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. Last Updated: 07/27/2016

China Walks Tightrope as Workers Lose Out

BEIJING -- "Wanted: young, able-bodied, hard-working men and women to work in clothing factory. 600 yuan a month. Short term. No residence permit needed."

The advertisement at the Yuetan labor exchange in Beijing attracts a throng of migrant workers, stamping their feet to ward off the winter cold in the drafty Ming Dynasty building.

"No overtime. No benefits. Conditions are tough for outsiders," mutters Zhang, 34, who came to Beijing looking for work after being laid off two years ago by a bankrupt textile factory in the central province of Anhui.

"But if you don't like it, there are plenty of people to take your place," he says, hurriedly filling in an application form.

For workers like Zhang - once protected by a cradle-to-grave state welfare system, now moonlighting for unscrupulous private employers - China's imminent entry to the World Trade Organization means only one thing.

"More unemployment," says Guo, 40, a former electronics worker from Shanxi province, who has come to the exchange in vain every day for the last two weeks.

"That means more competition, worse conditions."

In his last job, Guo worked 15 hours a day, six days a week, without overtime, for 700 yuan ($84) a month.

Faced with slowing economic growth, China's cheap and abundant labor supply represents its most valuable natural resource - and its greatest potential threat.

China must keep labor costs down to compete for precious export markets and foreign investment with neighbors made more attractive by big falls in the value of their currencies during the Asian economic crisis.

But Beijing is also under increasing pressure to appease an army of workers disaffected by mass layoffs from flagging state enterprises and poor conditions in the private sector.

Labor conditions in the developing world were at the center of a dispute that helped to scupper a WTO meeting last month.

While angry demonstrators in Seattle accused the body of subverting democracy and destroying labor unions, developed nations called for a link between labor standards and trade.

Djankou Ndjonkou, director of the International Labor Organization's Beijing office, says trade sanctions are not the answer to Chinese workers' woes.

But neither is free trade alone.

"Of course the fundamental problem is that it is illegal for workers to form their own unions. Until workers have proper channels to resolve disputes, they are likely to take to the streets," he says.

China has made progress on technical issues, such as safety in the work place, but is reluctant to ratify fundamental conventions on more sensitive areas such as freedom of association and collective bargaining, he says.

Beijing has ratified 20 conventions of the ILO, the United Nations' labor agency, but 14 of those date back to before 1940, and 18 are purely technical.

China implemented a new labor law in January 1995, limiting the work week to 40 hours and overtime to 36 hours per month.

In the two years after the law was introduced, state media reported a dramatic rise in the number of labor disputes as workers became more aware of their rights.

But labor activists say that since economic crisis rocked Asia in 1997, local governments anxious to keep labor costs down have been turning a blind eye to employers who flout regulations.

Labor groups monitoring working conditions on the mainland continue to receive reports of sweatshops where rural migrants are held captive on minimal pay, especially around the freewheeling coastal special economic zones.

Rising living standards and tighter inspections by foreign investors have improved conditions inside special zones.

But many factories have simply moved to the edges of the zones and recruit workers from the surrounding countryside or the much poorer hinterland, labor groups say.

Outside the Yuetan labor exchange, workers mill around exchanging gossip and airing grievances.

"We'll never find anything," grumbles Li, 50, from the northern province of Hebei. "I have 10 years until I can retire. What am I supposed to do?"

Others show signs of mounting discontent.

"I blame the one-party system," says a former steelworker from Heilongjiang province in the northeast.

"Corruption is everywhere - rotting the heart of the country. Industry is no good. Agriculture is no good. The service industry is not developed.

"Look at all of us," he says, his face flushed with anger. "We are young and capable. What a waste."