Briefing on the Chinese

Garment Industry

By: Ruth Domoney

Labour Behind the Label
 Briefing on the Chinese Garment Industry
By: Ruth Domoney
Labour Behind the Label

China is now the world's biggest exporter of textiles and garments. Its factories supply almost all
UK high street shops and its market share is predicted to increase over the coming years. The
following information provides an overview of the Chinese garment industry, the situation for
garment workers and recent developments influencing the sector.

Contents

Abbreviations used

The Structure and Workforce of the Chinese Garment Industry

The context for Chinese workers

● Economic Liberalisation since 1979

● Internal Migration Laws
● Oversupplies of low skill labour
● Chinese Labour Law

The All China Federation of Trade Unions (ACFTU)

● Membership and recruitment

● Relationship between local branches, the ACFTU and the Chinese Communist
Party (CCP)
● Labour dispute mechanisms
● Challenges facing the ACFTU

Working Conditions in the Chinese Garment Industry

● Exploitation of migrant workers

● Restrictions on Freedom of Association

Recent Developments

● Collective Contracts
● Changes to Trade Union Law
● Increasing labour disputes and unrest
● Launch of CSC9000t Code of Conduct

Addressing the problems faced by Chinese garment workers

● Parallel Means
● Worker Training
● The Chinese Government

The EU and WTO position on trade with China

List of references

Labour Behind the Label Briefing on the Chinese garment industry, February 2007

Abbreviations used

ACFTU – All China Federation of Trade Unions

ATC – Agreement on textiles and clothing
CCP – Chinese Communist Party. National Government of China
CNTAC - China National Textile and Apparel Council
FoA – Freedom of Association
OHS – Occupational Health and Safety
MFA – Multi-fibre arrangement
SOE – state owned enterprise
The Structure and Workforce of the Chinese Garment Industry

The garment sector in China is based mainly on the east coast, in Guangdong, Zhejiang and
Jiangsu provinces1,2,3. Most factories are within 'Special Economic Zones'. They are
predominantly privately owned and foreign investment is common. For example in Guangdong
province, 62% of garment factories are foreign owned, many by Hong Kong and Taiwanese
companies2.

According to the Chinese National Textile Industry, 15 million people are employed in the
industry. The workforce is made up mainly of young women, the majority of whom are also
migrant workers3, 4, 5 (See below section on implications). Oxfam calculates that 4 out of 5
garment sector workers are women under 256. Significant discrimination against women over 35
has also been recorded7. Most garment workers are employed on short term contracts of one to
three years and labour turnover is therefore high3, 8.

The context for Chinese workers

Economic Liberalisation since 1979

The move towards a 'socialist market economy' has changed garment sector ownership from
mainly state owned to privately owned companies, creating high numbers of “laid off workers”
from former State Owned Enterprises (SOEs) and impacting significantly on labour relations and
social security arrangements in China2. A previous system of direct state ownership and control
has been replaced by a system of laws and regulations that are currently only weakly enforced.
For example, official Labour Law requires employers to provide old age, industrial injury,
maternity and medical insurance, but this is not always provided in practice1, 5 . It is estimated
that 9 out of 10 Chinese companies do not meet national labour law standards3.

Internal Migration Laws

A change in Chinese migration laws in the 1980s has prevented Chinese citizens from relocating
freely in search of work. This combined with high levels of underdevelopment and poverty in rural
areas, has led to a class of migrant workers in China.8,9,10. All Migrant workers (known as
nongmingong) require a permit and a work visa in advance of moving to a city to start work. While
in the cities they are not entitled to welfare benefits, to own property or to bring their family. When
the contract ends they must return to their village4. These migrant workers are particularly
vulnerable to exploitation, due to the alternative of rural poverty, their dependence on work visas
and the oversupplies in China of low skilled labour.

Low skill labour supplies

It is estimated by the China Labour Bulletin that between 2003 and 2020, 15 million new people
will enter the Chinese labour market each year, while only 8 million new jobs will be created at the
current growth rate9. It is therefore likely that there will be further pressure on wages and job
security for Chinese workers in the coming years. Nonetheless recent labour shortages have
been observed in the Guangdong Garment sector11. Shortages of 30-40% have been blamed on
bad working conditions, and more and more migrant workers relocating to areas with more skilled
and better paid jobs e.g. in the electronics industry11,12. In response, some wage increases in
Guangdong have occurred, but some factories have also relocated to other provinces.

Chinese Labour Law

● Freedom of Association

There remains no Freedom of Association in China. Article 3 of China’s trade Union Law, states
that “all manual or mental workers…have the right to organize and join trade unions according to
law”13. However, in reality, the All China Federation of Trade Unions (ACFTU) is the only legally
recognised trade union and therefore has a complete monopoly on representation. (See below for
more information on the ACFTU).
● International Agreements

China has ratified the UN covenant on Economic, Social and Cultural rights, but with reservations
on the right to organize trade unions. It has not ratified the International Labour Organisation
(ILO) conventions on Freedom of Association (FoA) and the right to collectively bargain (no.s 87
and 98).However, the ILO 1998 Declaration on Fundamental Principles and Rights at work,
requires all members to respect, promote and realize FoA, regardless of whether they have
ratified the conventions. So far China has ignored this14.

● The law on strikes

The right to strike was removed from the Chinese constitution in 1982 and is not mentioned in the
most recent trade union and labour law acts13. Formally the law neither allows nor disallows
strikes though in practice they are frequently repressed7,13 . Despite this, there is some pressure
and lobbying within China for the formal right to strike to be reintroduced. In the city of Dalian,
pilot regulations on strikes have been implemented15 and some academics and labour lawyers
on the fringes of the ACFTU are “quietly lobbying for the right to strike” on the grounds that it is
necessary for the successful functioning of the new market economy7. In addition, the Chinese
government didn’t enter any reservations on the right to strike when signing the UN Covenant on
economic, social and cultural rights7.The formal role of the ACFTU when strikes occur is to
mediate between employers and employees to resolve the situation. An ACFTU branch could not
legally instigate a strike and is not the representative of the workers in negotiations.

The All China Federation of Trade Unions (ACFTU)

The All China Federation of Trade Unions is the only legally recognised trade union in China. Its
official mandate is both to represent the interests of workers and to “take economic development
as the central task, uphold the socialist road, the people’s democratic dictatorship and leadership
by the Communist Party of China”16. In reality this means it has a monopoly on representation, is
officially subordinate to the CCP and has a fundamental conflict of interests between promoting
party policies and workers interests.

Membership and recruitment

The ACFTU claims to have 134 million members16 making it the largest trade Union in the
world14. However, there is suspicion that in reality many branches exist only on paper and
establishing a Union can be a bureaucratic exercise. In some places where the ACFTU claims to
have branches there is no knowledge of them among workers10,17,. Traditionally, the ACFTU
was based in State Owned Enterprises (SOEs) and it is still under represented in the non state
owned sector10,18 . This is significant as a large proportion of the garment sector is non state
owned2. There is currently a big a recruitment drive, focusing specifically on increasing
representation in private enterprises and membership in the private sector is increasing, though
it’s proportionally still low (estimated at 5% in 2000)19. Two years ago Wal-Mart conceded that
ACFTU branches could be established in their retail outlets in China, and the first branch was
established in 200610,20.

In its 2003 Congress, the ACFTU also recognised migrant workers as a formal section of the
workforce for the first time. It announced a specific recruitment drive aimed at increasing
membership amongst migrant workers, but so far, according to ICFTU, little progress appears to
have been made17.

Relationship between local branches, the ACFTU and the Chinese Communist Party (CCP)

All local ACFTU union branch representatives are subject to approval by the provincial level
offices and all union branches must be affiliated to the ACFTU21. In many branches, the union
officers are also members of the enterprises’ management and/or CCP members13, 19 . The
level to which the employees can be represented in disputes with the company management can
therefore be limited (see below). Constitutionally the Union is bound to accept the leadership of
the CCP and is officially subordinate to party policy. It therefore faces an ongoing conflict of
interests in representing workers’ rights and supporting the government line.
Labour dispute mechanisms

There are three official levels on which disputes can be settled in China. The first is mediation
within the enterprise, between employees and employers. The ACFTU’s role in this is to act as a
mediator, not a representative of the employees. The second level is arbitration involving the local
labour administration offices, managed by regional Labour Disputes and Arbitration Committees
(LDACs). This is a supposedly tripartite process between government representatives, the
ACFTU and the local government economic management office (who represent employers). The
final level is the civil courts. The recent increase in the number of disputes has put the LDACs
under pressure and many disputes now bypass arbitration and go straight to the courts.

Challenges facing the ACFTU

The ACFTU is currently under severe pressure, in terms of financial capacity, its legitimacy
amongst workers and its ability to adapt to the very different labour relationships of the socialist
market economy. The latest 2001 Trade Union Laws may have empowered it to play a greater
role in representing workers, but the lack of real freedom of association within the ACFTU, as well
as its capacity restraints continue to inhibit it.

The liberalisation of China’s economy, increasing Foreign Direct Investment (FDI) and the new
labour law framework have increased the demands of workers on the ACFTU. The number of
independent labour actions and spontaneous protests in China, (despite severe repression) have
increased significantly in recent years indicating the perception by workers that the ACFTU is
unable to defend their interests5,15,17 . In turn, the increases in labour unrest have increased
government pressure on the ACFTU to resolve the disputes and maintain order and productivity.
The ACFTU also faces financial challenges. ACFTU staff are paid by the CCP, however as the
government seeks to reduce budgets, these finances are under threat. Other money comes from
a 2% levy on the wage bill of all SOEs. However with mass closures and downsizing in this sector
ACFTU membership and revenue have fallen. Its ability to replace this from the private sector is
limited by a low presence in private enterprises and lack of any enforcement mechanism for
collecting wage levies19.

Working Conditions in the Chinese Garment Industry

The Chinese industry's competitiveness lies in its efficiency, its ability to produce at short notice
and its back-linked industries (such as cotton production). The knock on effects for conditions are
long hours and overtime at short notice22. Research for Oxfam’s “Trading Away our Rights”
report found that women faced 150 hours overtime per month, 60% had no written contract, and
90% had no access to social insurance.12 Standard working hours are between 10-12 hours and
sometimes 15-16 hours a day with one or two days off a month12,21. The ACFTU itself found
that 62% of workers worked 7 days a week and a quarter were not getting their wages paid on
time12. Health and safety conditions in the factories include exposure to toxic chemicals, fire
hazards and high risk of industrial accidents. Most migrant workers are either not covered or only
partially covered for maternity pay, sick pay or work injury21.Non-payment of wages and wages
being withheld for months are also major issues in China and the reasons for many labour
disputes1,5,23. Wages in the garment sector have also been identified as lower than in other
manufacturing industries in China8, a factor contributing to the current labour shortages in
Guangdong. Payment of less than the minimum wage is common and piece rate wages are often
inadequate to cover living costs1, 5,9.

Exploitation of migrant workers

The high number of migrant workers and their restricted status while working away from home,
leaves them particularly vulnerable to exploitation. Examples include many migrant workers in
SEZ’s not having contracts15 and many facing wage arrears and a severe lack of OHS. In 2004
the total amount of wage arrears owed to migrant workers was calculated at US$800 million17.
As migrant workers do not have full residency permits within cities their access to basic services
is also limited24. Limited income and limited access to property mean many migrant workers live
in employer owned dormitories where conditions are often crowded and dirty4,5 .
Due to the cost of work visas, some employers pay for these in advance, meaning workers are in
debt when they begin their contracts. Many workers are also required to pay ‘deposits’ to the
employers or hand over their ID documents at the start of the contract2, 12,24 . This creates a
system of economic bondage for many migrant workers within the garment sector allowing
employers to more easily enforce excessive overtime and flexible hours. According to the
Fairwear Foundation there is little understanding amongst migrant workers of their legal rights or
entitlements2. Most are either not covered or only partially covered for maternity pay, sick pay
and work injuries12, 21 . Pensions are generally not provided1.

Restrictions on Freedom of Association

Workers who organise independently, protest or strike in China do so at great personal risk and
face violent repression and imprisonment13. Labour activists can be sentenced to forced labour,
following criminal trials which do not reach international standards according to Amnesty. This is
known as “Reform through labour” or Laogai. They can also face “reeducation through labour” (or
Laojiao) which is a form of administrative detention without trial or appeal. Officially this can not
exceed three years but in practice it can be extended at will24.

Recent developments

Collective Contracts

Since the 1990s the ACFTU has been promoting the use of collective contracts as a means to
improve working conditions. These are negotiated between trade union representatives and
employers and cover working hours, pay, H&S and insurance18. Where a Union branch doesn’t
exist, workers are allowed by law to negotiate themselves with employers15, 18. The number of
collective contracts is growing, though there are few collective contracts used in private
companies. In practice these contracts normally only reflect minimum labour law requirements
and do not involve any actual bargaining15, 18. Also, as negotiations are carried out by ACFTU
representatives, workers are not always aware that the contracts exist.

Changes to Trade Union law

The latest changes to the trade union law in China give more priority to worker representation in
labour disputes (the ACFTU has commonly sided with employers in the past19). They provide
extra powers for local branches to hold enterprises liable under the law for breaches in collective
contracts and to request government assistance if labour law is broken. There is also some extra
protection provided for union officials from employer retaliation23.

However, the new law still maintains the ACFTU’s monopoly status and does not prevent union
officers from being members of the employer’s management.

Increasing labour disputes and unrest

Labour disputes have been increasing significantly across China since the 1990s13,17, 18. The
number of “mass incidents” (sit-ins, riots, strikes and demonstrations) reached 74 000 and
involved 3.7 million people in 2004. This was an all time high and compared to 10 000 incidents in
199425. Within the garment sector the number of arbitrated disputes (taken to local labour
offices) has also increased, mainly about wages and OHS complaints5. Examples include:

c) In Zhejiang province, 12,000 workers in 113 private sweater factories were involved in strike
action over wages. The dispute continued for four years with annual strikes during the busy
season. In 2004, with involvement from the ACFTU, a collective agreement on minimum wages
was agreed10.

d) In Beijing, 24 female migrant workers in the garment sector took their case of withheld wages
to the courts. Working with legal aid attorneys they eventually received all their back wages plus
compensation10.

e) In 2004, workers took part in mass protests over low pay and excessive overtime at the Stella
International shoe factory in Guangdong. Following the protests 10 workers were arrested and
charged for criminal damage caused during the protests.
However, working with China Labour Bulletin the workers secured legal representation and were
able to challenge the lack of evidence provided against them. In a landmark case, the lack of
alternative means of representation was cited by lawyers as a key reason behind the protests26.

Launch of CSC9000t Code of Conduct

CSC9000t (the China Social Compliance 9000 for the textile and apparel industry) is a code of
conduct for textile and clothing enterprises. It was launched in 2005 by the China National Textile
and Apparel Council, (CNTAC), an industry association existing to develop the textile sector. It is
also administered by them. The CSC9000t includes general principles, detailed regulations on
labour conditions and a process for self assessment.

The CNTAC sees the CSC9000t as a means to claim back Chinese control over their workers
rights, streamline the multiple codes and auditing procedures that have been used up until now
and improve China’s labour standards in the eyes of the global community (thereby reducing calls
for protectionism against China).

As of August 2005 roughly 170 Chinese firms had signed up to participate, and two major foreign
investors, the Hudson Bay Company (Canadian) and Linmark (Hong Kong) had agreed to work
with their suppliers to implement the code. However, the code is still very new, proportionally only
a very small number of firms are involved and it is not compulsory. CSC9000t could be of some
use as a tool for progress on code compliance other than freedom of association, but there are
several problems:

● The code is based mainly on Chinese labour law, plus some international conventions.
Therefore it does not allow for freedom of association and falls short of key ILO standards. As
such, if it gains popularity it will undermine other, more rigorous codes.
● It goes against the idea that it is not possible for companies to meet their full social
responsibility obligations while sourcing from China.

● The ITGLWF has characterised it as a “watered down version of SA8000”, due to the absence
of FoA provision, living wage allowances and freedom from discrimination on political affiliation or
sexual orientation.

● There have been significant problems with previous auditing systems due to cheating and
falsification of records. HKCIC found examples of false records being submitted and bribes being
used before audits. ICFTU also has examples of falsified time sheets and payslips in China.

● As a product of the Chinese government and national industry association, the code has not
been developed independently and is administered without any external, independent verification
mechanism.

Addressing the problems faced by Chinese garment workers

In the last ten years there has been a significant amount of research, worker exchange, and
awareness-raising by campaigners relating to China. Given the restrictive legal situation, the
issues for workers are how to implement codes of conduct and how to open up space to
organise. Many organisations have focussed on worker training in order to increase work place
democracy and access to legal rights. There are several Multi Stakeholder Initiatives (MSI’s)
currently working with business to develop these ways of working. So far, most practical work on
code implementation and CSR has taken place in Guangdong.

Parallel means

In response to the lack of FoA allowed within Chinese supplier firms, some companies have used
“parallel means” in order to increase worker involvement in the organisation. This has included
H&S committees and welfare committees, where committee members are elected from within
factories. These types of elections are allowed by law. This method has been put into practice by
Reebok c2000 working with the Asia Monitor Resource Center and other Hong Kong groups,
however with mixed success. Some of the committees formed were later assimilated into the
ACFTU. The Ethical Trading Initiative is also focussing on H&S committees. There remain issues
around the impacts of parallel means and whether they are undermining attempts at genuine
FoA. The very high turnover of the workforce in the garment sector also makes the work difficult
to sustain.
Worker training

There have been many attempts to work with genuine organisations on training, investigation and
democracy (facilitating elections, committees). The Clean Clothes Campaign have been calling
on brands to associate with the Hong Kong groups organising this work. For example Chinese
Working Women Network organise training and provide free consultations for migrant workers on
OHS, legal issues and women’s health. Other organisations offering training on legal issues for
workers include LESN, China Labour Bulletin, CLSN and LSC.

Training is broadly agreed to be useful so long as it’s independent. However there is also concern
that it might be co-opted by corporates, as audits were. Both training and parallel means are
useful tools which brands sourcing from China can be encouraged to use – as a number have -
but they should not replace other aspects of code implementation.

The Chinese Government

In contrast to many other garment producing countries the Chinese government is strong. It
therefore has more capacity to implement change and as a socialist state, maintains some
commitment to workers rights. At the moment for example, it is supportive of CSR initiatives.
Chinese labour law is often quite reasonable on paper, except for on freedom of association, but
implementation in practice is poor. Nonetheless the government remains highly repressive of
political freedoms and prepared to crack down quickly on independent organising and political
protests.

The EU and WTO position on trade with China

When China joined the WTO in 2001 certain safeguards were agreed to protect other WTO
members from Chinese exports. These include allowing a WTO member to restrain increasing
Chinese imports that disrupt its market (available to 2013), with a special textiles safeguard
available until 20089.This was put into practice in 2005, during the China/ EU ‘bra wars’.
Following the end of the MFA there was a rapid increase of Chinese textile and clothing imports
into Europe. In June 2005, the EU implemented the safeguard mechanism and negotiated with
China to cap import growth of textiles at 10% for the next three years. However, many orders had
already been placed and the quota for 2005 already exceeded. Chinese garment imports were
held in EU ports for several weeks before a deal was finally reached, allowing half the imports in
and counting the other half against the 2006 quota. As of 2008 none of these safeguards will
apply. As well as the bra wars, the EU has refused on other occasions to give China most
favoured nation status, as it says it hasn’t done enough to become a full market economy9.

Peter Mandelson stated the EU’s position in June as the following:

They are seeking “a policy that braces EU producers for change while allowing China to benefit
from textile liberalisation”. They reject “a return to the quota system for textiles” and argue their
policy “is based on the need to manage change and adjustment, rather than to manage trade”.
Mandelson also stressed that he is “hopeful” that the EU and China can negotiate “a solution that
is mutually acceptable to both sides” while recalling that the EU reserves the right under the
Textiles Specific Safeguard Clause to take action to provide its industry with “breathing space”27.

List of references

1. Hong Kong Christian Industrial Committee (HKCIC) (2004) “Conditions of women workers in
SEZ and Labour standards in supplier factories of German garment retailer companies and
brands in China”. Accessed 3/4/06 from http://www.cleanclothes.org/pub.htm
2. HKCIC (2004) “FairWear Foundation background report on China”, Fair Wear Foundation,
Amsterdam
I3. CFTU (2005) “Stitched Up! How those imposing unfair competition in the textiles and clothing
industries are the only winners in this race to the bottom”, accessed 04/06 from
http://www.icftu.org/displaydocument.asp?Index=991223200&Language=EN
4. www.maquilasolidarity.org/resources/maquilas/china.htm (Maquila Solidarity Network),
accessed 03/06
5. Chan, Jenny W. L (2005) “Gender and Global Labour Organising: Migrant women workers of
the Garment industry in South China”, accessed 04/06 from www.sweatshopwatch.org
6. www.oxfam.ca/news/maketradefair/TAOR_facts.htm, (Oxfam Canada) accessed 27/05/06
7. Chen, John (2004) “Two core labour rights assessed”, International Union Rights, 11(4), p6-7
8. China Textile University and Harvard Center of Textile and Apparel Research (1999) “The
development of the China Apparel Industry Report”, Beijing
9. Li, Jane (2004) “MFA Phase Out – Impact on Chinese workers”, Asia Labour Update, Issue 52,
accessed 5/06 from www.amrc.org.hk
10. America Centre for International Labour Solidarity (2005) “Justice for all: The struggle for
workers rights in China”, Washington, accessed 04/06 from
http://www.solidaritycenter.org/content.asp?contentid=501
11. www.china.org.cn, (China Internet Information Centre, Beijing), accessed 27/5/06. Cafod
(1998) “Asian Garment industry and Globalisation Policy Paper”
13. Cornell University (2000) “Freedom of Association and the effective recognition of the right to
collective bargaining”, accessed 05/06 from www.cornell.edu/
14. Blackburn, Daniel (2004) “China and the labour movement”, International Union Rights, 11(4),
p2
15. ICFTU (2005) “China, Peoples republic of: Annual Survey of violations of trade union rights,
2005”accessed 04/06 from
http://www.icftu.org/displaydocument.asp?Index=991222281&Language=EN
16. www.acftu.org.cn (ACFTU), accessed 05/06
17. http://www.ihlo.org/LRC/ACFTU/index.html (IHLO article, “ACFTU 14th Congress: The
stalemate continues”), accessed 3/4/06
18. Kai, Chang (2004) “Collective bargaining: problems and solutions”, International Union Rights,
11(4), p3- 4
19. Howell, Jude (2004) “Trade Unionism in China, Sinking or Swimming?”, accessed 04/06 from
http://www.ihlo.org/LRC/ACFTU/000604.html
20. China Labour Bulletin (2006) “Wal-Mart Unionisation Drive Ordered by Hu Jintao in March – A
Total of 17 Union Branches Now Set Up,” accessed 29/8 from www.china-labour.org.hk
21. Wong, Monina (2005) “Moving beyond the MFA. Regulating Business Practices through
Strengthening labour”, Hong Kong Christian Industrial Committee.
22. Loong-Yu, Au (2006) “The Post MFA era and the rise of China” accessed 3/04/06 from
http://www.ihlo.org/LRC/G/001105.html
23. Cooney, Sean (2004) “Limitations and possibilities”, International Union Rights, 11(4), p8-9
24. Amnesty International (Dutch section) (2006) “When In China: Encounters with Human
Rights”
25. ICFTU (2005) “Whose Miracle? How China’s workers are paying the price for it’s economic
boom.”
Accessed 04/06 from
http://www.icftu.org/displaydocument.asp?Index=991223214&Language=EN
26. Dongfang, Han (2004) “It’s our union and we want it back”, International Union Rights, 11(4),
p16-17
27.://ec.europa.eu/comm/commission_barroso/mandelson/speeches_articles/temp_icentre.cfm?t
emp=sppm 033_en, accessed 06/06
28. Oxfam (2004) “Trading Away our Rights: Women working in global supply chains.” Oxford:
Oxfam

About the author:

Ruth Domoney - Labour Behind the Label

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