© Maplecroft Electronics Production | September 16, 2010

Labour standards remain critical risk for firms manufacturing 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 relevant to all multinational corporations with subsidiaries and supply chains in China.
Moreover, with increasing unionization, worker protests and management initiative, wages and working conditions are being addressed, with some positive results albeit with cost implications for business.

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 7th 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."

Source: Maplecroft


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