By Linda Liang of King & Wood’s Corporate Group

In recent years, the All-China Federation of Trade Unions ("ACFTU") has been actively promoting the establishment of trade unions in enterprises. Many enterprises have received notices from trade unions at higher levels requiring them to set up their own unions. In addition, since last year, there have been several collective labor disputes and mass labor disturbances taking place around China, posing great challenges to the industrial relations and the human resource management of the enterprises. In view of the above, this article provides a brief summary of the latest development and characteristics of Chinese trade unions, with an aim of assisting enterprises dealing with issues they may face during the process of the establishment of trade unions.

I. Trends on the Developments of Trade Unions

A. ACFTU: Promoting the Establishment of Trade Unions and Union Membership

In July 2010, at the 4th Plenary Session of ACFTU’s 15th Executive Committee, ACFTU Chairman Wang Zhaoguo proposed a "two universality" work requirements, i.e. facilitating the universal establishment of trade unions and the universal implementation of collective wage bargaining in all enterprises in accordance with laws. ACFTU’s goal is to raise the unionization rate of enterprises above 60% nationwide by the end of 2010, above 80% by the end of 2011, and to achieve the universal establishment of trade unions in all enterprises by the end of 2012. Thus, promoting unionization among all types of enterprises, especially foreign invested enterprises and Hong Kong/Macao/Taiwan invested enterprises, has become a top priority on the work agenda of trade unions at all levels in China.

In order to implement the "two universality" requirements, from September to December of 2010, ACFTU launched the "Broad Survey, Deep Unionization, and Full Coverage" campaign across the country. In Beijing, Shanghai, Shenzhen and other regions, the local trade unions at different levels have set up active plans based on particular local conditions and have carried out a series of intensive unionization campaigns.

During the same period, with regard to unionization in foreign invested enterprises and Hong Kong/Macao/Taiwan invested enterprises, ACFTU has worked on the "Promotion of Unionization Work among the World’s Top 500 and Other Multinationals". Moreover, ACFTU has set up a special task force, overseeing directly the unionization effort of some of the world’s top 500 companies’ Chinese headquarters and their subsidiaries or branch offices. According to press reports, by the end of 2010, the unionization rate among the Chinese headquarters of the world’s top 500 companies and other multinationals has reached over 90%.

In addition, ACFTU also plans to release the Measures of Democratic Elections for Base-Level Trade Union Organizations this year to standardize base-level trade unions’ electoral system. This clearly shows the great efforts ACFTU has made to intensify unionization in enterprises.

B. Beijing: Promoting the Collection of Trade Union Funds and Trade Union Establishment-preparation Funds through Local Tax Bureaus

Since July 1, 2010, the Beijing Federation of Trade Unions has introduced two pilot programs, the "collection of establishment-preparation funds" and the "collection of trade union funds (establishment-preparation funds) by local tax bureaus", in Xicheng District (i.e. former Xuanwu District), Fengtai District and Changping District.

Firstly, enterprises without their own trade unions shall pay trade union establishment-preparation funds equivalent to 2% of the total wages of all of their employees every month ;

Secondly, the trade union funds as well as the trade union establishment-preparation funds shall be collected by the local tax authorities where the enterprises are located. This approach changes the traditional collection model, for it links the collection of trade union funds to the compulsory collection power of the tax authorities to ensure the payments of trade union funds by the enterprises.

The above two programs will be expanded to more districts in Beijing this July and will cover all districts in Beijing next January.

C. Shanghai: Facilitating Enterprise Unionization by the Workers Congress System

Regulations of the Shanghai Municipality on Workers Congress ("Regulations") has already become effective as of May 1, 2011. According to the Regulations, all enterprises, including Hong Kong, Macao and Taiwan invested enterprises and foreign invested enterprises shall establish and implement the Workers Congress system, and trade unions of enterprises are the operating mechanism of the Workers Congress and undertake its daily work. In addition, Chapter 5 "Rules of Procedure" and Chapter 6 "Operating Mechanism" of the Regulations repeatedly mention the separation and cooperation between the trade union and the Workers Congress. Thus, the Regulations clearly require enterprises to set up trade unions for the democratic management of the enterprises.

D. Shenzhen: Innovating on Trade Unions’ Establishment Models and Organizational Forms

In Shenzhen, the unionization rate of the enterprise, especially the big multinationals, is high relative to the national level. Statistics from the Shenzhen Federation of Trade Unions show that, the unionization rate of all enterprises in Shenzhen and that of the world’s top 500 companies in Shenzhen have both reached over 90%.

In this context, the Shenzhen Federation of Trade Unions is now considering innovations in the organizational forms of trade unions. For instance, for some large enterprises, it plans to adopt the concept of trade union federation, i.e. to form a united trade union by combining the trade union of the parent company with those of its affiliates and adopting a full-time trade union president, in contrast with the present model of establishing trade unions in the parent company and its affiliates respectively. The purpose for this is to facilitate the unified management by trade unions at higher levels and increase coordination among the trade unions in the same enterprise group. Moreover, this is helpful to the collective bargaining mechanisms to be carried out in the near future. Though this arrangement is still in the early stages, it deserves special attention since it represents a possible future development trend of trade unions of large enterprises in Shenzhen.

II. The Characteristics of Chinese Trade Unions

Enterprises face a variety of questions in the context of ACFTU’s promoting the establishment of enterprise level trade unions, For example, companies may ask, "Is unionization necessary?" "What types of unions should be established?" "How does an enterprise establish a trade union?" etc. The answer to these questions requires both an accurate understanding of Chinese macro policies for the present and a full appreciation of the characteristics of Chinese trade unions. Compared with trade unions in Western countries, Chinese trade unions have the following peculiarities:

A. The Nature of Chinese Trade Unions: Mass Organizations under the Leadership of the Party

The Chinese Trade Union Constitution explicitly stipulates that Chinese trade unions accept the leadership of the Communist Party of China ("CPC") and are important social pillars of the state power. This is the most important difference between trade unions in China and those in Europe and the U.S. Serving as the president of ACFTU, Mr. Wang Zhaoguo is also a member of the Poliburo of the CPC Central Committee and the Vice Chairman of the Standing Committee of the National People’s Congress. Likewise, the Vice President and the First Secretary of the Secretariat of the ACFTU, Mr. Wang Yupu, is also the alternate member of the Seventeenth CPC Central Committee. In addition, the staff of all levels of trade unions in China receives the same treatment and benefits as the personnel of the state organs.

In typical parliamentary democratic countries in the West, trade unions are politically independent of any political parties. But sometimes, for the rights and interests of the workers that they represent, trade unions also need to solicit certain parties to speak for them in the parliament, so as to contend with those representing capital. Therefore, trade unions and political parties in Western countries are both cooperative and competitive with each other.

B. The Structure of Chinese Trade Unions: A Unified Organizational System Headed by ACFTU

Chinese trade unions are structurally unified under the leadership of ACFTU. To be more specific, firstly, ACFTU is established at the national level as the highest leading body of all levels of local trade unions and industrial unions, and all trade unions in China are subordinate to ACFTU. Secondly, higher level trade union organizations lead the lower level ones, and the establishment of various levels of trade unions must be reported to the trade union at the next higher level for approval. Moreover, enterprise trade unions are established taking the enterprise as a unit, and they are the base level trade union organizations.

By contrast, in the West, trade unions are divided primarily by the nature of the industry, and there are various kinds and different forms of trade unions. Therefore, the diverse characteristics of trade unions in these countries are very obvious. For example, usually a number of trade unions for different industries coexist in the same enterprise, thus making it possible for employees to join one or more trade unions of different nature according to his/her own needs. As different trade unions always represent different interests, the pluralistic structure could possibly affect the respective power of these trade unions. But in power struggles between labor and capital, trade unions are often unified as one. Hence, the antagonism between labor and capital is relatively more obvious.

C. The Coverage of Chinese Trade Unions: Universality

Statistics from ACFTU show that, as of August 2010, there are 1,800 base level trade unions and 200 million union members throughout China, with more than 50% of all enterprises having a trade union. It is said that both the unionization rate of enterprises and that of employees are expected to reach 90% and above by the end of 2012.

In Western countries, thanks to their developed legal systems, the protection of a union member’s rights is not much different from that of a nonunion worker’s rights. As a result, the union membership rate in these countries is not high, usually about 20% to 30%.

D. The Function of Chinese Trade Unions: Assisting the Enterprise in Exercising its Business Management Rights

Article 38 of the PRC Trade Union Law clearly prescribes that the trade union shall support the enterprise in exercising its power of operation and management in accordance with law. It is thus clear that what is particularly unique about the Chinese trade union is that it not only represents and protects the workers’ legitimate rights and interests, but also needs to respect and support the enterprise’s executive power and production needs. Furthermore, the Chinese trade union has no right to organize the workers to strike.

In conclusion, Chinese trade unions are not completely antagonistic to the enterprises; instead, the trade union and the management shall treat each other with mutual respect and support. On the one hand, an enterprise trade union may fight for more economic interests for workers through negotiation; and on the other hand, it can also provide the employer with a stable work force in order to avoid shutdowns, strikes and other mass emergencies affecting the normal production and operation activities of the enterprise.