Financial Post: How an emerging labour movement in China’s Wal-Mart stores threatens expansion ambitions of all Western retailers

26 December 2015

China Labour Bulletin is quoted in the following article. Copyright remains with the original publisher

Linda van der Horst, Special to Financial Post

December 25, 2015

When Zhang Jun, a 44-year-old electrician at a Wal-Mart store east of Beijing, shared a Mao-era propaganda poster on his Weibo blog, he was making a point.

In it, Mao beams over a group of mobilized workers, above a caption that reads: “The working class must lead everything.” Zhang wasn’t expressing his affection for Mao, but was using the communist leader’s words as part of a cat-and-mouse game with China’s only legal trade union – and Zhang’s own capitalist bosses in Bentonville, Ark.

Zhang leads a loosely defined movement called the “Wal-Mart China Staff Association.” It is neither huge, nor high-profile, and doesn’t have a national political agenda. What these activists are fighting for is the right to elect their trade union committee, one that would be recognizable as such to the West, one with collective bargaining power.

The fight at Wal-Mart China is unique because it aspires to transform the only union that’s allowed to exist in China, the so-called All-China Federation of Trade Unions (ACFTU). Zhang and a small cadre of like-minded organizers are demanding the right to elect their own leaders at their respective Wal-Mart stores, a process they say has been illegally hijacked by Wal-Mart’s head office since it was forced to accept unionization in 2006.

Their dispute is part of an emerging labour rights movement, and the consequences are far reaching. “In five to 10 years, (Chinese) workers will be able to reclaim the union through collective bargaining, and that [would be] the biggest national union on earth with bargaining power,” says Han Dongfang, founder and director at China Labour Bulletin, a non-governmental organization founded in Hong Kong.

But labour activism could have even bigger consequences for foreign companies looking to take advantage of lower wages and access to the huge Chinese market. Operational risk analysts at Business Monitor International say movements such as Zhang’s could make it harder for Western companies to manage costs as China’s economy slows.

Companies such as Roots Canada and Alimentation Couche-Tard, which are considering expansion in China, should take heed. Canadian direct investment in China stood at only about $6.7 billion in 2014 , but Canada-China relations improved under former Prime Minister Stephen Harper, and China is currently Canada’s second-largest trade partner.

Access to 1.4 billion consumers with more discretionary income to spend will continue to be alluring, but the retail sector in China is still fraught with barriers to entry for foreign investors, including rising costs and cut-throat competition from domestic retailers.

Wal-Mart entered the Chinese market in 1996 as one of the first foreign retailers with ambitious expansion plans. Nineteen years later, it has only 411 stores – with more than 100,000 employees – across the country, compared to 5,163 outlets in the United States. The rate of expansion has slowed due to heavy competition from domestic retailers such as Sun-Art Retail Group.

Under pressure from the government-controlled ACFTU, Wal-Mart became the first foreign company to accept unionization of its work force in 2006. But since then, the union has stood largely on the sidelines, activists say. Although several municipal-level branches of the ACFTU convinced Wal-Mart in 2008 to raise its wages by eight per cent in both 2008 and 2009, Wal-Mart activists say wages have stagnated since then.

Activists say it’s because Wal-Mart’s union committees are controlled by management-appointed representatives, so-called “yellow union committees.” China’s labour laws and ACFTU policy theoretically allow workers to elect their own representatives, but in practice, Wal-Mart makes the appointments, the activists claim.

Wal-Mart wouldn’t comment on the election of its ACFTU officials, or on specific labour disputes, but Marilee McInnis, Wal-Mart’s director of international corporate affairs, said the company’s policy is to “protect the interest of associates [i.e. employees] while promoting the sustainable development of the company, provide competitive wages and have resources in place to train and develop associates.”

There are signs that the ACFTU itself may be primed for change.

In 2013, Chinese president Xi Jinping asked the ACFTU to “protect workers’ interests and promote social justice to win public trust and support,” and to set up trade unions as a genuine “home for employees.” After years of collective strikes, local branches of the ACFTU, in particular in Shenzhen and Guangdong, have said that they’re aiming to adopt direct elections in the next few years.

But Wal-Mart’s activists do not want to wait for the slow-moving ACFTU to reform.

Zhang Jun, the electrician, and the staff association founder, have been teaching Wal-Mart workers across China how to get their own representatives on union committees, using tactics learned from labour groups in Hong Kong.

“Years of anger over Wal-Mart’s … suppression and manipulation of the trade unions, and exploitation of employees, is now bursting out,” Zhang wrote on the association’s blog.

Those who speak out sometimes find themselves out of a job. Wang Shishu, a Wal-Mart worker in his mid-50s, lost his job in 2012 after urging workers in Shenzhen to demand better wages. He sued Wal-Mart for wrongful dismissal and won his job back.

At some point after he resumed agitating for workers, he was dismissed again. He’s currently in the process of suing to regain his position, alongside Yu Zhiming, one of the few democratically elected worker representatives at a Shenzhen store, who was let go in March after his union committee opposed a Wal-Mart rule that would make it easier to fire employees.

Duan Yi, a Guangdong-based labour lawyer, says that in the past six years he has helped over 100 Wal-Mart employees who have lost their jobs after attending labour rights workshops or marching in protests for things like higher wages. The “Wal-Mart union never spoke up when Wal-Mart laid off their employees in the past,” he says.

The latest battle to elect union representatives is taking place at a store in Shenzhen. Wal-Mart workers there are currently challenging the results of elections, claiming they are “yellow union committees.”

Zhang Liya, an activist with the staff association announced in September that he will put himself forward as candidate for the union’s presidency while also campaigning for democratic elections. But even if activists success in electing their own representatives, “those union members need more organization and training in the future, which they currently lack,” Duan said.

Foreign companies should be keeping a close eye on the developments in China, say operational risk analysts Vanessa d’Alancon and Andrew Pope of Business Monitor International.

Governments across China are responding to the emerging labour movement by introducing local regulations on collective bargaining. Setting up worker councils in advance of these new regulations, d’Alancon and Pope said, will mitigate the risk of strikes. “It is going to push up labour costs initially, but it will be better for companies in the longer run to create a more amicable relationship.”

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