The Process of Institutionalization

The China Journal (pages 101-13) No. 54, July 2005

GLOBAL PRODUCTION, COMPANY CODES OF CONDUCT, AND LABOR CONDITIONS IN CHINA: A CASE STUDY OF TWO FACTORIES*

Pun Ngai

As China becomes integrated into the world economy, most of the manufacturing there of Western brand-name goods has been produced under contract by Hong Kong, Taiwanese or, increasingly, privately owned PRC companies. These, and not the brand-name Western transnational corporations (TNCs), own and run factories inside China in what has become a global production chain.[1]

In the past two decades, these Asian companies have come under attack for labor violations numerous times in the international media and in academic studies.[2] These reports have fueled an anti-sweatshop movement in the West to put pressure on the famous-brand corporations to oblige their suppliers to upgrade labor standards in China and in other developing countries.[3] This push began after The Washington Post ran a story in 1992 about Levi jeans made by Chinese prison labor.[4] Concerned about its corporate image worldwide, Levi Strauss immediately reacted to public concern by drawing up a code of labor standards,[5] and pressures rapidly built from a broad coalition of church groups, student groups, consumer NGOs, and for other companies to follow suit.[6] In response, from the mid-1990s onward Western TNCs have competed to introduce corporate codes of conduct into China as part of these companies’ strategic policies to secure the sale of their goods and services on the global market.[7] A corporate code of conduct is a formal statement specifying the ethical standards that a transnational company holds and applying these to the factories of its suppliers or to its trade partners.[8] The corporate codes normally specify that there should be no forced or bonded labor; no child labor; no discrimination in employment; adequate wages and benefits; limits against excessive hours of overtime work; no chemical or other hazards to safety and health; and a decent working environment. A few company codes even contain clauses on freedom of association and a right to collective bargaining.[9]

To ensure these codes are being complied with, TNCs have allocated staff to check on the suppliers’ factories, but because the needed scale of such monitoring is often substantial they often have hired commercial firms to conduct the monitoring on a regular ongoing basis.

The regulation of labor standards by transnational corporations has occurred at a time when the Chinese government has been developing a new system of labor legislation and institutions to protect labor, including the promulgation of a new Labor Law in 1995 and the setting up of labor arbitration committees for channeling labor disputes.[10] Nevertheless, within factories the state’s role in regulating management-labor relations and providing labor protection has been seriously limited, and has therefore often failed to prevent labor protests and resistance.[11]

In line with the government’s negligence in overseeing labor conditions and management practices within the foreign-run factories in the export sector, no government departments, including the Labor Bureau, have seriously evaluated the corporate codes of conduct, assessed their influence on labor rights protection, or monitored the process. This situation provides room for the TNCs to enforce their own standards through the corporate codes of conduct. As a company officer in the so-called “human-rights department” of an American TNC in China remarked to me, “The government is useless here; no labor law is actually enforced. We take up its role to provide labor protections”.

A Reebok document, “Towards Sustainable Code Compliance: Worker Representation in China” (2002), proclaimed:

“For over a decade, Reebok International Ltd. has implemented its code of conduct—the Reebok Human Rights Production Standards—in the independently owned and operated factories that make its products. We do this to: 1) benefit the lives of the 150,000 workers who make our products; 2) ensure that workplace conditions meet internationally recognized standards and local law; 3) honor our corporation’s commitment to human rights; and 4) protect our brand reputation”.

Critics argue that these company codes are ploys of public relations as the TNCs are the judge and jury of their own codes because the TNCs have an interest is not publicizing rights violations in their supplier factories,[12] and there is no way outsiders can appraise the situation. Moreover, the pressure for implementing the corporate code is from the TNCs, but not from the suppliers or producers.[13] These suppliers or producers for TNCs in China have no choice but to agree to implement the company codes, accept in-house TNCs’ representatives to supervise working conditions, and a handful of them even accept a couple of new TNC’s pilot projects to allow workers’ committees or trade unions to be set up through democratic elections. All these activities have had a substantial impact on the re-organization of Chinese factory regimes in terms of production facilities, management practices and working and living conditions of workers.

This article attempts to understand the corporate ethical codes movement in China by drawing on information from the case studies of two factories that had to respond to the corporate social responsibility programs. The article will examine the process of implementation of corporate codes at the company level, and the implication of code practices on labor rights. More than simply arguing that the ethnical code movement is only a public relation exercise, I will point to the fact that this movement as a top-down process of labor rights protection results in a process of capital “co-opting” of civil and labor rights in Chinese society and elsewhere as well.

Field Study of Corporate Codes Implementation at the Workplace

An international anti-sweatshop campaign launched a pilot project to monitor the implementation of corporate codes by TNCs in China, and this provided us with the opportunity to conduct this research. This study is based on an eighteen-month observation of the pilot project to promote fair labor and business ethics in China. Staff and workers’ views from two factories - one in the Pearl River Delta and the other in the Yangtze River region - were solicited to assess the labor codes practices and their influence on production politics. Interviews were conducted in the workplaces as well as workers’ dormitories between 2002 and 2003. These two enterprises were willing to provide me with systematic documentation and allow use carry out in-depth interviews because they had signed an agreement with the anti-sweatshop campaign and a European brand-name TNC to implement and monitor the corporation code program. In addition we had access to some general surveys, NGO documentation and mass media coverage that form background information for the study.

The two enterprises are China Miracle Garments (China Miracle) in the Yangtze River Region, and China Galaxy Apparel (China Galaxy) in the Pearl River Delta. Besides frequent exchanges with the directors, the production managers, the personnel secretaries, the social compliance officers and the trade union chairs, formal interviews were conducted mainly with production workers. These workers were selected on the shop floor by my research team, taking into consideration factors of gender, age, marital status, work position and work department, covering a range of departments including the design, cutting, production, quality control, and packaging departments.[14]. We chose a total of fifty workers in China Miracle, and thirty-two workers in China Galaxy for in-depth interviews. Night visits to the factory dormitories were also undertaken to crosscheck information provided in the daytime by the workers while in the workplace.

The goal is to be global

Global pressure on TNCs to raise labor standards comes down the global production chain and ends up putting pressure on manufacturers in China and elsewhere. Enterprises in the two Deltas were under pressure to enhance their company profiles by upgrading their production facilities, reviewing management practices and improving workers’ living conditions to varying degrees. Many large enterprises therefore set up new positions such as social compliance officers to enforce code implementation and raise workers’ awareness of code provisions. Social compliance officers were employed at China Miracle and China Galaxy under the requirements of the European corporation in mid–2002. To them, the adoption of corporate codes was an additional burden as a necessity to implement just-in-time production and production of high quality, but these enterprises hardly had any choice. Severe competition among them resulted in the loss of supplier factories bargaining power with the TNCs in the global production system. Directors complained that production order prices continuously dropped but the requirement for labor codes had been stringent in the previous few years. They took the implementation of these codes as market pressures and emphasized that:

What we can do is to let our enterprise be global, and live up to the international standard of codes. It is the only way to secure production orders from our clients, especially those from America and Europe.

Thus, China Miracle, a joint-venture enterprise owned by a Taiwanese company and a mainland private businessman, injected RMB 20 millions to build a new 40-acre enterprise factory in 2000. The new investment not only enlarged the size of and enhanced the facilities of the enterprise, but also the working conditions. Management strategy was to build a model enterprise in the Yangtze River region so as to attract more production orders. The new compound went into operation in March 2001 and consists of a three-story factory with an attached administrative block, a separate one-story canteen and a utility room forworkers’ recreational purposes.[15] Surrounded by a rectangular wall with gates policed by armed security guards, China Miracle is one of the largest garment factories in the high-tech development zone. In addition to an emphasis on product quality, meeting the TNCs corporate codes and international standards such as ISO 9000, ISO 14000 and SA8000 were also goals set by the management team.[16]

Like China Miracle, China Galaxy located in Dongguan had the ambition to establish itself as a model factory in Pearl River Delta. Established in 1993, the enterprise, belonging to a Hong Kong company, controlled by a Hong Kong director and five Hong Kong managers, supplemented by twenty supervisory staff members from the mainland who were in charge of the daily management and operation of production. In addition to production orders received from the European TNC, China Galaxy also produced sportswear for American brand companies. The Hong Kong company was well aware of codes of conduct issues and hence laid down strict guild lines for the management staff of China Galaxy as well as its other factories in Shenzhen to follow. Even when first established, China Galaxy already aimed at becoming an advanced and modern factory in the Delta, outshining the thousands of other plants in the same sector. It expanded quickly to a workforce of 1,500 in the mid 1990s. The company management claimed that it had introduced modern management models and international labor standards. Directors and managers were proud of having built up a new “factory empire” on the mainland, one which was not only physically grand and magnificent, but with modern and advanced production facilities and rationalized managerial practices.

To upgrade its company facilities to meet the code requirements, China Galaxy made another investment of RMB 5 million to build a new dormitory in 1999. The dormitory compound was like a modern boarding school, with facilities including two canteens, a dancing hall, a reading room, a shop and a small clinic. Surrounded by trees, there was an open area for workers’ recreational activities such as badminton, basketball and the like. The dining hall would also be filled by workers in the late evening for watching TV programs and film shows. It was just like a small community. Typical of a model factory in China, there was, however, a hierarchy of accommodation, serving to segment the labor force. The Hong Kong managers were provided with well furnished self-contained flats of three bedrooms. The production workers were housed in rooms with a shared toilet, and with a common room for hot water on each floor. Each dormitory room accommodates six to eight workers, with storage space provided for their clothes and personal belongings. By all standards, the physical facilities were unusually good compared to other Hong Kong owned factories in the Delta region.

All the dormitory facilities follow strictly the European corporation’s code, which states dormitory facilities meet all applicable laws and regulations related to health and safety, including fire safety, sanitation, risk protection, and electrical, mechanical and structural safety. It also strictly controls sex segregation of sleeping quarters, privacy of space, number of toilets and showers, sufficiency of water suppliers as well as the freedom of workers’ mobility. It also says that dormitory residents are free to come and go during their off-hours under reasonable limitations imposed for their safety and comfort.

The meticulous regulations of corporate codes on physical standards is an attempt by TNCs to address the critique of Chinese factory regimes as despotic or authoritarian. These detailed codes serve to raise Chinese factory regimes to reach global modernized standards. However, the effort to enhance the labor standards via codes implementation was not effective because in interviews the company directors kept complaining that the production order prices had been dropping continuously yet the requirement for labor codes had been stringent. The director of China Miracle remarked:

The code practice required by the European Corporation is a “market behaviour”. We are lost at the moment, but we hope to get a return in the long run. It’s the way to survive in the world market.

The factory owner had injected new capital to meet the code requirement on physical facilities in the hope of securing more production orders from European retailers and also fuel hopes of expanding into the American market. Compliance to the corporate code of conduct had little to do with improving labor rights. The supplier company was purely motivated by business imperatives.

Moralistic Imperative: “Paradoxical” if not “Hypocritical”

One characteristic of the codes implementation is that by nature it is fraught with paradoxes and contradictions, resulting in an inescapable ambivalence of codes practices in the workplaces. One production line leader at China Galaxy said, “Who cares about labor rights? Do they [transnational corporations] really care about our working conditions? In times of rushed production outputs, we still have to violate the code.” Another company manager in Dongguan frankly explained to us: “We are forced to apply the labor codes by XX company, but we can judge from our intuition that when production and codes clash, which side we can cling to. Once I phoned their production department and asked: ‘Do you still want your products in time?’ The monitor then left our company alone.”

The moral face of capital further proved illusory when we interviewed production workers. While the managers of China Miracle and China Galaxy claimed that every worker had been provided with a written copy of the European corporation’s code when they signed or renewed their contract, all but two of the interviewed workers informed us that they had not received a copy. When we asked whether the code was read out to them in their morning meetings or other settings, most of them responded with uncertainty. Only a few of the workers had some knowledge or understanding of the code provisions. One worker even mistook the code as China Miracle’s own regulations. She asked me:

Do you mean company regulations? Yes, we have very strict regulations, and if we make mistake, we will be fined. Quality control is very high in this company.

To prepare for TNC monitors’ inspection, the management of the two companies repetitively “trained” the workers in how to respond to the monitors questions if asked, especially in terms of working hours, rest days and wages. A uniform answer provided by the workers in the exact same wording, certainly raised doubts about the truthfulness of the answers:

We work eight hours each day. No compulsory overtime work. We have Sunday off. We got 1.5 times pay for evening work, double for weekends and triple for public holidays.

Our suspicions were confirmed when we visited the workers’ dormitories at night where the workers were relatively free to express themselves: “You know we are afraid of losing production orders. We also don’t want to give wrong answers and get into trouble.” The workers were indoctrinated with the idea that if they gave the wrong answers, they would damage the profitability of the company and thus in the long run their own jobs and wages.[17].

Supervisory staff on the other hand saw the code of practice as a hypocritical act by the TNCs to assuage the “inner sins” of rich western countries. A production manager of China Miracle said:

The foreigners put us in a trap. One the one hand, they talk about human rights, but one the other hand, they also want good and cheap products. They are actually quite hypocritical, you know.

She stressed the point that when production orders were under time pressure, she had no choice but to give up “labor rights”, resulting in excessive overtime work in violation of the code. Severe global competition for low-cost products and just-in-time production structurally goes against code implementation, and results in a “paradoxical” if not “hypocritical” role for company code practices.

Nevertheless, the working conditions of enterprises with code practices are better than those without such codes in the same region. At China Miracle and China Galaxy, we witnessed no cases of bonded labor as all workers we interviewed were willing to work there. All workers were provided with a contract to sign at the end of a probation period, although it was not a standard labor contract drafted by the local Labor Bureau. The contract was much simpler and listed fewer clauses than required by the European corporations’ code.[18] Neither company kept the identity cards of workers, which other enterprises in China often do to prevent workers from quitting. Disciplinary penalties were replaced by a system of rewards and compensation. Standard working hours were ten hours each day, from 8:00 am to 8:00 pm with a two hour break for meals. Workers often had a rest day on Sunday unless pressing production orders required overtime work. Having one day off in seven is a core provision of the European corporation’s code.[19]

Another important provision of the code, often the most contested terrain, concerns excessive overtime work. The code states that “The factory shall not require, on a regularly scheduled basis, a work week in excess of 48 hours without overtime work and 60 hours with overtime.” This provision is obviously incompatible with the Chinese Labor Law which stipulates that normal working hours are 40 hours a week and about 9 hours of overtime. Most of the TNCs are aware that their code provisions on working hours are illegal and exceed the Chinese Labor Law. Few of them, however, have revised their codes, or stated clearly that the national standard would apply. The workers of China Galaxy and China Miracle had to work as long as ten hours each day, six days a week. Even when the two TNCs’ codes were adopted (and these codes claimed to uphold the standard of local laws) we did not observe genuine differences with regard to working hours.

The controversy over working hours often provided justification for the TNCs and their representatives to argue that it was the Chinese workers who wanted overtime work and pay. For this reason we paid particular attention to this issue and repeatedly asked the workers to express their views. Most mentioned that if they did not work overtime, the basic salary would be too low to support their daily living expenses. A 19-year-old female worker at China Miracle said:

With overtime work in the evenings and weekends, we could earn about six to seven hundred yuan (US$75-90) each month. Without overtime work, we could only earn three to four hundred yuan (US$50). That is not even enough to cover my expenses in the city.

Another said:

Yes, you may say we prefer long working hours. We travel a long distance to order to work. If we can’t feed ourselves, what’s the use of having a holiday on Sunday?

The wages of production workers at China Miracle and China Galaxy were still a bit higher than at many other companies in the same regions. The production workers could earn about RMB 600-700 each month in low season, and RMB 700-900 in high season, a bit higher than other companies in the same region.[20] Inability to meet the legal minimum wage, however, was noticeable when overtime hours were deducted and wages were calculated on the basis of working an eight-hour day.[21] Overtime work on weekdays including Saturday was counted at normal piece rate, though Sundays and public holidays were paid double, which was still not a common practice in China. However, in violation of the Chinese labor law no pay would be given for annual leave or statutory holidays in either of the two enterprises. The workers left for ten days during Chinese New Year of 2002 and were without any pay. When we questioned this practice, the personnel officer of China Galaxy said that it was not realistic to ask them to comply with the Chinese Labor Law.

The Process of Institutionalization

The moral imperative being a facade is further substantiated by a process of insitutionalization and formalization of labor standards and regulations in the factories. The TNCs’ social compliance officers were keen to show us their newly constructed files and records demonstrating the institutionalization of advanced management and labor standards as claimed. Thus there were files on Code of Conduct Training Procedures, Code of Conduct Test Records, New Workers’ Assessment Form, Workers’ Complaint and Handling Records, Guidelines on Admission and Dismissal, The Management of Dormitory Guidelines, and the like. A social compliance officer told us:

The most important thing in code implementation is documentation and filing. How can you prove to your buyers and their monitors, but to provide figures and data. The more details in your files, the better it will look.

They understood code implementation as nothing more than documentation and filing systems. The necessity of building up official documentation systems was applauded by the auditors who played an indispensable role in advising on the code’s implementation in the two enterprises. The role of the auditors was also particularly important in the process of institutionalization in the way that almost all recommendations they made centred on the setting-up of registers and filing systems. For instance, on the issue of no child and juvenile workers in compliance with the code, the auditors meticulously suggested the companies build up three registers: the first one for recording the ID copies of juvenile workers (16-18); the second for establishing a register of physical examination provided to workers of age 16-18; the third for recording the training program of juvenile workers as required by the code, and a register of evaluation for the program. Surely, no record of under aged workers would appear in the files.

This example was only the tip of an elaborate documentation system. Much more energy was devoted to designing recording systems on corporate code training, wages, working hours, contracts, and non-discrimination employment policies. Training sessions provided by the social compliance officer on the code provisions were organized for new workers who had to pass a test covering basic information on the company, their contract provisions and mainly the code provisions. Apart from the new workers, training sessions were only provided to the upper and middle managerial staff such as supervisors and line leaders who in turn disseminated information on the code to their work units or production lines. Sample test papers, testing workers’ knowledge of the code were shown to us and all had a full mark. However, interviews with workers continued to indicate that the workers did not actually understand the reasons for having such a code and the benefits they could provide, although some workers could mention expressions such as “human rights”, “labor rights”, no discrimination and no compulsory work, items that are listed in the code.

In spite of these obvious problems in code implementation, the directors of the two enterprises were, very satisfied with their improvements in institutionalizing the code practice, especially with reports of the social compliance officers and auditors. The director of China Miracle remarked:

We now have a clear direction of what to do. Paperwork is time consuming, but it’s a must to show our commitment. It is good that we now have a lot of records for your inspection.

Thus, the contradictory practices between the code practices and production seemed to be resolved in this rapid process of institutionalization. Documentation, registers and filing were seen as a must in order to implement the code, and at least having records to demonstrate their compliance with it and the Chinese Labor Law.

Three mechanisms of labor complaint were also set up: a labor dispute committee, a complaints hotline hosted by grievance handling supervisors, and workers’ face-to-face meetings with the social compliance officer. A detailed three- page- long complaint handling procedure states that its mission is to “guarantee unimpeded internal company information flows, uncover problems, resolve them and effectively forestall potential troubles”. The procedure stipulated three ways to file complaints: Written reports could be placed in suggestion boxes which were placed on each floor; oral complaints through either the hotlines, to the social compliance officer, or to the labor dispute committee (constituted by the trade union, the social compliance officer, the personnel secretary and the production manager).

But only one of the workers interviewed claimed that she had used the suggestion box to suggest improvement of the food in the canteen. Workers fully understood that no matter how transparent and effective, these grievances mechanisms were set up without their representation. They were used by the management for the management. One worker pointed out, “There are a number of names posted on the wall for hotline complaints, but we never use them.” “Why not?” “We see these grievance-handling supervisors everyday on the shop floor. They are our supervisors. What’s the point of going out of the company and phoning in if we have grievances?”[22] Those phone numbers painted on the wall were simply for decoration purposes. While none of the workers interviewed reported that they had ever made complaints, records for complaints and grievances were shown to us by the social compliance officer at China Miracle, who failed to recount the details surrounding those cases.

Both China Miracle and China Galaxy had a trade union to demonstrate to their international buyers that they have one. China Galaxy set up its trade union in 2000, but it barely functioned when we interviewed the union chair in May 2002. China Miracle had one newly established in June 2002. The corporation code states that “Workers are free to join associations of their own choosing”.[23] The management of China Miracle thus helped workers to make their own choice by setting up a trade union under the guidance of the city-level Garment Industry Federation Trade Union which sent a representative to be the union chair. The union committee consisted of five representatives from the management staff including the social compliance officer. The two introduced to us as “worker representatives” were actually a shop floor supervisor and a line leader. In short, there was no one on the committee representing the workers.

There were three main reasons to set up the trade union at China Miracle: to show extra commitment in meeting the code; to meet the requirement of SA 8000 which was believed to be important in gaining production orders from big American retailers; and to enable the company to sign a collective contract by the union for all workers which was granted the right by the China Labor Law. By the time of our interviewing, a collective contract was discussed by the trade union as one of its major duties to be accomplished in the coming year. Manipulating the collective contract was particularly important in that once the pro-management trade union took over the right “representing the workers”, the company did not even have to offer individual contracts to workers. The union chair, who was aged in his mid-forties and a Party member, said:

Why do we need to set up a trade union? It’s not because of a state request or regulation. Ours is a joint-venture company, and we still have the option to do or not to do it. It’s solely a market consideration. Nowadays we believe in market forces and only market forces can effectively ask the company to set up a trade union. … A trade union can help communication between the company and workers, and it’s good for the company’s development.

The economic benefits for the company of having a trade union in the workplace were not only highlighted by the union chair but also the company director who said that the trade union was established not out of political concern but for purely economic and business considerations. He said,

We see many good sides to having a trade union. We won’t worry about letting workers be organized. If the workers have their own organization, they could organize leisure and welfare activities according to their liking. It’s good for boosting productivity if the workers are happy working in my company. They can work faster, you know.

The trade union was thus turned into wing of management working to meet international code requirements. In spite of the hopes held by management, the workers were notably lukewarm toward the trade union and it had difficulty recruiting members. The union began with sixty-seven members in June 2002 and had increased to ninety-five members in late December of the same year. Most of the union members were managerial, technical and supervisory staff, and less than ten were production workers, who could not easily be persuaded to join. Most of these workers were local citizens of the region and had been working there for more than two to three years and were often considered as “old workers”, (lao yuan gong), of the company. These workers had a deeper sense of loyalty to the company than ordinary workers who were typically migrant, transient and hence had been only in the factory for a shorter period. One of the ten who was a production worker explained to us why she joined the union:

Oh, yes, I know a lot of workers did not join the trade union. Why did I join? There is no particular reason. Our supervisor mobilized me to join and said it’s good for organizing activities for the workers. She said I was a veteran employee, so should be supportive for the trade union.

For the ordinary production workers, because this union was mobilized and established in a top-down way, most of them obviously lacked for enthusiasm for it. The union chair and committee members were elected by the sixty-seven members before it expanded to the production workers, and the “election” was only a formality. Most of the workers interviewed could not name the union chair, who he was, or why he was elected as the chair. Few would say they would go to the union for help if they had problems or grievances against management. The workers’ most concerned issues-work hours and wages- were not never included in the meeting agenda of the union. The membership fee was RMB 40 each year[24] and for many workers the fee was too expensive. In the previous six months, the activities organised by the trade union were the Moon Festival, for both members and non-members, a cinema show, and a Christmas party on Christmas Eve 2002.

Conclusion

This study has striven to unravel the imperative behind the corporate codes of conduct. It highlights a fundamental paradox of TNCs in regulating new labor standards in China: the “economic” imperative of global capital to make money using “race to bottom” strategy. The ethical code movement, however, keeps a check on the dark side of global production by putting a brake on the tyranny of management at the expense of labor rights. In this way, corporate code practices are inherently contradictory, and this contradictory nature continuously shapes labor standards in China within the global system of production. On the one hand, the improvement of work and living physical environment as a result of corporate code implementation helps justify the argument that the practices of companies in China have been improved when they compete to meet international standards.[25] On the other hand, rather than leading to workers enjoying, better work conditions, shorter work hours and higher pay, labor rights collective bargaining is co-opted by capital. The result is at best managerial paternalism and if workers have any labor rights, they are granted from the above.

These two case studies demonstrate how global capital penetrate into the sphere of labor rights in China. It is true that some improvements have been made, including investment to upgrade company facilities and the normalization of employment relations through the provision of labor contracts, one day off in seven, and the ending of the deposit systems, and the like. However, regardless of these improvements the whole idea of a code of conduct that the companies initiate was for the supplier companies to secure a firmer place in the global production chain in attracting more production orders and expansion into new markets. This results in a rapid process of formal institutionalization in the workplace in terms of procedures and systems built up for codes compliance. As these two factories showed, the companies had devoted huge resources to setting up systems and procedures, but they demonstrated no genuine concern for labor rights, less still workers’ representation or participation. In particular, the numerous labor complaint mechanisms looked like business gloss and the trade union was a formality set up without workers’ support or even knowlwdge. The grievance mechanisms and trade unions further demonstrated the trend of business “co-opting” labor rights which should be a sphere that belongs to the workers.

The cardinal concern of this study has been to let the voices of staff and workers be heard at a time when most of the big TNCs such as Reebok, Adidas, Levi Strauss and The Gap are competing to implement codes of conduct practices in China.[26] Derived from staff and workers’ views, this article has argued that the codes represent a process of capital-defined labor rights in Chinese workplaces, and hence generates a containment of labor empowerment. The new wave of setting up code compliance mechanisms is reflected in three aspects: first, the rapid institutionalization of labor relations by the capital imperative at the workplace level; second, the turning of labor mechanisms and trade unions, newly established in the factories, into management institutions for facilitating the production and business goals of capital; and, third, the possible subsumption of workers’ autonomy and labor power since it is deliberately confined in the company codes of practice as a top-down regulatory process. In replacing the role of the Chinese state in regulating labor standards in the workplace, this top-down process of granting labor rights could result in perpetuating authoritarian factory regimes in which the management played a paternalistic role in “protecting” their workers from labor exploitation, while exploitation continues.

* The author would like to thank Anita Chan, Jonathan Unger, Eva Hung and the two anonymous reviewers for their valuable comments on this paper. This research is also supported by the Hong Kong Research Grant Council on a project ‘Living with Global Capitalism: Labour Control and Resistance through the Dormitory Labour System in China’.

[1] The pioneers in this area are Stephen Frenkel, ‘Globalization, athletic footwear commodity chains and employment relations in China’, Organization Studies, issue 4(2001), pp531-562. Tan Shen and Liu Ka Ming, Kuaguo gongsi di shihui zeren (Transnational corporate social responsibility in China) (Beijing: shihui kexue wenxian chubanshe, 2003); and Anita Chan and Wang Hongzen, “The Impact of the State on Workers' Conditions: Comparing Taiwanese Factories in China and Vietnam," Pacific Affairs, Vol. 77, No. 4 (Winter 2004).

[2] On the latter see, e.g., the writings of Anita Chan and in particular her China’s Workers under Assault: The Exploitation of Labor in a Globalizing Economy (Armonk: M. E. Sharpe, 2001); Ching Kwan Lee, Gender and the South China Miracle: Two Worlds of Factory Women (Berkeley: University of California Press, 1998); and Hsing You-tien, Making Capitalism in China: The Taiwan Connection (Oxford: Oxford University Press, 1998).

[3] The anti-sweatshop campaigns have been run by NGOs such as the National Labor Committee and the Worker Rights Consortium in the US, Labor behind the Label in the UK and the Clean Clothes Campaign (CCC) in Europe. Some of the organizations have been quite moderate, such as the Ethical Trading Initiative, which even includes governments and corporations.

[4] See Jean-Paul Sajhau, ‘Business ethics in the textile, clothing and footwear (TCF) industries: Codes of Conduct’, ILO Bulletin, no. II-9, (June, 1997).

[5] Women Working Worldwide, “Company Codes of Conduct” (2000), at http://www.poptel.org.uk/women-ww/company_coc.htm.

[6] For instance, the Clean Clothes Campaign (CCC) even produced a unified international code of conduct for all its affiliated companies and others. The CCC is a network of organizations from a number of countries working to improve working conditions in the textile, clothing and footwear industries. Its aim is to raise consumer awareness about how clothes are made and to put pressure on retailers to take responsibility for labour conditions throughout subcontracting chains. More information is available at the CCC website http://www.cleanclothes.org/codes.

[7] See, e.g., Jean-Paul Sajhau, “Business Ethics in the Textile, Clothing and Footwear Industries: Codes of Conduct”, ILO Bulletin, No. II-9 (June, 1997); Nina Ascoly, ‘About the Clean Clothes Campaign: A Brief Overview of the CCC’s Development and Areas of Activity’, paper presented at Forum on Industrial Relations and Labour Polices in a Globalizing World’, Beijing, 9-11 January 2000.

[8] R. Jenkins et al. (eds), Corporate Responsibility and Labour Rights: Codes of Conduct in the Global Economy (London: Earthscan, 2002)

[9] Reebok, The Gap and Switcher are among the few companies to have included freedom of association (i.e., a right to organize unions) in their company codes.

[10] See Ching Kwan Lee, “From the Specter of Mao to the Spirit of the Law: Labour Insurgency in China”, Theory and Society, Vol. 31, 2002, pp.189-229; Feng Chen, “Industrial Restructuring and Workers’ Resistance in China”, Modern China, Vol. 29, No. 2 (2003), pp.237-262.

[11] Ching Kwan Lee, “From the Specter of Mao to the Spirit of the Law: Labour Insurgency in China”, pp.189-229. Also see Marc J. Blecher, “Hegemony and Workers’ Politics in China, The China Quarterly, No. 170(June 2002), pp. 283-303; Dorothy J. Solinger, “Labour Market Reform and the Plight of the Laid-off Proletariat”, China Quarterly, No. 170, June 2002, pp. 304-326; Feng Chen, “Industrial Restructuring and Workers’ Resistance in China”, pp.237-262.

[12] See CIC, Feb 2000; LARIC, July-August 2000; Global Exchange, ‘Executive Summary of Report on Nike and Reebok in China’, (Sept 1997), at http://www.globalexhange.org/economy/corporations/nike/NikeReebok ChinaSummary.html.

[13] See Stephen Frenkel, ‘Globalization, athletic footwear commodity chains and employment relations in China’, Organization Studies, issue 4(2001).

[14] We interviewed these workers one by one in meeting rooms provided by China Miracle as well as providing labour legal training in China Miracle. I would like to thank Yu Xiaomin and Emily Leung for helping in carrying out the interviews.

[15] A worker’s dormitory building was planned but construction was not yet started. The company rented dormitory rooms outside for their workers, which required a fifteen- minute walk to the company premises.

[16] China Miracle had been certified ISO9000, a kind of standard certification for product quality in 2000, ISO 14000, a standard certification for environment protection in 2002 and aimed at certifying SA 8000 in the mid of 2003. Few companies in China really paid attention to achieving certification of SA 8000.

[17] International NGOs such as Oxfam International, Clean Clothes Campaign and the Maquila Solidarity Network are well aware of the workers’ precarious situation in providing “correct answers” to the monitors and have attempted to make recommendations regarding monitoring practices.

[18] The code stated that “A contract based on local legislation has to be established between employee and employer.” The code also required the contract to contain the following points: workers are paid at least the minimum legal wage; overtime pay meeting the legal requirements; pay annual leave and holidays as required by law; and an understandable wage statement which includes number of days worked, wage or piece rate earned per day, hours of overtime at each specified rate, bonuses, allowances and contractual deductions. However, the contract provided by the two enterprises contain only: date of start; name of the work unit; need for the worker to abide by the factory regulations; need for the worker to follow the work arrangements concerning a change of position without arguing against it; ensure and respect safe company environment; dismissal of a worker in case he or she does not follow the company regulations and causes loss of production; and company pays wages, insurance, overtime in accordance with the Labour Law.

[19] According to the China Labour Law, workers should have two days off in seven.

[20] Supervisors, technical, managerial and office staff were paid on monthly rates, ranged from RMB 1000 to 2000.

[21] The legal minimum wage in the Yangtze River region was RMB 430 in April 2002 which was raised to RMB 460 in December 2002. Management insisted that meeting the legal requirement was not their problem because most workers would receive more than that amount. However, the workers did not know what the minimum wage was and most of them were not aware of the provision.

[22] Interview, 22 December 2002.

[23] The Code further states that “Factories may not interfere with workers who wish to lawfully and peacefully associate, organize or bargain collectively.”

[24] The company said it would contribute to 2% of total employee’ wages to the union, but it was not proved.

[25] See Doug Guthrie, Dragon in a Three-Piece Suit (Princeton, New Jersey: Princeton University Press, 1999).

[26] I would like to acknowledge that most of the NGOs involving in the labour code monitoring have provided a critical stance in stating that the major limitation of code implementation is lack of workers’ participation.

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