Chinese Law Is Not An Ass, At Least For Western Companies.
The Off The Record Blog (a really good blog, BTW) just did a short, sweet, blunt post on the law in China that is only half right. The post is entitled, the "The Law is an ass and there you have it." It consists of the following quote from "a prominent Chinese lawyer during a private discussion about China’s new Labor Law":
“The problem with Western companies in China is that you think laws are about compliance; Chinese companies realise they are just obstacles to be avoided.”
In fact, that is only half the problem. The problem is that BOTH the Chinese lawyer and the Western companies are acting rationally and correctly. The Western company has to comply because it will be an easy target if it does not. The Chinese company, on the other hand, can game the system and probably do just fine.
There is also a flip side to this. I had lunch earlier this week with co-blogger Steve Dickinson and Ben Dietz, who just this week joined my firm and who handles US side legal work for Chinese companies. We discussed how difficult it is representing Chinese clients in the United States because they tend to spend so much time and effort seeking to avoid clear laws even when following the laws would be relatively painless and far less risky.
Looking on the bright side (at least for us lawyers), China is very slowly becoming more legalistic and I see the new labor law as a prime sign of that. That law probably comes closer than any other law in China in terms of having an equal impact on foreign and Chinese companies because much of its enforcement will come from disgruntled employees and ex-employees, as opposed to from the government.
Comments
As always, thanks for the praise for our blog. Let me clarify our position on the post you comment on. I agree totally with your comment. Our headline was tongue-in-cheek and in reference to the new Labor Law. The post was meant to highlight the problem Western companies have in China; we compete on a very uneven field. The new Labor Law will make it much harder for foreign companies that cannot afford to not comply; but we will all find the cost of compliance burdensome. I believe many small foreign companies in China will go out of business because of the new Labor Law.
Posted by: Alistair Nicholas | March 29, 2008 2:58 AM
this new labor law sucks big time. i doubt it will last 24 months as is. this law is a step backwards to the iron rice bowl era.
no doubt china needed better laws protecting workers, but this law surpasses the rights given to many workers in european countries. with the rmb getting stronger, the price of oil up over $100 a barrel and raw materials getting more expensive month by month, china won't be able to afford this type of protection for its workers. keep in mind that many of the people in the communist party are factory owners themselves. i own 2 factories here in beijing with about 200 workers total. i travel and visit other factories regularly. i visit with my local govt officials and with the officials of other counties around china. these officials all have their hands into different enterprises. i visited a denim factory with 1,200 workers near shaoxing about a year ago and the boss was the head local official. first we went to his factory and we went straight to the chairman's office. then we went to the nearby government station where he was the party secretary at.
this law will hurt the chinese factories with the regular workers that they have been abusing for some time, but it will also hurt the western companies over here as well. the western factories will have a hard time getting rid of the truly bad workers. right now i am having problems with one woman who has worked at my factory for 7 years. her first 5 years she was was one the hardest working people i had ever seen. but the last 2 years though she has started to feel entitled to a high position and high pay. she is no longer willing to pitch in when things are needed to be done. the woman who used to make 2,000 rmb per month and worked 12 hours a day has been getting 4,000 rmb per month for the past 2 years and hasn't put in a 30 week the whole time. she refused to sign a contract at the beginning of 2007 and at the beginning of 2008. she got upset because one of the other old time managers had his pay increased to 5,000 rmb per month so she demanded the same. she refused to come in and work when we had problems and she refused to work night shift when it was her turn. so we let her go. the first thing she did was run down to the labor bureau and complain that she didn't have a contract. she is now demanding 7.5 months severance pay and an extra 7.5 months severance pay for penalty. we are going to arbitration next week and telling the board we didn't really fire the woman. her job is still there waiting for her to come back. we plan on signing her to a contract that will run until the end of the year and then let her go without any trouble at the end of the year with 8 months severance pay. we get to work her for her money between now and then.
the point of this being though,, is that this law may not hurt the western companies as much as the local chinese companies, but western companies are going to have problems like i am having. the workers who should be rightfully discharged are not going to be so easy to get rid of any more. at least not until this rule about open ended contracts comes to an end.
Posted by: jim | March 29, 2008 8:22 AM
"how difficult it is representing Chinese clients in the United States because they tend to spend so much time and effort seeking to avoid clear laws even when following the laws would be relatively painless and far less risky"
This isn't exactly to your point, but it's a story about Chinese fast guanxi culture versus European bureaucracy...
www.spiegel.de/international/germany/0,1518,541543,00.html
Posted by: Phil | March 29, 2008 9:40 PM