Labour standards remain critical risk for firms manufacturing in China – Maplecroft reportPhoto: Localised labour rights and protection risk profile - by Maplecroft

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. According to a recent Maplecroft 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.

Labour standards remain critical risk for firms manufacturing in China – Maplecroft reportPhoto: Localised labour rights and protection risk profile - by Maplecroft

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. According to a July 2010 recent Maplecroft 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.”

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.

Maplecroft's 'Labour Standards Report - China' contains in-depth analysis for all major labour issues including: working hours, compensation, health and safety, freedom of association, labour contracts, discrimination, migrant workers, forced labour and child labour. In addition, country scores and trends are provided by Maplecroft's labour rights and protection indices, plus sub-national maps of labour rights infringements, key recent events and stakeholder viewpoints are supplied.

Click here for full Maplecroft press release.