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ACFTU unit stunned as Siemens China sacks sales force

The global mobile telephone business of German electronics giant Siemens with a workforce of 6,000 worldwide, including its China operations, was taken over on 8 June 2005, by BenQ, a Taiwanese-owned company. Unfortunately, the business was loss-making and in a dramatic move to boost profitability, the company announced on 27 June that it would be cutting staff, including 95 percent of its China sales staff. During this unexpected mass lay-off of personnel, employees were told that their dismissal was effective immediately and that they should erase their personal information and files and return their computers and staff cards.

The move slashed the number of salespersons in Siemens China from 150 to only 16. Employees had little time to propose or prepare for negotiations on compensation terms, and as a result they were not satisfied with the severance pay offered by the company. On 29 June, about 20 laid-off staff demonstrated outside the company's headquarters in Beijing, protesting against the lay-offs. One of the workers who took part in the demonstration charged that the company's trade union did nothing to help them fight for their rights after the company's management failed to reach an agreement with the employees over the compensation terms for their redundancy. Another staff member told the press that there was a trade union in the company, but it only dealt with back office matters, such as employment benefits, staff picnics, organising ball games, hiking parties and distributing employees' welfare benefits.

A tale of two unions, IG Metall vs Siemens China

In contrast to the Siemens China trade union, IG Metall – the German trade union for metalworkers, did a stellar job in protecting its members' rights. According to a report by United Press International on 16 July 2004, Siemens planned to move its mobile phone business to Hungary, where the wages were only 20 per cent of that in Germany. IG Metall negotiated with Siemens on behalf of the company's workers in Germany and reached an agreement whereby the workers would increase their weekly working hours from 35 hours to 40 hours without any salary increase and the German electronics company promised to retain the 4,000 workers' jobs until late June 2006. But according to a report in the Frankfurt Allgemeine Zeitung on 20 June 2005, BenQ planned to cut half of Siemens' worldwide mobile phone production after the takeover, which meant the German plant would face mass lay-offs. IG Metall then arranged to hold negotiations with BenQ; the trade union told the workers that the agreement they made with Siemens in 2004 would be breached if the negotiations failed. If BenQ refused to comply with the agreement, the trade union would have the right to ask the company to reduce the workers' weekly working hours from 40 hours back to 35 hours. The union also planned to fight for compensation for the workers' annual leave and overtime payment for working on Christmas Day in the past year. In a desperate move to head off the crisis, BenQ's Taiwanese director flew to Germany on 19 June and to calm the workers.

Mainland Chinese media reported that foreign trade unions were strong, because the industry trade unions had greater leverage and the leaders of industry trade union did not receive any income from the company. The media reports were in fact implying that the trade union in Siemens China was ineffective because it was set up in the company. The trade union leaders received salaries from the company and they were restricted by the company management from doing too much.

This might explain part of the reality. But it is also clear that the trade union structure should be based on the needs of trade union development, not on political needs. Political needs are in fact what the All-China Federation of Trade Unions (ACFTU) – the only official trade union in China – considered when it established the trade union structure in China. The grassroots units of the ACFTU were established in enterprises and the ACFTU set out its policies and strategies based on these grassroots unions. These strategies in fact derive from the political needs of the Chinese Communist Party. The grassroots unions and the grassroots party organisations support one another and make it possible for the Communist Party to penetrate into companies. This kind of trade union structure had resulted in the grassroots unions acting as an agent of the management of the foreign-invested enterprises and private companies. Thus, under such a trade union structure, the Siemens China company union would not be able to do anything for the workers. Then, would it make a difference if these grassroots unions were elevated to district-level, county-level, city-level or even industry trade unions? The answer is still uncertain. The district-level, city-level and industry trade unions in China are still under the control of the Chinese Communist Party, and therefore they are not autonomous in their actions. They also lack any practical experience in fighting for workers' rights in private and foreign invested enterprises.

Huge Wage Gap

Mainland Chinese media reports also revealed that there was a huge difference in the pay levels of Chinese workers and the German staff of Siemens China, even for those in the same posts, doing similar work. Some reports said the salaries of German staff members were 10 times greater the Chinese workers, while some said the German staff were paid 26 times more than their Chinese colleagues. With regard to this difference, a researcher from the Ministry of Labour and Social Security said that since part of the company's German staff's salaries was the "allowance for foreign employees", it did not break the PRC Labour Law. But the researcher agreed that the difference in compensation represented "nationality discrimination." In fact, this disparity should have nothing to do with discrimination. In fact, it was a common tactic for multinationals to give its overseas staff welfare benefits to encourage them to work overseas, particularly in developing countries. In fact, what lies behind is the inaction of the trade union. Without internal pressure from a union, it would be unlikely that these companies would substantially increase the salaries of their local staff to a level comparable with that of their foreign staff. The internal pressure should come from organised workers and the trade union should represent the workers in their negotiations with the company management. However, due to the ineffectuality and inaction of Siemens China trade union, there was no internal pressure to reduce the huge wage disparity between its Chinese and German staff.

Taking it to the streets

From the Siemens China workers' case, we can also see the failure of setting up a trade union by the Chinese government. According to the PRC Trade Union Law, the All-China Federation of Trade Unions (ACFTU) is the only legal trade union in China. The ACFTU is under the direct control of the Chinese Communist Party and must take orders from any and every level of government. The official trade union has been trying hard to set up trade union branches in foreign-invested companies in recent years and the Siemens China Trade Union is a good example of its success. However, the Siemens workers discovered that the official union was ineffective in protecting their rights. At the same time, they also realised that they were unable to establish their own trade union. The messy street protest outside the company's headquarters in Beijing was the only avenue left to voice their discontent about the huge difference between their wages and those of their German colleagues' as well as the mass lay-offs. It should also be remembered that the workers' representatives, who were elected by the workers and conducted the protest, would face greater difficulties finding a job after their demonstration was reported by the media.

Five minutes of "collective bargaining"

According to some media reports, Siemens China workers undertook "collective bargaining" with the company management one day before they staged the protest. This was not the kind of formal "collective bargaining" usually recommended in labour manuals. It was more of a conversation between the laid-off workers and the company management. The reports said more than 40 workers took part in the negotiations. However, the talks lasted only five minutes before "a serious argument between the two sides" broke out and ended the session. At the end of this meeting, management asked the workers to sign a severance pay package agreement before the deadline. This last statement was the trigger that unleashed the workers' anger and street protest. Without proper training and leadership from workers' representative or trade union negotiators, it is not unusual to see this kind of conflict erupt between workers and company management. A temporarily organised group might have a common target, but it is difficult for such a group to have a commonly agreed action plan, to ensure a proper division of labour among the group members, and maintain an awareness of the need to sustain their struggle. These can be seen the reasons leading to the failed negotiations between the two parties.

In recent years, Chinese workers have become bolder in taking collective action and many excellent organisers and workers' leaders have emerged in these actions. Nevertheless, they have not been able to take the next step and establish formal trade unions, formed by the workers themselves. There are various reasons for this, but one of the most important is the heavy-handed crackdown of any such movement by the Chinese government. With government policies prohibiting such action, workers have to protect their organisers and leaders. Labour activists can only play behind-the-scenes roles. At the same time, this government policy also causes problems at various levels of governments and for the management of companies. When they seriously need to negotiate with labour, they cannot find any workers' representatives to talk to. During the mass protest of the retired workers of Tieshu Textile Factory in Suizhou, Hubei Province, in 2002, the Suizhou deputy mayor went to the factory to negotiate with the workers, but the workers refused to elect a workers' representative. The deputy mayor realised that he had to negotiate with several hundred workers, instead of a workers' representative.

Siemens China's violation of PRC law

The way Siemens China laid off its workers violated PRC's law. According to the "Regulation on lay-offs on economic grounds in enterprises", a company should inform the trade union or the whole workforce about the reasons for the lay-offs 30 days in advance. The company has to collect opinions from its staff about the lay-off plan, and it also has to submit a report about the lay-off plan to the local government's labour and social security departments. Siemens China did not follow this legal procedure during the lay-off process. It was not only Siemens China who broke the law, but the company's trade union which violated the PRC Trade Union Law. The company's trade union did not follow the requirement stipulated in the Trade Union Law to protect the workers' legal rights. From another point of view, even if Siemens China had strictly followed the law to inform the trade union about the lay-off plan beforehand, such a trade union which only dealt with organising ball games and hiking parties would not have opposed the plan or fought for a reasonable compensation.

In late 2004, the ACFTU expressed strong discontent with multinational companies' refusal to allow trade unions in their China-based operations and claimed that it would sue them in court for violating the PRC's Trade Union Law. Under this pressure from the Chinese government and the ACFTU, some multinationals said they would follow the law and set up trade unions in their China subsidiaries. However, the ineffectuality of Siemens China's trade union in handling the company's lay-offs shows us that China's workers have not been benefited from the ACFTU's move. Learning from this lay-off incident in Siemens China, the ACFTU should re-evaluate the purpose and the effect of setting up official trade union branches in foreign-invested companies.

1. "Siemens China trade union silent as staff face lay-offs," Beijing News, 8 July 2005, posted on China Labour and Social Security News,

2. Wang Liwei, "Siemens China's way of handling lay-offs saddens its staff," Oriental Morning Post, 8 August 2005,

3. Huang Jie, "German trade union protests against BenQ for increasing working time, Taiwanese director flew to Germany to calm the workers," Daily Economic News, 22 June 2005,

4. "Siemens accused of nationality discrimination for laying off mobile phone sales staff in China only," Xinhuanet, 5 July 2005,

5. Zou Shan, "Siemens China laid-off staff demand for equal treatment as German colleagues," Beijing News, 1 July 2005,

6. Gu Jianbing and Wei Wei, "Story behind the negotiation between company management and workers over lay-offs at Siemens China," 21st Century Economic News, 4 July 2005,

7. "IG Metall legt sich mit Siemens und Benq an," Frankfurt Allgemeine Zeitung, 20 June 2005.

8. Roland Flamini, "Analysis: 35-hour work week fading away," United Press International, 16 July 2004,


2 November 2005

China Labour Bulletin