Labor Pains

By Michael S. Serrill

"LEATHER BELTS, LEATHER belts, big bargain price!" shouted Chen Zhong, hoisting a fistful of the articles in question on the edge of Ritan Park in Beijing. Chen (not his real name) is one of China's new entrepreneurs -- but hardly by choice. A year ago, he was laid off by the state-owned leather factory where he worked for more than 25 years and was given a stipend of $10.50 a month, less than half his previous salary and not enough to support / his family of four. The leather plant is half shut and bankrupt because it cannot find a market for its shoddy goods.

Factory managers apologized profusely to Chen and gave him some of their stockpiled belts to sell. But when he first tried to find buyers at the park, two inspectors from the Industrial and Commerce Bureau berated him for vending without a license. Chen exploded in frustration. "Go ahead, take me away, arrest me!" he barked. "By tomorrow morning you'll find my wife and children in front of your office. You feed them." The inspectors backed away.

These are hard times for workers in the world's largest officially communist state. The "iron rice bowl" of guaranteed employment has been broken, and in the past year millions of Chinese from the cash-strapped state sector have been fired, laid off or furloughed at half their salaries. In 1993 in Heilongjiang province alone 2 million workers lost their jobs. Millions of others are being exploited by China's new private entrepreneurs -- overworked, physically abused and paid less than the minimum wage. Working conditions are frequently unsafe; the number of workers killed or injured in mine disasters and industrial accidents has risen dramatically. Illegal use of child labor is rampant.

To make matters worse, inflation is galloping along at 20% or more annually, eating away at every worker's livelihood. Says an official in Gansu, a northwest province: "Even cadres like me are beginning to feel the pain, and I earn at least three times as much as an ordinary worker."

The response among laborers has been increasingly militant. Since March a series of wildcat strikes and slowdowns has been reported in Shenyang, Dalian, Chengdu, Shenzhen and other major cities. A particular center of discontent is the northeast, home to many of China's crumbling state-owned industries. According to the China Labor Bulletin, a publication printed in Hong Kong and smuggled to mainland labor dissidents, more than 300 strikes and protests broke out in March and April in the northeast provinces of Anhui, Heilongjiang, Gansu, Liaoning, Shaanxi and Sichuan, some lasting more than 40 days and involving more than 200,000 people. Tens of thousands of unemployed and underemployed workers marched through Heilongjiang province's two largest industrial towns, Harbin and Qiqiha'er, the Bulletin reported. Some demonstrators reportedly committed suicide in front of officials, while others chanted, "We want to survive; we want to eat."

The reaction of China's communist leaders has been ambivalent. Knowing that its very legitimacy is at stake, the government has expressed sympathy for worker grievances, extending unemployment benefits and passing new laws designed to curb employer abuses. Blame has been heaped on Taiwanese, Hong Kong and South Korean manufacturers, and the official All-China Federation of Trade Unions (A.C.F.T.U.) has been encouraged to organize workers in foreign- owned factories. But at the same time Beijing has made clear that it will not tolerate unsanctioned labor organizing. Worker protests have been broken up, often brutally, by police. Labor dissidents have been harassed, arrested, forced underground and chased into exile. In China today, nothing triggers violent repression more readily than the threat of a Solidarity-style independent labor movement.

THE SPREADING LABOR UNREST IS also testimony to the difficulty of converting a welfare state, with cradle-to-grave protections for workers, to what Beijing's leaders call a "socialist market economy." China may boast one of the world's fastest-growing gross domestic products -- GDP shot up 13.4% in 1993 and at nearly a 13% annual rate in the first quarter of 1994 -- but at least for the short term, the process of converting to a market economy has cost China many more jobs than it has created. State-run factories, which still employ more than two-thirds of China's industrial workers, find that they cannot compete with more efficient private firms unless they fire a hefty proportion of their staff. For the first time, they are being encouraged to do so.

The government estimates that 10 million to 20 million of the 109 million workers in state enterprises are redundant. Calculations by private economists push that figure much higher. In a study of the laundry-detergent industry, McKinsey & Co. concluded that mainland producers employ 10 times as many workers as Western factories with the same capacity. Executives of Shanghai Petrochemicals, one of the most successful state enterprises, admitted last year that 40% of workers were involved in "non-core" activities -- in the company's clinic, nursery, cafeteria and other human-resource departments.

"Enterprise reform," to close outmoded factories and make the rest more efficient, has been official policy since 1984, but until very recently little was accomplished. Since 1988 only an estimated 1,000 firms have been allowed to go bankrupt. The reason is that the state enterprises are not just places of employment: under old-style communist thinking they were social nuclei, providing their workers with everything from cheap housing, education and medical care to free haircuts. "Government departments in charge of these enterprises don't want to see them go bankrupt because they will be the ones in charge of the welfare of the unemployed workers," says Zhou Shulian, a senior fellow in the Institute of Industrial Economics in Beijing.

Banks have also resisted the closedown of failing state firms because "they are the largest creditors of the state-owned enterprises," explains Zhou. Since last summer, Chinese banks have been under pressure from Vice Premier Zhu Rongji, China's economics czar, to make their lending standards tougher. Chinese bankers estimate that of the $350 billion in credit that is outstanding in the banking system, at least 10% will never be repaid. With so much at risk, says a Western economist, "banks don't want these firms to close until their loans are repaid."

But the crunch is at hand. Warns Zhou: "If no enterprises go bankrupt, the state will finally go bankrupt." The central government, weighed down with a $2.38 billion annual deficit -- $14.8 billion according to some Western economists -- is cutting state subsidies and demanding that state enterprises take responsibility for their own profits and losses. At the same time, an influx of quality foreign-made products into China has rendered the goods produced in many state factories unmarketable. The proportion of state enterprises operating in the red increased from 34.2% at the end of 1992 to 49.6% at the end of 1993, according to the State Statistical Bureau. Losses for last year totaled $1.8 billion, up 79.7%.

The result has been to visit desperation -- and some new opportunities -- on millions of workers. Says Yan Yun, 33, a former seamstress in the state-owned textile mill in Shenyang, the capital of northeastern Liaoning province: "When I started the job seven years ago, I thought I would never leave it." A year ago, however, the factory was unable to meet its payroll, and she was told she did not need to come to work every day. For six months she worked part time, taking home half her former salary of $23 a month. Finally she gave up and started a small restaurant. She has no regrets. "Factory jobs these days just don't pay enough for a family to live on," she says.

Yan Yun is one of the lucky ones. More than 60% of Shenyang's factories are bankrupt, and most of the thousands of laid-off and half-time workers have found no new employment. "It's the older workers who have been hit hardest," notes a local journalist. "They were the first to benefit from communism and are the last to benefit from the reforms."

Those who have survived best are often husband-and-wife teams who succeed at what has become known as yijia liangzhi, "one family, two systems." In this relatively ideal arrangement, one spouse hangs on to a state job, thereby snaring such important perks as subsidized housing, education and medical care for the family, even though take-home pay may be paltry. The other spouse plunges into the sea of moneymaking either by becoming a private entrepreneur or by working for a joint-venture company.

But for the typical redundant worker without education and resources, there is no easy way to avoid penury. And the frustration and despair are multiplying across China. In many major cities the unemployed loiter on street corners looking for odd jobs as maids, waiters, dishwashers and car washers. Those who do have jobs are often at war with their employers. The Labor Ministry reports that last year 12,358 labor disputes went to arbitration, an increase of 50% over 1992. And those figures, say China experts, are just a small sample of the breadth of unrest. To its credit, the Beijing government is making no effort to hide the crisis. "The rapid change of the economic structure has increased the difficulties of employment," said the Communist Party newspaper People's Daily in a recent editorial. "This year and next year, the employment situation will be extremely grim."

The Statistical Bureau recorded an unemployment rate of 2.6% at the end of 1993, up from 2.3% a year earlier. But outside analysts consider this a gross underestimate that takes no account of workers on reduced pay nor of the army of 150 million to 200 million surplus rural laborers.

More than 30 million farm laborers, thrown out of work by mechanization and made mobile through the lifting of restrictions on travel, have moved to the cities in the past few years to take odd jobs or do menial work in new factories, and millions follow them every year. "These people end up living in ghettos in coastal areas," says Jean-Phillipe Beja, a French Sinologist in Hong Kong, "and many come from the same district or village."

Though it is at the heart of China's economic miracle, foreign investment offers no cure for the unemployment morass. The private industrial sector -- millions of mostly small firms that employ an estimated 30 million people -- takes up just 5% of China's work force. Yet 10 million people join the ranks of job seekers every year. In fact, some foreign-owned companies are contributing to the crisis through a pattern of abuse of their workers.

Last week at least 20 people were killed when the Yu Xin Textile Factory in the Zhuhai Special Economic Zone near Macao collapsed. Fire had swept through the six-story building the day before. The factory, which was owned by Chinese, Hong Kong and Taiwanese investors, was one of the largest in Zhuhai, employing about 1,500 workers. Earlier the top two floors of the Xie Cheng toy factory outside Shenzhen collapsed, killing at least 11 workers and injuring 27. Like many of the thousands of electronics, toy and garment factories that dot southern China, the Xie Cheng plant broke almost every law on the books. The owners did not have a permit to construct the uncompleted building, much less the authority to move anyone in. The factory used child labor; two of the dead girls were found to be 14 and 15 years old. Those who survived, including 900 workers living in adjacent quarters, hadn't been paid in two months. And during that time they had been forced to work 16-hour shifts five days a week, all for just $30 a month.

"When the investors came to China, they thought they had to abide by all these laws," says Han Dongfang, an exiled labor activist who produces the China Labor Bulletin from his tiny apartment on an outer island of Hong Kong. "After a couple of years they realized they didn't. That is why the situation has become worse." Analysts say industrialists have been able to sidestep safety rules in part because officials are eager to attract new business, but also because those same officials frequently have their hand out for bribes. "It is much cheaper to bribe the official in charge," says Beja, "than to pay for the permits or for the cost of meeting safety standards."

Most of the workers in foreign enterprises, Han says, are women from the interior, "who are more obedient and less willing to stand up for their rights." Foreign businessmen often advertise for workers by offering the minimum wage of about $100 a month, he said. Then they take away half or more by "fining" the workers for making mistakes in production. Usually the women live and work in the same building; they are sometimes held in virtual bondage by their employer. In the southeastern city of Fuzhou last January, a woman suspected of stealing a pair of shoes from her employer, Yungqi Shoe Ltd., a Taiwanese venture, was tied up, beaten and locked in a cage with two large dogs.

The largest challenge to government policymakers, however, is to hold back the catastrophic collapse of the state-owned factories that represent the great bulk of China's jobs. Officials at all levels are frantically looking for ways to help bankrupt factories and marginalized workers. The A.C.F.T.U. is being mobilized to conduct "political and ideological work" to ensure that the workers remain "stable" in their attitudes. In Shanghai, where nearly 100 state-owned firms are losing money, city officials are requiring each municipal department to "adopt" one or two failing companies and make them profitable within six months. Firms that cannot be turned around will be merged with successful companies, auctioned off or, as a last resort, forced into bankruptcy.

For those who lose their job, more and more cities are setting up unemployment-benefits programs based on employer contributions. The Labor Ministry says some 500,000 companies now participate in such undertakings. The city of Beijing will start offering benefits in July. "From now on the jobless will no longer feel anxiety over their declining income," Liu Zhihua, chief of Beijing's labor bureau, told the Beijing Youth News. Well, they might feel a little, since benefits start at just $17 a month.

THE GOVERNMENT IS TRYING TO address other complaints. It has told factory supervisors to improve working conditions and has conducted a nationwide inspection to check whether child-labor laws are violated and to inspect contracts, wages, working hours, insurance and welfare programs for workers. In the vanguard of these efforts are the leaders of the A.C.F.T.U., who are trying to shake off their image as Establishment toadies and forge better relations with workers.

Despite such efforts, none of the palliatives is likely to have much effect on a work force that is suffering from rising anger and alienation. "Workers feel betrayed," says an Asian economist based in Beijing. A survey conducted two years ago by the A.C.F.T.U. among 210,000 laborers at 400 state enterprises in 17 cities found that only 12% of workers felt satisfied with their condition, while 51% thought their status in society had fallen to an all-time low.

Morale has only deteriorated further since then, opening opportunities -- and hazards -- for a new generation of independent labor organizers. In late February, two of those activists, law student Wang Jiaqi and Beijing University law professor Yuan Hongbing, wrote the founding charter for a new, free trade union, called the League for the Protection of Working People's Rights. Yuan and Wang were arrested March 2; Wang later escaped and is now in the U.S. The labor charter was presented to the Ministry of Civil Affairs March 9 by a third dissident, Liu Nianchun, a veteran of the 1979 Democracy Wall protests. He too was arrested. Since then, more than two dozen others have been detained for labor agitation.

Like most communist states, China has always had an allergy to independent labor organizations. David Bachman, chair of the China Studies program at the U.S.'s University of Washington, points out that labor activists were singled out for repression during the 1979 Democracy Wall outbreak and again at Tiananmen Square.

As in the past, says Bachman, "the agents of coercion seem to be doing their job." But how long can they keep the pot from boiling over? "In a society where there are mechanisms for reconciliation," says Han Dongfang, "there can be a balance of various interests. But in China that mechanism doesn't exist. And the state is confused about its role." The result is a building of tensions. "The government has a choice," says Robin Munro, the Hong Kong director of Human Rights Watch/Asia. "It can try to keep the lid on by arresting more dissidents and wait for it to blow. Or it can take a brave step and offer workers a controlled way to issue their demands."

Either way, those demands will not disappear. Han claims that there are now secret cells of labor activists in most of China's major cities who give wide circulation to his China Labor Bulletin -- banned on the mainland as "subversive" -- and who are playing a key role in the outbreak of wildcat strikes and protests. "How much pressure can the laborers endure?" asks the dissident. "Things can explode at any time." And the government seems all too aware that the fuse is burning.

CHART: NOT AVAILABLE

CREDIT: [TMFONT 1 d #666666 d {Source: China Statistical Yearbook, 1993}]CAPTION: UPS AND DOWNS OF THE BOOM

With reporting by David Aikman/Washington, John Colmey/Hong Kong, Jaime A. FlorCruz/Beijing and Mia Turner/Shenyang