Chamber comments on the Draft Labour Contract Law

The draft of the Labour Contract Law of the People's Republic of China passed a first reading in the Standing Committee of the National People's Congress (NPC) in December 2005. In March 2006, it was made public for comments on the NPC's website for one month.

The European Chamber organized seminars in Beijing and Shanghai where PRC labour law experts explained the details of the draft to members. The comments and recommendations voiced at these seminars, or subsequently submitted to the Chamber, were compiled in a letter addressed to the Legal Affairs Committee of the NPC. This letter reflects the concerns of European industry regarding the potential impact of the law on human resources management in China. The Chamber further invited the Chinese authorities involved in the legislative process to a constructive dialogue aiming to improve certain areas of the draft.

The declared scope of this new piece of legislation is to protect employees and create harmony between employer and employees. Such objectives are commendable and certainly deserve further attention from both government and industry. Nevertheless, in order to ensure that these aims are met, some issues in the draft law need further consideration and clarification.

The European Chamber eagerly anticipates more concrete guidelines for the implementation of this legislation. A number of articles in the draft are written in a rather vague manner, making interpretation ambiguous and implementation difficult to achieve. As labour contracts establish a long-term relationship between the parties involved, clarity would encourage a more harmonious development of this relationship. Clear termination rules for contracts would encourage employers to give a larger number of potential employees a chance to prove their abilities without running the risk of being unable to terminate contracts.

In certain areas, the draft tends to overregulate the employment relationships. Based on our members' experience from various European and non-European countries however, we know that such legislation, in order to be efficient, needs to be flexible enough to apply to various business situations. Very detailed and rigid rules and regulations may potentially lead to unavoidable conflicts between the parties.

In its letter to the NPC, the European Chamber provided specific comments on the Chamber that strengthened the role of labour unions, the creation and interpretation of employment relationships, probation periods, company rules, non-compete clauses, training and service return agreements, as well as the strict regulations for the termination of labour contracts by employers.

The European Chamber will continue to closely monitor the legislative process and channel the concerns of its members to the Chinese and European authorities.

Job Fair held in Nanjing

The European Chamber of Commerce in Nanjing continually strives to adapt to the needs of its members. In light of this, on April 8, the first Job Fair was held at the Sheraton Nanjing Kingsley Hotel, where 18 member companies, including Siemens and Ericsson, were recruiting staff. It was a big success with over 300 graduates looking to become future employees of these recruiting companies and taking advantage of the opportunity to be in direct contact with them. The companies had direct job offers for the young potentials and experienced candidates, and there was also the possibility to talk with general managers and human resources managers about future job opportunities. There were more than 140 positions on offer for the best-suited applicants, and many on-the-spot interviews took place.

The European Chamber Nanjing Chapter would like to thank its three sponsors, Valeo, Sino Santa Fe and Sheraton Hotels, who contributed greatly to the overall success of the day.

Sourcing of tools in China

China's tools market is the third-largest worldwide by value, following Japan and Germany. The compounded annual average growth rate is over 15 percent for the last 10 years.

According to a study recently carried out by Kerkhoff Consulting, tools of the low-end to the middle range of the market can be procured completely and without quality loss from China. Some automobile suppliers have already realized over 80 percent of their need in the Chinese market, where savings of up to 60 percent can be had. Meanwhile, statistics also show that the export of Chinese tools has increased tenfold in the past decade, indicating the global acceptance of Chinese tools is on the rise.

However, the procurement of technology-intensive tools, 57 percent of which are injection tools, still depends on imports. The main imported products include large-sized tools for automotives, high-precision encapsulating tools for the IT industry and other high-complexity tools.

The tool market in China is very fragmented with over 20,000 enterprises, employing 500,000 staff. Compared with their international competitors, most Chinese toolmakers have a low productivity of around US$10,000 per year per employee, with amounts up to US$300,000 per year per employee in Western countries.

Chinese tools makers have clustered in three main areas. Guangdong province enjoys the highest turnover, imports and exports volume. Most tools are for consumer electronics, IT, construction and toy industry.

Most suppliers in Zhejiang province are in the city of Ningbo. Six cluster areas of Ningbo, like Yuyao and Beilun, specialize in different areas of the market.

Shanghai has over 1,500 tool suppliers. Most of them supply to the IT and automotive industries. Quite a few of them, either private companies or joint ventures, have already managed to produce tools for the high-end market.

When it comes to procurement, communication and quality are the two main concerns of our interviewees. Generally, Chinese suppliers have the advantage of shorter leadtime in this industry, but most of their customers said it took them at least half a year to achieve successful cooperation with local tool makers.

Contributed by Jan Schmolke,
Business Development Manager, Greater China,
Kerkhoff Consulting GmbH

Lobby Actions

China to launch negotiations to join the WTO Government Procurement Agreement (GPA)

China pledged to start negotiations to join the Government Procurement Agreement (GPA) "as soon as possible" after its accession to the World Trade Organization in December 2001. While China became an observer of the GPA in 2002, until now it has kept deferring the decision to start negotiations.

In April this year, after extensive data collection and information gathering on the potential impact of GPA membership on its economy and domestic companies, China finally announced that it would initiate negotiations to join the agreement and have its dossier ready by December 2007.

Public procurement and China's accession to the WTO GPA listed among the European Chamber's top ten priorities. This is therefore a significant breakthrough for the Public Procurement Working Group who has been advocating this move since the European industry came together last year to address issues related to public purchasing and contracting in China. The Working Group will follow the negotiations closely, expecting timely action and the implementation of good public procurement practices in accordance with market economy principles.

A degree doesn't make the man

Vocational training is also an important method of learning the skills most important in today's workforce Vocational training is often considered the result of an inferior level of study, and hence it equates to an inferior level of accomplishment. This is curious considering the very nature of the word "vocation", which refers to an occupation that particularly suits a person.

It tends to be the highly practical nature of those jobs labelled as being most applicable for vocational training that marginalizes the regard in which they are held. This seems particularly relevant here in China, where many multinationals and SMEs are seeing distinct gaps open up in their workforce, gaps that need the kind of staff that have had accelerated training for specific job roles - in other words, vocational training.

Critics of vocational training claim that it develops non-transferable skills. The modern management mindset that looks for a workforce with flexible skills might therefore be tempted to compartmentalize those who have had such training to only being able to perform that particular job role. Yet whilst the skills and abilities that tend to be the focus of vocational training are certainly more specific than more general academic or professional training, it is certainly arguable to claim that they are non-transferable. Organization, attention to detail, researching, prioritizing and active learning are all skills acquired in any vocational training program.

A very good example of vocational training is the language- and competency-based training projects of one of the world's leading PCOG (petrochemical, oil & gas) companies. A well-prepared and -executed project that looked at every job role within the company, it devised full competency statements for all job activities and for all language communication needs. Through the blended combination of competency-based language and skills training, this ambitious program was able to provide effective vocational training that expanded rather than limited the scope of all those involved.

All studies can be seen as helping to equip people with the skills and abilities they will need in their occupation and their lives - therefore vocational training programs should be seen as some of the most focused and valuable of all educational programs.

This article was contributed by Adam Hopewell of EF Corporate Language Training. You may email him at adam.hopewell@ef.com


McCreevy comes to China

In depth discussions on Financial Services and Public Procurement with the Commissioner

Charlie McCreevy, EU Commissioner for Internal Market and Services (Markt), visited China in May. The main topics on the agenda were public procurement and financial services and how the EU and China can strengthen their cooperation in these areas. DG Markt is the central authority responsible for the implementation of the single European market, coordination of financial regulations and liberalization of the service industry across the Union. Sharing these experiences with Chinese authorities is a central part of the dialogues.

Ahead of his meeting with the Chairmen of all three financial services regulators, Insurance (CIRC), Banking (CBRC) and Securities (CSRC), Commissioner McCreevy met with representatives of the European Chamber's Insurance and Banking Working Groups for a long working lunch. The meeting allowed McCreevy and his team, including Director General Schaub, to get an extensive overview of the situation EU firms face in China and the specific areas where improvements are necessary. Key topics raised in banking included infrastructural obstacles (such as high capital requirements and the need to report prudential ratios per branch) and limitations on foreign ownership in Chinese banks. The insurance issues raised included limitations for foreign companies to offer pensions products and third-party liability insurance.

China to initiate GPA negotiations

Commissioner McCreevy kicked off the EU-China Regulatory Dialogue on Government Procurement, which paves the way for regular consultations between the two parties. In the same context, Commissioner McCreevy met with Vice Minister of Commerce Yu Guangzhou at a high-level Government Procurement Conference held in Beijing on May 16. VM Yu took this opportunity to confirm/reiterate China's recent announcement that negotiations to join the WTO Government Procurement Agreement (GPA) would be initiated by December 2007.

In view of China's recent move on the GPA dossier, the conference was tailored to address the Chinese counterpart's interest in developing a better understanding of the Agreement, its economic impact and how it would affect domestic companies.

A large delegation of member companies participated in the forum. The European Chamber welcomed the opportunity to illustrate the current business environment for foreign-invested companies interested in participating in public-funded projects in China and communicate key messages to EU and Chinese authorities, including NDRC, MOFCOM, MOF and MOC.


Upcoming Events

Beijing

Dinner in honour of
Commissioner Mandelson
Venue: TBC
Price: TBC
The European Chamber is pleased to host a dinner in honour of Commissioner Mandelson.

SME Breakfast Seminar
8.30am, Capital Club
Price: Members RMB150,
Non-Members RMB300
The European Chamber is pleased to welcome you to the 10th SME Breakfast Seminar.

Shanghai

Breakfast Seminar on the Chinese
Legal System
8:30am, venue TBC
Price: Members RMB200,
Non-Members RMB400
The aim of this seminar is to explain the Chinese legal system to representatives of SMEs. It will also give an introduction to the Chinese court system and alternative dispute resolution.

Panel Discussion on Complying
with Anti-Corruption Laws
8:30am, Hilton Hotel
Price: TBC
The European Chamber invites you to a breakfast panel on compliance with anti-corruption laws. Three outstanding panellists will provide insights on regulations and compliance of foreign and Chinese anti-corruption laws.


European Chamber Conference on
the Development Zones in the Yangtze River Delta
8:00am, Howard Johnson
Price: Members RMB600 - 900,
Non-Members RMB1,000 - 1,300
This full-day conference intends to provide an understanding of China's development zones. Three panels will be offered, covering issues of taxes, operations and human resources. Information will be complemented by diverse case studies.

Nanjing

Building Construction Seminar
7:00 pm, Xuanwu Hotel 2F
Price: TBC
Presentation on "Successfully managing your construction project in China" by the Nanjing member company Spaceframe (www.spaceframe.com.cn) which specializes in industrial construction. A comprehensive case study will be presented as well.

Guangzhou

Dinner in honour of
Commissioner Mandelson
Venue: TBC
Price: TBC
The European Chamber is pleased to host a dinner in honour of Commissioner Mandelson.
DCCC
DCCC Summer party
The Danish Embassy in Beijing
Price: Adults RMB300,
Children (3-12 yrs) RMB150
The Danish Chamber is pleased to announce that it will host a summer party in June before the business people go on vacation. The party will be set off with entertainment for the children from 3pm, and the barbeque grill will be started at 5pm. A jazz band will provide entertainment at the party. For more information, please visit the DCCC website at www.dccc.com.cn

Other

China Trade & Export Finance Forum
June 19 & 20, The Westin Hotel, Shanghai
Price: Members US$1150, Non-Members US$1350
The European Chamber is pleased to announce its sponsorship of the China Trade & Export Finance Forum. Special rates are available for members of the European Chamber. For more information please visit the Global Trade Review website: www.gtreview.com