Aaron Halegua. ChinaFile. Is Chinese Investment Good for Workers?

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On December 13, 2017 Affiliated Scholar Aaron Halegua was featured in a ChinaFile Conversation with other leading experts in Chinese labor law. This discussion was conceived and lead by Mr. Halegua. To read his entire report on labor rights in China, visit: https://usali.org/chinasworkers

December 13, 2017
Original Post ChinaFile

China’s Belt and Road Initiative is a $1 trillion plan to deepen economic relations between itself and up to 60 other countries worldwide through large investments in infrastructure, construction, and other projects. Many commentators have considered the significance of Belt and Road from a political, economic, or even environmental perspective. This discussion, conceived and led by Aaron Halegua, considers a largely neglected topic: what are the initiative’s implications for labor in China and the target countries? To what extent do China’s investments create jobs for local workers versus Chinese workers? Are the projects positively impacting labor conditions in participating countries or driving down labor standards? Does it matter whether the Chinese investor is state-owned? And how do the answers to these questions vary across jurisdictions?

Commentary from Aaron Halegua

One recent case comes from the island of Saipan, a U.S. Commonwealth in the Pacific Ocean. At least three major Chinese contractors—including state-owned (Metallurgical Corporation of China), publicly-listed (Gold Mantis), and private (Nanjing Beilida) companies—were hired to construct the Imperial Pacific casino and hotel there. Although the U.S. is not technically part of the Belt and Road Initiative, each company identified their work in Saipan as a “One Belt, One Road” project.

Awarding contracts to these Chinese companies resulted in thousands of construction jobs for Chinese workers, but very few for Saipan residents. The managers, foreman, and workers were all brought in from China. After the supply of work visas was exhausted, rather than offer a wage high enough to attract local residents, the companies arranged for more Chinese construction workers to enter Saipan as “tourists.” Some estimate that over 1,000 Chinese heigong (undocumented laborers) worked on the site. Many of them paid thousands of dollars in recruitment fees just for the opportunity to work in Saipan, underscoring how Belt and Road also serves as an important outlet for China’s surplus of unskilled labor in a slowing economy.

Hiring Chinese workers allowed the employers to impose exploitative labor conditions that locals would never tolerate. Many of the company practices resembled those in China, but violate the U.S. federal laws applicable in Saipan. For instance, these workers labored 13 hours per day, seven days per week; they were only paid once per month, if at all; compensation was below the applicable minimum wage; and overtime was rarely paid. Safety conditions were atrocious, resulting in high injury rates and even worker deaths. The companies resisted taking injured workers to a doctor unless absolutely necessary. Employers also confiscated workers’ passports—a legal violation as well as an indicator of forced labor. Accordingly, contracting with these Chinese companies cannot be said to have positively impacted labor conditions on the island.

In this case, the Chinese employers ultimately received some punishment and the workers achieved some modicum of justice. But this result is quite surprising given the lack of labor unions or worker centers in Saipan and the fact that most heigong, themselves in Saipan illegally, are terrified to complain to government agencies. Indeed, these abusive conditions persisted for a long time before a few brave whistleblowers came forward, including hospital doctors and workers themselves, prompting federal law enforcement agencies to intervene. Some of the largest fines for workplace safety violations in 2017 were imposed on the companies and several managers were criminally prosecuted for harboring and employing illegal aliens.

The contractors also agreed to compensate the workers millions of dollars for the minimum wage and overtime violations in settlements with the U.S. Department of Labor. But their motivation to settle was driven at least as much by the attacks on their public image than a fear of legal liability. The exploited workers continuously protested outside the casino for their wages without interference from the police; they received support from labor rights organizations in the U.S. and Hong Kong; and major media outlets reported on their plight. However, this tandem of worker support from law enforcement agencies and civil society institutions does not coalesce in every instance of abuse in the United States and may be particularly hard to achieve in some other Belt and Road target countries.

Read the entire conversation here: http://www.chinafile.com/conversation/chinese-investment-good-workers