Labour Standards Remain Critical Risk for Electronics Firms in China

A recent spate of stories focusing on electronics companies with manufacturing operations in the special economic zones (SEZs) have highlighted poor labour standards and reputational risks in China, according to a new labour standards report released by risk intelligence and rating firm, Maplecroft.

The most high-profile situation concerns Foxconn, the world’s largest electronics contract manufacturer that makes iPhones and iPads for Apple, computers for Dell and other high-tech devices for well-known companies. During 2010, various sources raised concerns about the working conditions for young workers at the Foxconn factory in Shenzhen, where it is reported that 12 workers, aged around 20 years old, have committed suicide since the beginning of this year.

A report published in January 2009 by the US-based non-governmental organisation (NGO) National Labour Committee (NLC), entitled ‘High Tech Misery’, also reveals sub-standard working conditions in plastics and electronics factories in Dongguan. The report claims that employees are forbidden from going to the restroom or talking to colleagues. Workers are also fined for being one minute late and work an average of 81 hours per week, sitting on wooden stools with no backrests. The NLC also alleges that other electronic factories submit young workers to similar conditions as Foxconn. These include: KYE systems, which makes computer mice for Microsoft, and Meitai Plastic and Electronics, a Chinese hardware factory which creates keyboards for IBM, Dell Lenovo and HP.

In response, most companies sent a statement saying that they supported good labour practices and a third party audit to be undertaken by the Electronic Industry Citizen Coalition, which promotes an industry code of conduct for global electronics supply chains to improve working and environmental conditions.

According to Maplecroft’s report, the SEZs are well known for their ability to attract foreign investors because of tax incentives and a large pool of cheap labour. However, SEZs are also subject to a prevalence of labour rights violations due to weak enforcement of labour laws. This can be attributed to underfunded, untrained and sometimes corrupt local labour departments not having the resources to monitor workplaces properly.

“China is rated extreme risk in Maplecroft’s Working Conditions Index and is ranked seventh out of 196 countries,” said Maplecroft labour rights expert, Monique Bianchi. “Companies must perform due diligence when sourcing from local suppliers, especially in high risk regions including Dongguan and Shenzhen. These suppliers may ignore or attempt to circumvent labour laws. Such tactics can include avoiding labour laws by reducing overtime pay or using doctored contracts that employees do not understand.”

Despite the risks that exist for companies with manufacturing operations in China, the report also points to increasing unionisation, worker protests and management initiatives having some positive effects on wages and working conditions, albeit with cost implications for business.


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