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Industrial Sectors: Construction
Deconstructing Construction in China
This short paper aims to summarise the current condition of China’s construction industry from a labour perspective. The industry has been indispensable to the government’s overall economic strategy over the last 25 years of reform and has played a central role in employment policy, urban housing reform and large-scale infrastructure projects. How the construction industry is managed also has an indirect impact on migration policy, property management, urbanisation, anti-corruption campaigns and even education and medical reforms. Given the centrality of the industry to the economy’s overall health as well as the labour-related issues that the re-structuring of the industry has thrown up, it is surprising how little non-academic attention it has attracted. This paper will begin with a brief profile of the industry at present and the direction it is likely to go in. A middle section will summarise the workforce and employment structure in the context of the subcontracting system. Unfortunately we do not have space to examine the latter in the detail it deserves. The final section will look at labour relations through the prism of a major issue facing workers on site: wage arrears. Apologies are offered in advance for failing to cover, other than in passing, health and safety issues. Again space precludes an adequate appraisal and while there are obviously specific reasons why China’s construction industry offers the second most dangerous jobs – after mining – the absence of effective and participatory trade union power is at the core of all bad health and safety practice, regardless of industry or sector. We conclude by arguing that there is an urgent need for imaginative policies from the central government. The emergence of a complex system of sub-contracting, the continuing discriminatory environment that building workers find themselves in, and the industry’s poor health and safety performance are just some of the problems demanding powerful trade union action. The government must apply itself to the task of creating the space for construction workers to organise, both in the official trade union and – crucially – beyond it. It is only through genuine and participatory representation that the stability which both the government and construction workers are clearly seeking will emerge. Current Shape of the Industry Construction enterprises in China are generally divided into three categories according to their capacity. At the beginning of 2003, there were 65,611 construction enterprises organized along a pyramid structure that generally reflects the shape of the industry in developed countries. Construction companies are graded from ‘A’ to ‘C’ and in 2003, 6 percent were Grade A, 26 per cent were Grade B and the majority, at 65 per cent, was Grade C. The chart below illustrates the types of ownership. The salient features being that there was – and still is – a low level of foreign invested enterprises and that state owned enterprises (SOE) accounted for just fewer than 18 per cent of the total number of enterprises. Pre-WTO restrictions on market access and national treatment account for the former and an early start to privatisation for the latter. Recovery from the post Asian financial crisis (1997-98) has seen a dramatic rise in staff and workers employed by various types of private and semi-private enterprises such as joint ownership, joint stock companies, companies with limited liability as well as foreign enterprises with foreign investment. The numbers working for these enterprises has risen from 330,000 in 1997 to 2.36 million in 2002.
The apparent low density of SOEs needs to be treated with caution as most of the joint stock companies are affiliated to construction SOEs for the period of a project and as such have little control over the supply chain. Ongoing research from the Hong Kong-based Asia Monitor Resource Centre points out that SOEs are in a much better position to dominate the market due to access to cheaper land, bank loans, closer connections to the Ministry of Construction (MoC) and the often intimate relationship between senior SOE directors and leading government and Party officials. Given that construction is a traditional site for serious corruption in almost every country, the implications for China are only too clear and have been borne out in practice. Corruption has marred the construction industry at almost every stage of activity: land rights transfers, compulsory land acquisitions, project-related bank loans, demolition and re-housing, materials procurement, quality control, labour relations, health and safety and, of course, remuneration. In truth, corruption in China’s construction industry is probably no worse than in other countries that have gone through rapid economic transformation and expansion. It is the lack of independent and organised channels of redress that transform the disputes that arise as a result of corruption into profoundly sensitive issues. As part of a response, in early 2005 the Beijing Construction Committee, following patterns already tested in other parts of China, announced that supervision and inspection of construction projects would be assigned to specific and proven management companies with a mandate to supervise not only construction quality but also the time period of a project and the costs incurred throughout the project’s life. The difference between these management companies and the previous inspection organs is that the latter were restricted to monitoring quality control. As we discuss in the section on construction workers, this may possibly ameliorate the problem of wages arrears by bringing more supervision over more of the supply chain, but the fact that the companies are appointed by the developers themselves (jianshe danwei) only further highlights the need for trade union representatives to be involved at all stages of a construction project – including overall management. Both the expanded role for supervisory management companies and the lack of input from trade unions reflect the fact that China’s construction industry is moving closer to the international model. The construction market in China began to take off in 1992 and by 1996 the industry’s output was five times what it was in the mid-80s. The government designated it a key industry in 1996 and its importance to the overall growth of the economy continues due mainly to a number of interlinked factors: WTO accession in December 2001 and the subsequent increases in the rate of FDI investment; housing and property reforms; the Beijing Olympics in 2008 which includes the construction of 32 stadiums, the Olympic village, and major transport projects; and the Go West policy, which formally started in 1997, and is an attempt by the government to bring the development opportunities to central and western China. Combined, these factors will result in a continuation of the steady increase in fixed asset investment and ensure that construction remains a major player. The annual growth rate in 2000 was between 10 and 13 per cent and total output value in the first half of 2005 was up 18.4 per cent on the previous year at over US$150 billion. Profits during the same period continued to grow at an even higher rate of 25.4 per cent on the previous year to US$1.9 billion and are predicted to rise by 30 per cent in 2006. These figures do not include the activities of companies specifically providing labour to the industry; nor do they include the equally impressive statistics from the road and railway infrastructure projects which are accounted for separately. Unlike the manufacturing sector, foreign capital has not so far played a dominant role in the construction industry. Over 56 per cent of the 999 foreign construction companies registered in 2003 – just 1.5 per cent of the total number – were from Hong Kong and their larger presence is due to Hong Kong’s cultural and geographic proximities as well as the boost to economic cooperation that has accompanied the return to Chinese sovereignty since 1997. As of 2003, foreign investors came from 29 countries, the vast majority of which set up China-based construction enterprises between 1990 and 1995. Until recently, participation in construction projects by foreign companies was limited by a rule that restricted their access to those projects backed – either by investment or through loans – by foreign governments. During the nineties the Chinese government policy viewed the participation of foreign companies in the construction industry largely as a channel for technology transfer. Investment rules were changed to allow technology and know-how to be registered as capital investment. China’s first three years as a WTO member did not fully open up the construction market – classified by the WTO as trade in services – and the role of FDI remained strongest in the research and development field as opposed to construction itself. However, the lifting of restrictions on market access and national treatment are likely to change this scenario and the aforementioned factors driving the continued development of the domestic construction industry will also attract foreign companies. Perhaps the two most important changes that came into effect in late 2005 as a direct result of WTO commitments are lifting of the restriction that limited investment to projects backed by foreign governments and the permission for wholly owned foreign construction companies to set up shop. Consequently, even neighboring Asian construction companies, traditionally slow to invest outside their domestic markets, are showing increased interest in China. This is due not just due to improved opportunities in the China market but also to increased competition from foreign companies at home as capital moves with relative ease across borders. Japanese construction companies for example are piggy backing on investment in China from Japanese manufacturers by competing for factory construction. Almost inevitably, the next five years will see the increased activity by foreign companies in the construction industry as more foreign construction companies establish themselves and this process will be accompanied by mergers with and acquisitions of local construction enterprises. The Workforce Construction sites employ large numbers of workers on a day-hire basis. Even for skilled workers who are much more likely to be hired for the full term of a project, contracts are the exception rather than the norm. The dramatic rise of smaller highly specialized subcontractors providing workers to construction companies has made it very difficult to ascertain who is actually working for whom as has the presence of construction workers on site without proper papers. This renders the reporting of any figures on the total number of workers employed in construction a hazardous affair. Unless stated the statistics in this section are national labour statistics compiled by four government departments including the National Bureau of Statistics and are presented in an annual China Labour Statistical Yearbook (2004). While still far from foolproof most observers recognise a gradual improvement and depoliticisation of statistics over the last decade. At the same time, it should also be remembered that there are default initiatives connected to tax and social security payments for under/over reporting by companies, local officials and provincial governments. The mid 80s saw the partial deregulation of employment practices. Managers and directors of employing units found themselves with much greater leeway in their hiring and firing practices. But even before this, the construction industry had been practicing fairly large scale sub contracting of cheap rural labour on specific projects. The practice had been the flash point for political polemics and struggles during the Cultural Revolution when ‘radicals’ condemned the practice as a sign of continuing capitalist relations in China. So it is not surprising that, more than any other industry, the construction industry witnessed the largest increase in employment between 1980 and 1985 when numbers employed jumped from 8.5 million to over 20 million. The increase has continued steadily ever since. In 2002 just fewer than 40 million workers were employed in construction, second only – if we exclude farming – to the wholesale, retail, trade and catering industries which are combined in Chinese industrial statistics. Approximately 80 per cent of these workers are employed outside the towns and cities. The chart below shows the top ten employers of construction workers in urban areas in 2003 by province/municipality. It is important to note that if we take 1994 as a starting point, the numbers involved in construction overall have increased from almost 32 million to almost 39 million in 2003, while the numbers working in urban areas have dropped 11.1 million to eight million. Most of the major infrastructure and construction of small towns – part of the government’s urbanization programme – is taking place in the countryside. The 1997/98 crisis barely showed up in national statistics on employment in construction but it looked much more dramatic if we concentrate on the urban areas where numbers dropped from 10.3 million in 1997 to 8.8 million in 1998 as government policy adapted to the changed economic environment and reigned in construction projects. Numbers only started to rise again slowly in 2002. Increased mechanization and labour productivity in the cities will probably ensure a steady market-orientated fluctuation rather than dramatic increases in numbers employed on urban sites and projects. Urban construction sites have always employed large numbers of women and over the last 10 years they have represented between 13-20 per cent of the total employees. In 2002 there were 1.4 million women workers employed in the construction industry. On site, women mostly do the unskilled heavy labouring jobs such as supplying bricks and blocks and cement mixes to bricklayers, site cleaning, loading and unloading of materials etc. The women are often kin or spouses of male workers on site. There are no figures available for women working on sites and projects in rural areas.
Mr. Liu is a scaffold worker from Guangxi province who moved to off-farm work due to the poor land quality in his village. He was recruited by his boss, also from Guangxi, while staying with bridge builders in a hostel similar to Mr Wang’s in Shenzhen. Liu said that his boss was previously an electrician employed by a state owned company building materials company specialising in bridge building equipment in Guangzhou. His boss had built up a network of “reliable” bridge workers over the years and eventually struck out on his own. When interviewed Liu said his boss had over 100 workers scattered over four sites in the province. Liu’s boss did not offer contracts and pay was on a project basis. Subs of up to 50 per cent of the total hours worked were available to cover urgent needs such as children’s education and medical costs for illness. No training was deemed necessary although Liu said his boss tried to retain workers to build up a sense of team spirit and reliability. There was no insurance provided although Liu expressed confidence that his boss would “see him right” should there be an accident. The bridge workers lived, ate and occasionally got drunk together during a job and the subcontractor often attempted to ameliorate the exhaustion of an especially long working week by turning up on site with food and drink. Working hours were eight to nine hours a day normally and up to 12 hours a day during a “good week”. Most builders work between 26 and 28 days per month weather allowing. Liu earned 50 yuan for a nine hour day and more with overtime. He said this was the going rate for unskilled construction workers – in Guangdong cities – working at height and our research bears this out. He said experienced skilled workers could earn considerably more. The aforementioned AMRC research provides a detailed breakdown of day rate and piece rate construction wages which range from 25 yuan for ordinary labouring to 50 yuan per day for working at height. What is noticeable about the construction industry wage structure in the case of this southern Chinese city is the complexity and differentials of the wage rates. For example, bricklayers are paid per brick laid and workers making shuttering for cement pouring are paid 10 yuan per square metre. By way of comparison, illegal and legal migrant construction workers from the UK and Turkey working in West Germany in the early 1980s were paid one of two flat rates depending whether the worker was skilled or unskilled. The serious differentials were on the basis of race. Brits were paid many times more than Turks. Wage Arrears The late or non-payment of wages is the most serious manifestation of the wage issue. Mainland media have reported construction worker wages being paid in illegal “currencies” such as food coupons in restaurants. Other reports have charted illegal deductions made from workers wages called building quality deductions (gongcheng zheliang) and deductions aimed at preventing workers from moving to another site (gong qi di jin). Combined, these two deductions can knock 10 per cent off the total wage. Along with wage arrears, the collective protests that these practices cause have given rise to serious concern from the authorities. They are generally referred to in the media as social incidents and as far as the construction industry is concerned they mostly take place around Spring Festival. This is because most building workers are paid a living subsidy – usually 10 per cent of the agreed wage – until the completion of the project or Spring Festival comes around in January or February of the Gregorian calendar. The lack of independent trade unions capable of effectively monitoring the industry is not the main reason for wage arrears. Unions are part of the solution. The power of capital in general and the influence – direct or otherwise – of the forces of globalisation are the cause. The All China Federation of Trade Unions (ACFTU) is the only trade union allowed to operate in China and it is legally and constitutionally bound to working under the leadership of the Chinese Communist Party (CCP). Given the latter’s enthusiasm for market forces, it is not surprising to find that the ACFTU while highly critical of the process that leads to wages arrears and the construction companies involved, its papers and newspaper articles on the subject apportion the lion’s share of the blame not on market forces but on the current imperfect market forces operating in China. The implication being that once these are perfected, the problem of wage arrears – which in Spring 2005 stood at approximately US$12 million – will diminish. The following will take a quick look at some the causes underlying wage arrears. Secondly, the labour supply market remains open to considerable abuse. As already discussed employment channels are often casual and informal and on a daily basis. The official trade union for construction workers is the Chinese Seafarers and Construction Trade Union (CSCTU) and this body has recently embarked on a number of campaigns to recruit migrant construction workers and has also organised bilateral talks with major state-owned construction companies. But it has made virtually no impact on the growing private sector and has concentrated its efforts mainly on research and law drafting, effectively playing the dog’s tail to both government policy aimed at tackling the problem and workers’ own more direct initiatives. These have included organising press conferences, threats of suicide in which workers draw lots and the ‘loser’ climbs up a crane or suitably high building to threaten suicide unless until a compromise is reached. paid. This tactic meets with varying degrees of success. If the workers succeed in persuading the local government’s to get involved pressure will be brought on the relevant party. However, should the police decide to make arrests then the individual who takes the action pays the price usually with a spell in detention. Collective protests such as strikes, road blocks and picketing finished sites are highly effective but very risky for the organisers. Thirdly is criminal or corrupt behaviour. The industry is not short on scams, organised crime and gang bosses. Zhou Ziyong is a former construction worker who worked his way up to a position of site supervisor. In 2004 he recruited 700 workers to build a mall in Beijing. The contractor disappeared with the wages and left Zhou owing 758,000 yuan to 397 workers. Mr. Zhou took his story to the press and said he did not dare go home for Spring Festival as he would face unspecified pressure from the relatives and friends of those he recruited. The MoC City Construction Committees and the Ministry of Labour and Social Security have put great store in the various tools of labour relations to attempt to improve the labour market. Contract templates for the industry have been drafted and issued; the official CSCTU has been urged to increase efforts to sign up migrant workers and increase pressure and persuasion on employers; gang bosses will be eliminated from the Beijing construction industry by the end of 2005. These will dilute the problem – especially in boom times – but not solve it. The negative impact of market forces can only be really tackled by strong unions willing to challenge at least some aspects of capitalist ideology and remove labour to the edges of its influence. Migrant construction workers are only likely to become active in trade unions that prove capable of pursuing collective class interests as well as legal rights. Top down recruiting campaigns will meet membership quotas from above but have a negligible impact on China’s hundreds and thousands of construction sites. Conclusion China’s construction industry is likely to remain a key industrial component of the country’s overall development. ‘Decent Work’ is an ILO sponsored framework for overall development and states that government policies should have at their core “opportunities for productive, remunerative, and safe work; the provision of social security; respect for workers’ rights; and the promotion of social dialogue”. This paper hopefully demonstrates that while construction does indeed create millions of job opportunities which have been central to China’s relative success in poverty reduction, the industry at present falls well short of meeting the remaining components of the Decent Work framework. Migrant workers make up the backbone of the industry and yet they work in an atmosphere of institutionalised discrimination that finds its clearest expression in the hukou system of residential restrictions. In short hukou dictates that migrant workers cannot live where they work unless they are in work. If they out of work, they have to leave. This is hardly a level playing field for the social dialogue that Decent Work demands. Nor is the construction industry safe with over … reported fatalities in … it is the ... most dangerous construction industry in the world. At a 2002 conference in Shanghai on Decent Work in China the Director of the International Labour Institute of the MOLSS, Mr. Liu Yanbin, proposed that in the context of a transitional country, employment opportunities must: safeguard the creation of employment opportunities; ensure a minimum income; and protect workers’ basic rights and interests. In this light, the construction industry is an ideal area in which the government can fashion policy into addressing all of these aims while avoiding any radical policy departures which it claims to avoid in the name of building a “harmonious society”. These include legal reform in: residential discrimination (hukou); the right to strike; implementation of existing labour law; the identification and closing of legal loopholes that facilitate wage arrears and corruption along the supply chain; restriction on and monitoring of the bidding and tendering process for construction projects; access to legal redress for workers; and access to compensation for industrial injury. As we stated at the outset, none of these recommendations will be truly effective without independent trade unions.
IHLO |
