China's social climate has seen great changes in the past two decades due to the upheaval of the economic transition from a centrally planned economy to one oriented around an open market. A society formerly organized through static work units and an "iron rice bowl" has found itself in the uncertainty of an entirely new system.

The Chinese Government has made significant efforts to keep the restructuring a controlled process, and important strides can indeed be seen in the economic achievements of recent years. GDP has reached record highs, and inflation has been avoided. The self-imposed deadline for turning around most of the large and medium-sized enterprises operating at a loss is close to being met. However, further work is needed. China's entry to the WTO, for instance, will create greater challenges for many of China's domestic sectors.

In addition, it has become obvious that social institutions must be developed along with economic and business ones. Social security, in particular, must be adapted to fit the new structure. The social security system was previously an extension of enterprises and work units, and challenges now exist in shifting the responsibility to government institutions, especially in regards to the collection of funds. Currently, coverage is reserved mainly for state employees, and management of the system is scattered over many different sectors and regions. There is also a lack of benefit adjustment, and social security in the rural areas is relatively scarce.

The labour market has changed acutely, in a manner felt by many. As mentioned above, the "iron rice bowl" of a centrally controlled labour market has given way to a market oriented system. Unemployment, virtually unheard of before restructuring, has become one of China's greatest problems and sources of insecurity. According to official government statistics, 11.8 million workers lost their jobs in SOEs during 2002. Rural unemployment and underemployment combine to over 30% of the population. Approximately 26 million people have been laid-off because of SOE reform.

The lay-offs have been particularly trying for women workers. Women were laid-off at a higher percentage than men, typically at a ratio of 3 to 2. In addition, it has been recognized that women are having a harder time in finding reemployment. With the abundance of workers now available, it has become a buyer's market, and while there are technically regulations to protect women against discrimination, the practice still exists to a large degree.

The increase in instability has lead to an increase in labour disputes. From 1992 to 1999, the number of registered disputes in a year, which could be anything from a wage conflict to a full strike, has increased 14 times to over 120,000. In 2001 the total number of registered disputes was 154,621. Common themes run through the various conflicts; workers are frustrated with not being consulted about lay-offs, and not being paid stipends and pensions once they are out of work. Most workers understand the need for reform and that factories and mines must reorganize or close; however they are discouraged by the lack of information and the corruption within upper management. As economic restructuring continues, and unemployment increases, these disputes are likely to continue.

Labour disputes, however, are only the outward signs of a more fundamental matter: the separation of interests between employers and workers. Policymakers and practitioners in market economies acknowledge this separation of interests as legitimate. To accommodate separate interests toward the aim of industrial peace and cooperation, institutions have been created in China through which compromise and agreement can be reached, however they seem to be inadequate and underdeveloped.

Finally, given the persistent death toll and frequency of serious accidents there is increased concern about working conditions throughout China. A new institution, State Administration of Work Safety Management and Supervision (also serving as State Administration of Coal Mining Inspection) was set up to strengthen occupational safety, while the Ministry of Health is responsible for occupational health management and supervision. With further State-owned enterprise reform and the diversification of economic ownership, how to enforce and improve OSH situations at an enterprise level is key for China to materialize its guiding principle of "Safety First, Prevention Foremost".

INTERNATIONAL LABOUR STANDARDS DEVELOPMENT

International labour standards (ILS) are the cornerstone of the ILO's work in any country.

ILS are developed first in the Governing Body of the ILO in response to a perceived need, and then distributed to the member constituents for discussion. The proposal is then discussed at the International Labour Conference over two consecutive sessions (one year apart). In the meantime, between discussions, the proposal will be passed back and forth between the International Labour Office and the various Governments, workers' and employers' organizations gathering comments and suggestions for alteration. Finally, a draft Convention is prepared for final approval. Adoption of a Convention or Recommendation is done by the Conference with a two-thirds majority of votes.

Of the 184 Conventions that have been passed by the International Labour Conference, 8 have been identified as "Fundamental" Conventions by the ILO. The Declaration on Fundamental Principles and Rights at Work, adopted by the 86th International Labour Conference held in Geneva in June 1998, relate to freedom of association, discrimination, forced labour and child labour.

The operational objectives of ILO's ILS work in China include:

(a) to promote and realize the ILO Declaration on Fundamental Principles and Rights at Work;
(b) to provide technical advice and assistance for the ratification and application of ILO Conventions, including fundamental and priority Conventions;
(c) to conduct information and educational activities to promote greater awareness of (a variety of ) international labour standards;
(d) to strengthen institutional capacity in labour inspection to promote the effective application of ILO Conventions, taking into account the relevant Conventions on labour inspection.

CHINA HAS RATIFIED THE FOLLOWING 23 CONVENTIONS:

WHAT IS ON THE HORIZON

In addition to the aforementioned Conventions, the ILO is working with the Chinese Government as well as the employers' and workers' organizations on the ratification of others. These include:

Convention 111, Discrimination (Employment and Occupation), 1958.

C. 111 is one of the eight fundamental Conventions of the ILO. It stipulates that every country that ratifies the Convention must take measures to protect equality of opportunity and eradicate instances of discrimination in employment and occupation. Discrimination in this case is defined as "any distinction, exclusion or preference on the basis of race, colour, sex, religion, political opinion, national extraction or social origin".

To date, six workshops have been held on the Convention, with an emphasis on ethnic minorities, as well as women's issues. Apart from that a programme is being developed to promote the ratification and application of this Convention.

Convention 108, Seafarers Identity Documents Convention, 1958, and Convention180, Seafarers' Hour of Work and the Manning of Ships Convention, 1996.

The Government has expressed interested in ILO technical assistance in considering these two maritime Conventions. A tripartite seminar was held in July 2001 to discuss the possibility of ratification.

Convention 182, Worst Forms of Child Labour, 1999.

C. 182 is the most recently approved Convention by the International Labour Convention as one of the eight Core Conventions identified in the ILO Declaration of Fundamental Principles and Rights at Work.

Convention 155, Occupational Safety and Health, 1981, and Convention 161, Occupational Health Service, 1985

These two Conventions are the main Occupational Safety and Health (OSH) Conventions. A tripartite seminar was held in July 2001 to review the national laws and practice, in conjunction with the provisions of these two Conventions. With the adoption and promulgation of the Law on Prevention and Control of Occupational Diseases on October 27, 2001 and the Law on Work Safety in June 2002, Chinese authorities are paying close attention to the issue of occupational safety and health and the enforcement of these two laws, along with considering the ratification of the two ILO OSH Conventions.

Convention 81, Labour Inspection, 1947.

The government recently reconfirmed its interests in ratifying this Convention as some of the delegates attending the Annual Conference of the National People's Congress made a motion urging the government to improve labour inspection by ratifying the Convention.

Employment creation is fundamental in ensuring social stability and development. The ILO's work in employment in China has been focused on:

CHALLENGES RELATING TO EMPLOYMENT IN CHINA

China, the most populated country with its 1.276 billion citizens, has been remarkably successful in achieving high and sustained economic growth rates, maintaining high levels of employment and reducing poverty in the last two decades. China has chosen its own way of economic and social reforms, characterized by gradualism, experimentation and strong reliance on initiatives from the bottom - of people, communities and enterprises, for which the central government has gradually removed obstacles and created enabling conditions.

As a result and also thanks to its huge domestic market, China has neither gone through any transition crisis, so detrimental for many Central and Eastern European countries, nor has it been as severely affected by the Asian financial crisis as several other economies. At the end of 2002, total employment was 730 million, of which 33.3 percent was in urban areas and 67 percent was in rural areas. The primary sector provided employment to 50 percent and the secondary sector to 22.3 percent of workers while the share of the tertiary sector in total employment equalled 27.7 percent.

Significant progress has been achieved in the average level of education as the illiteracy rate has been reduced to 12 percent while 36 percent of workers have gained basic education, 49 percent secondary schooling and 3 percent post-secondary education.

However, despite high economic growth, the capacity of the Chinese economy to create new jobs and to absorb the eight million new labour market entrants each year is not sufficient. Millions of workers have been laid off from state-owned enterprises (SOE) under restructuring and from other types of enterprises. Underemployment in rural areas has also increased.

The exposure of the Chinese economy to global market competition accelerates with the entry of China in the World Trade Organization (WTO) in November 2001. This points to the expectations of lower labour absorption, to improvements in labour productivity in agriculture and industry in China and growing employment problems.

UNEMPLOYMENT AND UNDEREMPLOYMENT

The urban registered unemployment rate has increased to 4 percent (7.7 million persons) at the end of 2002 and is expected to grow further to some 5 percent within the next five years. In addition, another 1.7 percent of the urban labour force (4.1 million workers) were laid-off from state-owned enterprises and seeking re-employment. Estimate of underemployment (surplus labour) in rural areas is 150 million workers and many of them come to urban areas to seek employment, often in the informal economy. Almost one-third of the rural population is underemployed and a large portion of rural workers have become "floating" migrants who have taken up unregistered informal sector employment in urban areas.

EMPLOYMENT PROMOTION

Employment promotion is now one of the main policy priorities of the Government and also of the social partners. There is a need to address vast and still increasing regional employment and income disparities that imply potentially serious social problems. Policies are directed towards the reforms of vocational education and training, including adult education, and towards regulated labour migration from regions with scarce jobs to regions in demand of labour but also towards attracting highly educated specialists with business management experience to regions.

BETTER MATCHING OF LABOUR SUPPLY AND DEMAND

Policies should encourage job creation through business development, foreign direct investment and investment in micro, small and medium-sized enterprise start-ups and development and self-employment. The underdeveloped service sector, in particular, services for production and community and household services, as well as labour intensive industries are among the most promising sectors for new job generation. New non-farming activities are needed in rural areas. There is a need to facilitate better matching of labour supply and demand by strengthening the capacity of labour market institutions to provide high quality employment services, also directed to vulnerable social groups, and to secure better protection of workers' rights through improved labour market regulation.

Employment and China's Entry into the WTO

• The major force of change that will impact on the employment and labour market situation is China's entry into the WTO. As China implements its WTO commitments it is likely to face rising unemployment in capital-intensive industries and in agriculture. At the same time, entry into the WTO will provide China with significant opportunities to significantly increase its exports of apparel and other labour-intensive goods. The CEF will examine some of the key issues in ensuring a smooth transition in the short and medium term following China's entry into the WTO.

  Entry into the WTO could also provide greater scope for China to move into more higher value added products and knowledge-intensive niches in the global economy. Entrepreneurship development could be further liberated through the reform process (e.g. banking sector reforms) and by new market opportunities resulting from entry into the WTO. Special attention would need to be devoted to improving the regulatory framework and launching effective measures at central and local levels to promote economic performance and employment generation in small private formal and informal firms in both urban and rural areas.
  
  Employment Agenda for China

  The China Employment Forum (CEF) will look at issues with the goal of developing an Employment Agenda for China. The CEF will seek to ensure that the agenda includes fundamental principles and rights at work, the fight against discrimination at work, promotion of gender equality and social dialogue as key elements in ensuring a socially responsible and equitable management of change. Items for consideration for China's Employment Agenda include:
  

• Promoting knowledge and skills for employment
  
• Reform of the national vocational education and training system.
  
• Reform of adult training for skills adaptation of those with obsolete skills, seeking re-employment or threatened by lay-off.

• Active labour market policies
  
• Changes in labour market policy and social policy facilitating labour adjustment for enterprises and simultaneously giving workers enough employment and income security to be ready to change jobs.
  
• Unemployment insurance and active labour market policies.
  
• Strengthening the public employment service to provide effective assistance primarily to laid-off workers from SOEs but also to other workers made redundant, new labour market entrants and other jobseekers both in job search and income support.
  
• Discussion of the role of private employment agencies.
  
• Special programmes in favour of disadvantaged jobseekers - women, older workers and disabled persons.

• Labour migration
  
• Profile, patterns and trends in mobility.
  
• Labour migration as a tool for solving labour market imbalances and contributing to economic growth.
  
• Need for appropriate housing, environmental and other policies as well as solid employment and social protection of migrant workers in order to maintain social and environmental stability.
  
• Issues in international labour migration for China.

• Labour market information
  
• Discussion of the key components of the national labour market information system.
  
• Improvements and expansion of labour statistics based on sample surveys of households and enterprises following international standards.
  
• Improvements in labour market analysis and prognosis for proper formulation and implementation of adequate employment policy.
  
  

ILO ACTIVITIES ON EMPLOYMENT IN CHINA

With the purpose of providing better assistance to ILO's Chinese constituents to create greater opportunities for women and men to secure decent employment and income in the present context of China, a series of activities have been conducted or are on going:

- A feasibility study on local economic development in five localities in China was completed last year. The results of the study are being prepared;

- A summary outline on a potential project regarding enhanced distance learning and training in China has been developed. The outline is based on studies conducted by ILO and MOLSS in Beijing, August 2001, in Shanghai and Shenzhen, January 2002, and Sichuan and Hunan Provinces, May 2002;

- An action research project that looks at employment growth in small and medium-sized enterprises (SME) is in the planning stages in three representative cities in China;
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- The Chinese Translation of the Key Indicators of Labour Market (KILM) 2001-2002 is being translated and will soon be available in CD-ROM format;

- The Chinese translation and publication of the Public Employment Service - in the Changing Labour Market;

- Research is being conducted on a potential Project on 'Impact of Employment Intensive Public Works on Poverty Alleviation in Western China" from November 2001 until November 2002;

- Employment Promotion for Vulnerable Groups - ILO is providing technical consultation to the China Disabled Persons' Federation

- Several training sessions conducted related to job placement techniques, evaluating performance, international standards related to vocational rehabilitation and vocational assessment;

- The Chinese translation and publication of three booklets-two related to job placement, one for placement of job-seekers with disabilities and a curriculum guide;

- China is part of a regional study on training and employment of disabled persons to mark the end of the Asia Pacific Decade of Disabled Persons, 1992-2002.

ILO Projects on Employment in China

The ILO consistently works with its tripartite constituents as represented by the Ministry of Labour and Social Security (MOLSS), the All China Federation of Unions (ACFTU) and China Enterprise Confederation (CEC) address the above-mentioned areas. The aim of such cooperation is to overcome the challenges in Chinese employment by working together.

A Memorandum of Understanding (MOU) was signed in May 2001 in order to launch a programme of cooperation between the International Labour Office and the Ministry of Labour Social Security of the People's Republic of China, based on the ILO's goal of Decent Work, to support national reform in China and social progress worldwide.

The ILO continues to provide on-going technical consultation to China in dealing with issues of employment. One of the major activities that ILO has planned is the China Employment Forum (CEF). The ILO's Global Employment Agenda which is being developed can help provide an integrated strategic framework, taking into account the specificity of the employment and labour market situation in China for making employment a central part in economic decision making.

The key elements of such an agenda, elements that seek to promote a virtuous circle of productivity, employment and output growth, can find relevance for employment policy in the Chinese context. Distinctive of the ILO's approach to employment policy is the central observation that, irrespective of a country's level of economic development, there is no trade-off between the fundamentals of decent work - the threshold of which is expressed in the Declaration of Fundamental Principles and Rights at Work - and job creation. Not only is a threshold of decent work attainable at any level of economic development but decent work itself is a factor in economic betterment and productivity improvement.

Click here for more information about the China Employment Forum (CEF)

Annex:

Table: Value-added, employment, real wages and output elasticity of employment in manufacturing in China (annual growth rates in percent)

The ILO/PEP is a technical cooperation project executed by ILO in the Asia Pacific Region with funding support from the Japanese government. The project aims to assist ministries of labour in the region in developing appropriate employment promotion strategies for un/underemployed people.

The project was launched in China in 1997. Through pilot activities in 23 counties in the Hebei, Gansu and Jiangxi Provinces, the project has created a comprehensive model for promoting self/wage employment of rural farmers.

Since 2001, the project has shifted its focus to urban unemployed and laid-off workers. Currently, the PEP is operating in three cities in China: Jilin of Jilin Province, Zhangjiakou of Hebei Province and Baotou of Inner Mongolian Autonomous Region. This phase hopes to promote employment in small business by combining entrepreneurship training and financial support.

Click here for the Country Project "ILO/Japan Inter-Country Project on Strategic Approaches Towards Employment Promotion"

ILO Project on Human Resources Development/Management and Labour Relations in Chinese Special Economic Zones (SEZs)

As China progresses into the global economy, it is increasingly apparent that to compete, it must adapt to the international standard of performance. A well-trained and skillful labour force is a key answer to this challenge. Sound labour relations will likewise be essential to secure and attract investment.

This Swiss-funded Project hopes to help China fill in the gaps in it human resource development and management, as well as increase enterprises' ability to fairly deal with labour relations. This will be done through extensive training programmes and consulting exercises.

The Project is currently operating in three cities in China: Shanghai, Dalian and Guangzhou. This is a three-year project to assist enterprises in Special Economic Zones to compete in an international market through improved human resources and labour relations.

Click here for the Country Project "Improved Human Resources Development and Management and Labour Management Relations in Chinese Economic Development Zones"

Social Protection: "Enhance the coverage and effectiveness of social protection for all"

Occupational Safety and Health (OSH) has been one of the key mandates of the ILO since its establishment in 1919. Of the many ILO Conventions and Recommendations, about 70 are of related issues. Conventions 155 and 161 are the most important dealing with general requirements and health services. The ILO has also developed the "Codes of Practice", manuals and guidelines providing more practical, technical guidance on different OSH subjects. For example, in June 2001, the ILO issued the Guidelines on Occupational Safety and Health Management Systems (ILO-OSH 2001). The In-Focus Programme on SafeWork of the ILO is leading a global campaign to prevent hazards in the workplace; the International Occupational Safety and Health Information Centre (CIS) of the ILO provides a variety of information on the subject.

The ILO has maintained close technical co-operation with the Chinese constituents in the field of occupational safety and health over the past years. The cooperation focuses on the promotion of related ILO Conventions, development of national action plans and programmes in hazardous areas (coal mining, chemical safety and construction) as well as capacity building on OSH information systems and State inspectors' training. China ratified the Chemicals Convention (170) in 1995 and the Safety and Health in Construction Convention (167) in 2001. The Chinese government also transformed the ILO-OSH 2001 into the national guidelines issued in December 2001. A further cooperation on OSH will be strengthened through a comprehensive technical review on OSH situations in China and the subsequent development of a technical cooperation proposal.

Social security is a key ingredient of the goal of decent work and is recognized as a human right.

The Chinese Government has made substantial efforts to improve and reform the social security system, mainly focusing on pension, health and unemployment insurance as well as the minimum living standards for urban residents. Especially with China's continuing SOE reform, entry to WTO and rapidly aging population, such a reform has become one of the priorities of national social and economic development. Recently, a Pilot Programme on Improving China's Urban Social Security System was launched by the Chinese Government with the aim of establishing a social security system that is independent of enterprises and institutions.

The ILO has actively cooperated with the Chinese Government in the field of social security. In recent years, the ILO has provided its advice and assistance to the Chinese Government on social security legislation, social security budgeting, and unemployment insurance. A technical review on social security was conducted in 2001 by the ILO together with the Ministry of Labour and Social Security. Based on the review, a project document on development of social security in China has been developed.

Fighting HIV/AIDS and mitigating its impact on the world of work is a new ILO commitment. The ILO has developed a Code of Practice on HIV/AIDS and the World of Work that contains fundamental principles for policy development and practical guidelines.

Although only a total of 30,736 HIV-infected persons has been officially reported in China between 1985 and 2001. The number of people living with HIV/AIDS in China was estimated to be over 1 million at the end of 2002. In 2001, 8,219 new HIV/AIDS cases were reported, an increase of 58% compared with the previous year.

The Chinese Government issued the National Medium and Long Term Strategic Plan for HIV/AIDS Prevention and Control (1998-2010) in 1998 and the China Action Plan for HIV/AIDS Prevention and Control (2001-2005). The State Council set up a National AIDS/STD Prevention and Control Committee composed of 34 organizations at the central level in which the Ministry of Labour and Social Security (MOLSS) and the All-China Federation of Trade Unions (ACFTU) have participated.

The ILO/AIDS carried out the first fact-finding mission to China from April 15-19, 2002 during which a tripartite technical consultation meeting was held with the participation of MOLSS, ACFTU, CEC, MOH and UNAIDS China. The meeting sensitized the constituents on the urgency and importance of the issue and their roles in the world of work, and also reached the consensus on the follow-ups of the meeting. The ILO is preparing a UNAIDS-funded Project on Fighting against AIDS-related Stigma and Discrimination at the Workplace.

Social Dialogue: "Strengthen tripartism and social dialogue"

Tripartism has a critical role to play in the maintenance of social stability and a cooperative climate. China has already demonstrated its commitment to tripartism by ratifying the ILO Tripartite Consultation Convention (No. 144). A national tripartite consultative committee was established in August 2001.

Against this background, assistance of the ILO has focused on capacity building of the social partners and promoting effective collective bargaining and dispute settlement mechanisms. The ILO's technical cooperation with its Chinese constituents in this field has been active and constructive. In the past several years, a series of activities relating to labour dispute settlement, collective bargaining, labour inspection and tripartism have been carried out by means of workshops, study tours and technical consultancy. For example, an ILO mission on tripartism at central and provincial levels was fielded in May 2002 to Beijing, Dalian and Chengdu. A technical report on tripartism in China was prepared. An ILO/CEC workshop on globalization and industrial relations was conducted during 13-14 August 2002 in Beijing. An ILO/ACFTU workshop on social diaglogue was conducted during 26-29 August 2002 in Kunming. A three-day tripartite training workshop on social diaglogue was conducted during 12-14 February 2003 in Beijing. During the year 2003, emphasis will still be put on tripartism and social diaglogue, industrial relations and globalization.

In addition, a project document on promoting workplace democracy and improving industrial relations in China has been formulated and updated for funding. The project will assist in the creation of a national framework for industrial relations through which the means to prevent and resolve labour disputes will be institutionalized.

Country projects in China

Improved Human Resource Development and Management and Labour Management Relations in Chinese Economic Development Zones (Active*)

ILO/Japan Inter-Country Project on Strategic Approaches Towards Employment Promotion (Active*)

Combating Trafficking in Children and Women (Active*)

Promoting Workplace Democracy and Improved Industrial Relations in China (pipeline**)

Development of Social Security in China: 2002-2007 (Pipeline**)

ILO Preparatory Technical Assistance on Social Security (pipeline**)

ILO Project on Occupational Health and Safety in China (Preparatory Assistance Phase***).

FOR FURTHER INFORMATION ABOUT THESE PROJECTS, PLEASE CONTACT US!

*     Refers to "Active Projects" or projects which are currently in operation.
**   Refers to "Pipeline Projects" or projects for which the necessary project documents have been fully prepared and for which funding for implementation is being sought.
***  Refers to "Preparatory Assistance Phase" which indicates that the project document of the related project is under preparation and will be completed within three to six months.