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Tuesday, January 2, 2007

Great Leap Forward?

Welcome, Wal-Mart Comrades
Wall Street Journal editorial, Dec. 21, 2006

Economic development news from around the region and around the globe

For a peek into China's labor market, look no further than Wal-Mart. In North America, the world's biggest retailer prefers to close down stores rather than tolerate unionized staff. But in China, most of Wal-Mart's 68 stores not only have labor unions, but six locations now boast Communist Party branches as well. What's next? Comrade Sam's Clubs?

The latest Wal-Mart Party cell debuted Friday at the chain's headquarters in Shenzhen. This followed the company's decision in July to give in after years of pressure from the nationally sanctioned All-China Federation of Trade Unions. Thirty employees at a Wal-Mart store in Fujian province unionized. According to the ACFTU, it now has more than 6,000 members in Wal-Marts across China. The Party has followed the unions' path through the front doors.

Wal-Mart spokesman Jonathan Dong told China Daily that Wal-Mart supports the Shenzhen cadres. "We have had this attitude since the trade union was established [in July]," he said. "Both will be good for the development of Wal-Mart in China."

That's not a sure thing. For starters, the function of the new unions remains unclear. Labor lawyers tell us that Chinese unions aren't like those in the West. Relations with management are generally benign. Demonstrations are rare, as unions and party cells like to keep a low profile. So a company like Wal-Mart may not perceive much threat from opening its doors to union and Party. But there's nothing to guarantee that union members won't catch onto the practices of their Western peers.

Legal change is afoot, too. Sometime in the next week, Beijing's legislature is expected to hold a second reading of the Labor Contract Law. The document will redefine labor rights and the ACFTU's power. The first draft gave foreign investors a jolt. It made employee dismissals for poor performance difficult. The draft also required company policies and regulations to be negotiated between employer and "employee representatives," a la Germany.

More than 190,000 industry players registered comments on the draft law with the Party. Many believe the new version will be more employer friendly, though the draft still hasn't been made public. Many foreign-invested firms are waiting for the passage of the legislation before deciding whether to admit the ACFTU, as Wal-Mart did.

Which makes Wal-Mart's embrace of union and Party all the more puzzling. Perhaps Wal-Mart wasn't given much of a choice, and was chosen to send a message to other foreign-invested enterprises. Which is: We're watching you from outside, and inside.

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