Changsha

The signs all over the store proclaiming Everyday Low Prices look the same (except that they’re printed in Chinese), as do the neatly dressed “associates” patrolling the selling floor. Busy shoppers plucking bargains ranging from music CDs to shoes to fresh bean curd have the same determined look about them. And one other thing about Wal-Mart in China is familiar, too: The company’s labor problems are making headlines.

To be sure, the All-China Federation of Trade Unions (ACFTU), which has launched a public relations campaign against Wal-Mart over the firm’s refusal to let its Chinese workers unionize, does not much resemble unions in the United States (where Wal-Mart is the target of almost forty lawsuits alleging forced overtime without pay; a class-action lawsuit claiming gender discrimination; and, most recently, charges by federal prosecutors that the company has violated immigration laws by hiring undocumented workers). It is, rat

her, a virtual extension of the Communist Party and the government, and the fight with the antiunion Wal-Mart does as much to showcase the labor group’s own shortcomings as those of the corporation.

The labor federation is threatening to sue Wal-Mart unless the US company agrees to establish unions in its stores. Wal-Mart, for its part, maintains that officials in the central government have assured the company that it’s not required to do so. Which seems a bit odd, because Article 10 of China’s Trade Union Law clearly states that a union “shall be set up” in any enterprise with twenty-five or more workers. The explanation for the apparent contradiction may be that the government’s desire for foreign investment and jobs trumps any concern for workers’ rights. That wouldn’t be surprising in the Chinese environment, where strikes are forbidden and the official labor grouping actively supports the government’s efforts to block the rise of independent unions.

Wal-Mart currently has thirty-one outlets in fifteen Chinese cities, with 16,000 employees. A company spokesman declined to give sales figures, but published reports have put Wal-Mart’s total revenues in China at just under $1 billion. Shoppers at the Wal-Mart Supercenter in Changsha are doing their best to raise that number. Corporate affairs manager Jiang Lichun says the store–which opened in June–is doing better than the roughly $60,000 a day originally projected. Wal-Mart has earned considerable notoriety in the United States and elsewhere by paying its workers rock-bottom wages. It’s clear the company has adopted the same approach in China. Jiang won’t give a figure for what the company pays in Changsha or other cities but says it’s a “competitive” rate that’s enough to “guarantee the workers’ basic existence.”

Wang Meihua (not her real name), a perky salesclerk in her mid-20s dressed in a bright red Wal-Mart polo shirt and blue jeans, says most workers earn about $84 to $96 a month. That’s enough to provide spending money for a young person with no dependents, but anyone trying to support a family on that wage would indeed be existing in a most basic fashion. Wal-Mart’s wage strategy sets it apart from many US and foreign firms in China, which tend to pay somewhat above local standards in order to attract and retain good workers. So how does a job at Wal-Mart compare with working for a Chinese company? The American company hires far fewer people, Wang says. “Here each person does the work of three! Our productivity is much higher,” she says brightly. A question about unions stumps her. She’s heard the term before but isn’t too sure what a union would do. “You’d have to ask our managers about that,” she says.

Wal-Mart’s insistence on keeping the Chinese union out of its stores is another thing setting it apart from other foreign companies. Andrew Rothman, a former US diplomat who is now the China country head for CLSA Emerging Markets, an investment bank, says, “Most multinational companies of any size in China have a union presence, and I’ve not heard of it causing a problem for anybody.” That’s little wonder, because the federation unit at most companies confines itself to such things as organizing outings for workers or, less often, administering workers’ health or unemployment insurance payments. So it may not be too much of a reach to suspect that Wal-Mart’s real motivation here is the desire to avoid setting a precedent that might encourage workers elsewhere. Wal-Mart spokesman Bill Wertz points out that Wal-Marts in Germany have workers’ councils, as required by law. But the company’s antiunion zeal is clearly fueling its impasse with the Chinese labor federation: “It’s our belief that it’s better for us to deal with our own associates directly rather than to have someone else come in between,” says Wertz.

Wal-Mart may well have determined that some unfriendly headlines are a price worth paying if the company can stick to its bedrock antiunion principles. The labor federation, for its part, is accustomed to walking into corporate offices and cutting deals with managers–not to organizing workers. That’s why labor activists in China and abroad have long regarded the official union–which claims a membership of 103 million–as part of the problem, not the solution. “The way the ACFTU operates has nothing to do with trade union principles,” says labor activist Han Dongfang, who was expelled from China in 1993 for his efforts to build independent unions.

There is at least one way the ACFTU resembles its counterparts elsewhere: It needs new member dues to keep going. More than 30 million Chinese workers have lost their jobs as the old state-owned industrial base has crumbled before the competitive onslaught of foreign and domestic private firms. As a result, the federation is losing members and revenues. It can rebuild its financial base only by establishing itself in the private sector through companies like Wal-Mart.

But it will mean little for Chinese workers if the official union does thrive. The federation’s role, as China evolves into a corporatist, quasi-fascist system marked by close, often corrupt, ties between government and big business, mainly comes down to preventing workers from taking their rightful place at the table. Under the best of conditions Chinese leaders would have their hands full dealing with such problems as massive urban unemployment and the flood of desperate rural laborers into the cities. Squelching workers’ grievances and closing off their channels for peaceful protest can only raise the danger of massive social upheaval in the near future.

And that’s got to be bad for business in a way that even profit-minded Communist Party leaders and Wal-Mart executives can understand.