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Case 11:China’s positive responses to growingmarket economySince the founding of the People’s Republicof China in 1949, a planned economic systemhas been adopted, whereby highly concentratedemployment and wage and labour systemsguaranteed the livelihood of employees, and alsopromoted social security.However, this system has had to adapt with thechanges in economic and social development, particularlysince 1978, when China began its policyof reform and opening up. This period was markedby a focus on economic construction that swiftlymoved towards what has been called a ‘socialistmarket economy system.’As a result, labour and social security structuresunderwent many changes. Most obviously, Chinaexperienced unprecedented economic growth ofbetween eight to 12 percent, far exceeding thecentralised and collective growth patterns. This inturn affected employment patterns in cities withlarge urban migration from rural areas, un-contractedhires, long working hours, and low wages,with little or no job security or safety protection.Meanwhile, rural unemployment was also on theincrease and the gulf between classes was widening.It is estimated that there are more than 150million redundant rural labourers, with an unemploymentrate in urban areas and townships standingat over four percent.However, the most far reaching efforts to changethe law were announced in March 2006 by PremierWen Jiabao in his annual speech at the NationalPeople’s Congress. The wide ranging economic reformpackage includes a new labour law addressingworking conditions in China. With some amendments,influenced to some extent by the ILO, thenew labour ruling has become law taking effect 1January 2008. The State is now declared to haveobligations, good governance, better public institutions,protection clauses, contracts, regulationsand legal arbitrations. The reform package indicatesthat the State will play a crucial role by rethinkingdevelopment strategies and having solidpolicies in place. The following features are themost important of the new labour initiatives:• Most industrial employees, including migrantworkers are covered;• Provisions are clarified for collective contractsthat apply to groups of workers and employersindustry-wide or within a given region;• The employer must account for any deviationfrom the labour standards imposed by law,which also includes a requirement for them toprovide written contracts;• The courts will take a more stringent approachto labour violations as per the new laws. In fact,should the employer be found in violation ofeither the law or even ‘administrative regulations’,the labour administration has the powerto issue warnings or ‘rectifications’ dependingon the severity of the violation. There are alsoprovisions within the law for damages and evencriminal liability in those cases where labourrights are grossly infringed. The law strictlylimits tacking on probationary periods duringwhich the employer can arbitrarily terminate anemployee. This feature is designed to overcomean abusive practice that deprives employeesof protections from arbitrary discharge and requires‘just cause’ before an employee is dismissed;• This proposed law regulates for the first timethe new industry of labour brokers or ‘labourdispatchers,’ which has grown up to furnish exportindustries with ‘just-in-time’ workers whohave dubious legal status as employees under186