New Chinese labor law takes effect

China yesterday introduced a new labor law that enhances rights for the nation's workers, including open-ended work contracts and severance pay.

"The government that is making the most concerted effort to protect workers rights is China," said Auret van Heerden, Geneva-based head of Fair Labor Association, which monitors work conditions in 60 countries.

That "goes against the conventional wisdom that China is leading the race to the bottom," van Heerden said.

Higher costs may drive many manufacturers with low margins out of China, damping investment in factories that helped push inflation to a ten-year high. Olympus Corp, the world's No. 4 digital camera maker, and Yue Yuen Industrial (Holdings) Ltd (裕元工業), the biggest maker of shoes for brands such as Nike Inc, are among companies shifting some production to Vietnam to cut costs.

"We are likely to see more factory closures next year," said Stanley Lau (劉展灝), vice-chairman of the Federation of Hong Kong Industries (香港工業總會). The new law will make it more difficult for companies to hire temporary workers, a practice favored by exporters to cope with fluctuations in orders, he said.

The Labor Contract Law aims to improve job security for workers, making open-ended terms of employment an option for those who have completed two fixed terms.

The legislation limits overtime, sets minimum wages and guarantees one month's pay for each year worked for sacked employees.

The new law "will definitely raise our costs," said Edmund Ding (丁祈安), spokesman for Hon Hai Precision Industry Co (鴻海精密). Taipei-based Hon Hai, the world's biggest contract manufacturer of consumer electronics, has 61 units in China making products including mobile phones and music consoles.

Some companies have been terminating contracts and asking employees to resign ahead of the introduction of the law.

Huawei Technologies Co (華為技術), China's largest maker of telecommunications equipment, offered about 7,000 workers new contracts with benefits if they terminated their agreements, spokesman Ross Gan said in an e-mail.

Some employees accepted, while others chose not to sign and left, he said, without providing details. The move wasn't aimed at evading legislation, Gan said.

RISING PRICES

Meanwhile, Chinese President Hu Jintao (胡錦濤) has vowed "forceful measures" to curb rising food prices and address a booming real estate market that has seen property prices sky-rocket, state press said yesterday.

"The central government attaches great importance to commodity prices and has made it an important task to stabilize them," China Central Television quoted Hu as saying during a New Year's Eve visit to the northern port city of Tianjin.

"A series of forceful measures have been taken and will continue to be taken to ensure the normal life of the masses," Hu said.

Inflation hit an 11-year high of 6.9 percent in November, according to official statistics.

The spike was propelled by an 18.2-percent rise in food prices. Pork, which forms the core of most Chinese diets, was up by a staggering 56 percent.

He also vowed to curb rising housing prices to help low-income families, and to provide them with better health care benefits, two other top concerns of ordinary Chinese.

"The [Communist] Party and government are very much concerned about the housing problem of the low-income masses," Hu said.