Increased union membership generates cash for the Chinese government

Since late July the Chinese media have been crowing over a grudging decision by Wal-Mart, one of the most prominent foreign firms in China, to allow members of its 31,000-strong Chinese workforce to form trade unions. Wal-Mart had been discouraging this since it began operating in China in 1996, just as it does elsewhere, including in America, its home country... Wal-Mart, with its self-proclaimed anti-union stance, came under growing scrutiny—notwithstanding its large contribution to China's economy. The company says it bought $19 billion-worth of goods from China in 2004, amounting to some 15% of China's total exports to America in that year according to China's statistics (10% by America's)...

Unions in China are controlled by the Communist Party through an umbrella organisation, the All-China Federation of Trade Unions (ACFTU), to which all unions must be affiliated. Two decades ago, when China's economy was still mostly run by the state, almost all urban workers belonged to trade unions set up in the state-owned enterprises to which they belonged. At best these unions acted as mediators between management and workers rather than as champions of workers' interests. They had little bargaining power—strikes and other forms of collective pressure being effectively banned (the right to strike was removed from China's constitution in 1982). Most union offices did little more than organise occasional entertainment and help the party monitor worker morale.

Since the 1990s the rapid growth of private, including foreign, enterprise and the widespread closure of state-owned firms has gutted unions from the urban workforce. It has also stripped the party of its own network of cells in workplaces, each of which once had both a union and a party committee. Even if newly established private enterprises employed party members, such people often neglected to organise cells and fell out of touch with the party itself....

By 1999 union membership had fallen to 87m, down from a peak of 104m in 1995...

This has been a blow to the authorities. For a party used to all-pervasive control, the withering of its grassroots organisations has left it feeling increasingly uneasy. In recent years wildcat strikes, go-slows and other forms of worker protest have become more frequent. These have been triggered both by the shrinking of the state sector and by harsh working conditions in some private enterprises. The party wants its unions back in place in order to keep workers off the streets, which, it accepts, sometimes means restraining employers too. Giving government-controlled unions a little bit more muscle, the party feels, helps to deter desperate workers from trying to establish independent unions. The party still shudders at the recollection of Solidarity's growth in Poland in the 1980s. And more unions mean more money for the government. Unionised companies have to give 2% of payroll to their unions. Of this, 40% is meant to be forwarded to the ACFTU.

Official figures suggest the party is making headway...

Some companies are worried. A new labour-contract law, which may be passed within the next year or so, contains provisions that critics (inside both foreign and Chinese enterprises) say could give unions a greater say in company decision-making. In a recent survey of its members by the European Union Chamber of Commerce in China, about half the consumer-goods companies questioned said they had negative or very negative views of the law as currently drafted. Revisions are expected.

However, there is little likelihood that trade unions in China will acquire the clout that some of their counterparts exercise in Western countries. For all its Marxist pretensions, the party is still more interested in business than in the grievances of the proletariat.

Emphasis mine.