guangdong province is a draft law that would support collective negotiation.

There is a possibility that such rebalancing could encourage companies to pull out of China due to rising labor costs. While this trend is being debated, China's manufacturing industry is still massive, with about 100 million workers. The migrant worker population is bigger yet, at around 270 million. Ensuring that the rights and interests of this population are respected by all companies, domestic and foreign, could support the CCP’s stated goal of stamping out social inequality. If the government is in fact increasing support for worker demands and even supporting the organization of labor unrest, workers will have more to gain from initiating strikes. Though Yue Yuen strike has broken a number of records for labor action in China, it has also provided opportunities that ensure that the greater Chinese labor movement still has its best days ahead.