CHINA: Growing workers’ unrest increases operating risk

On 23 February, more than 500 temporary workers from German carmaker Volkswagen rallied in the north-eastern city of Changchun to protest what they saw as unfair wages and unpaid compensation. While such protests are illegal in China, incidents of labour unrest have been on the rise in recent years. This trend is likely to continue in 2017, posing significant operational risks to construction, logistics, manufacturing and retail businesses.

The Volkswagen dispute primarily centres on temporary or ‘agency’ workers hired from recruitment agencies; the German company employs about 1,500 of these personnel. This arrangement is popular among local and foreign enterprises as they are not responsible for the agency workers’ wages, social insurance and termination payments, which helps lower overall operating costs. China’s only state-sanctioned trade union estimates that there are 60 million such workers, making up about 8 per cent of the country’s active labour force.

However, this practice is coming under pressure from the agency workers and their supporters. Since December 2016, the Volkswagen demonstrators have sought the help of state labour, municipal trade union and provincial officials to resolve the dispute. More recently, they have applied for labour arbitration, demanding up to EUR200,000 in compensation per person.

Hong Kong-based advocacy group China Labour Bulletin recorded 2,663 labour-related protests and strikes in 2016, slightly below 2015’s total but double the number in 2014. The regions with the most incidents are in China’s manufacturing heartlands, notably Guangdong, Jiangsu and Shandong provinces.

One of the most prominent industrial actions in 2016 was staged by employees from Walmart China, the local joint venture of U.S. supermarket chain Walmart Corporate…

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