China defends labour law, employers reluctant

Chinese officials defended on Sunday a new labour contract law that makes it tougher to fire employees and said it would not raise the cost of doing business, but conceded they faced resistance from reluctant employers.
The law, which took effect on January 1, requires firms to give open-ended contracts to staff who have worked for 10 years or completed two fixed-term contracts and mandates higher company contributions to pension and insurance funds.
"The issue now is not revision, but full enforcement," Sun Baoshu, Vice Minister of Labour and Social Security, told a news conference at China's annual session of parliament.
Despite complaints from employers, some of whom he said might try to "lower labour costs through non-compliance", the law had only been in place for three months and it was too early to consider amendments.
"The added cost of this law is actually very limited," Sun said.
The law has prompted concerns that it could lead to greater rigidity in the employment market in China, a country whose growth has relied on cheap labour, and force up business costs. But rising wages will also help with China's goals of boosting domestic consumption, and better protection of workers and improved working conditions fit with its aim of building a more equitable-and less restive-society.
"The open-term contract is by no means an iron rice bowl. It will not lead to rigidity in the labour market," Sun said, referring to the cradle-to-grave system of employment that was the norm for urban workers under China's planned economy.
"I think these concerns are a result of incomplete or inaccurate interpretation," Sun said. "It won't affect the investment environment. On the contrary, it will improve it." China also has a law on labour arbitration due to come into effect in May, and the ministry said a goal of 2008 would be strengthening mediation of disputes and improving professional training for arbitrators. But the ruling Communist Party bans independent trade unions in China, depriving workers a key channel for resolving disputes. Unpaid wages, especially to migrant workers, have also been a source of the sort of unrest China's leaders are keen to avoid.