Chinese Labor and Employment Law

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CHINESE LABOR AND EMPLOYMENT LAW BY NATHAN JACKSON April 2011 This FAQ is an attempt to answer questions that a foreign layperson may ask about is often a politically charged issue in foreign countries and much misinformation is frequently deployed in political debates. In addition to providing an overview , this FAQ also attempts

to highlight relevant topics that may be unfamiliar to informed laypersons. The focus of this document is on law, but as the FAQ will show, there is often a large gap between law and actual

labor and employment laws.

influence the prices of goods and services around the globe, the locations in which companies and individuals choose to invest or move production, and the social stability of China. In November 2001, China became a fully admitted member of the World Trade Organization and in n in international trade. China has not only become a major export power, but also an attractive investment target for

world trade and investment continues to increase, its labor environment will likely attract more



1980. At least 130 million of these are migrant workers who move from relatively poor rural areas to urban and industrial centers to work. Many of these migrant workers remit portions of their earnings back to family members in their hometown. Until recently, China has typically had an oversupply of unskilled labor and a shortage of skilled and professional workers. However, in the past several years, some companies in the major industrial hubs have begun to complain about labor shortages. As a result, many companies now raise wages 10 percent or more annually to retain workers, while others have closed their doors and moved to poorer inland areas or countries with cheaper labor. Interestingly, salaries for new university graduates have stagnated

university system. While university graduates start their careers with wages comparable to a factory worker, their salaries typically rise much more quickly than those factory workers. How have

35 years. Prior to the early 1980s, nearly all jobs were allocated to citizens through an administrative bureau. Employees could not choose their employer or terminate their employment. Further, regulations set an expectation that the employee would work for the same employer for her or his whole working life. Companies in this era could only terminate employees for gross misconduct. This type of labor market and social safety net was called the Iron Rice Bowl because the employer guaranteed job security and benefits to employees In other words, the benefits could not be taken away


In 1983, the government introduced a contract system that attempted to address the low productivity of the labor market by replacing the Iron Rice Bowl with short-term labor contracts. At first, state-owned companies resisted this trend and the government succeeded only in minimal reforms. In 1992, the N required all trade unions to be affiliated with the All-China Federation of Trade Unions (ACFTU). This effectively brought labor unions under greater control of the government. The Labor Law of 1994 liberalized the labor market. The labor law, when combined with economic reforms, resulted in more than 40 million lost jobs in government and state-owned enterprises. As a result of the reforms, the government shuttered inefficient businesses and the formerly economically dominant northeast turned into a rustbelt. Meanwhile, Chinese entrepreneurs and Hong Kong investors transformed the formerly weak southeast province of Guangdong into the largest center of manufacturing in the world. In 2008, the government introduced a Labor Contract Law that rolled back some of the laissez-faire approaches to the workforce that the government introduced in the 1990s. This new law abolished the system of at-will employment for most full-time employees and required employers to provide employees with written contracts. Since 2008, the government has also revisited...
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