New Chinese labor law may price some U.S. and other foreign companies out of China - Curt Surls, Employment Attorney, California.

New Chinese labor law may price some U.S. and other foreign companies out of China. Wei Hoqiang used to work in a toy factory. His boss had forced him to sign a labor contract it did not allow him to read. His salary was 30 cents an hour, and he worked in a room that was freezing during the winter and stifling during the summer. On January 1, 2008, however, a landmark new labor contract law went into effect. The law seeks to declare war on labor abuses such as forced labor, withholding of pay, and unwarranted dismissals. A major victory for Chinese workers, it has emboldened legions of workers in recent months to talk about quitting or striking to insist on higher wages and better work conditions. For companies already battling inflation, high energy costs, the falling dollar and environmental crackdowns, however, the new law has been ruinous. It has added to the rising cost of doing business in China; in turn, this has led to the flight of thousands of factories from major industrial areas like the Pearl River Delta in southern China. According to a first quarter 2008 survey by the Shanghai branch of the American Chamber of Commerce along with Booz Allen Hamilton, 20 percent of companies with foreign ownership or investment have concrete plans to move some or all of their operations out of China. Another study by the Federation of Hong Kong Industries reports that, in the Delta, which turns out about 1/3 of the country’s exports, about 10,000 companies are planning to scale back or shut down. Citation: Washington Post Foreign Service, Washington, D.C., Monday April 14, 2008, Page A01 (byline of Ariana Eunjung Cha).