Xinhua Insight: China's Finance Minister criticizes law on live TV

The widely held belief that the Great Hall of the People, iconic edifice of China's political democracy, had little room for spontaneous dissent crumbled today when Finance Minister Lou Jiwei delivered a lengthy attack on a standing law, live on national TV.

Monday was the third day of the national parliamentary session, and the news briefing where Lou made his unprecedented statement was hosted by the National People's Congress (NPC), the body which approved his nomination as Finance Minister and whose Standing Committee in 2007 passed the Labor Contract Law which has so irked the minister.

Hundreds of reporters were present to hear the man who holds China's purse strings, when one of them, citing complaints from entrepreneurs, lit Lou's fuse by asking about previous criticism he had made of the law.

Those comments had been to a rather different audience, one composed mainly of academics in Tsinghua University and on another occasion at a scholars' forum. Well-known as a no-nonsense straight-talker, Lou held nothing back.

The minister's argument is that the law is overprotective of employees, making employers unwilling to create jobs and invest in training. This, Lou claims, ultimately hurts workers by denying them jobs openings or the opportunity to improve their skills.

"For enterprises and employees, the extent of protection afforded by the Labor Contract Law is unbalanced," Lou said. "For prospective employees, especially the low-skilled, the law discriminates against them.

"As employees are allowed to terminate employment easily with only one month's notice, employers lack the motivation to invest in training. Why would any business spend money on training them? Our acute shortage of medium to highly skilled technicians partly stems from this law.

"An employee may not work hard and the law makes it difficult for the employer to deal with by, for example, firing him or her. That prevents another prospective employee from taking the position."

Lou is not the first to voice concern over the Labor Contract Law. The draft spent nearly a year in front of the cabinet before being submitted to the Standing Committee of the NPC and took another 19 months to be approved.

In China drafts are usually read three times, but the labor contract draft was read for a fourth time, after its full text was released for public consultation.

It was a time of breathtaking manufacturing growth in China, built mainly on the efforts of a labor force who, according to the law's proponents, were deprived of their fair share of prosperity. Opponents of the law argued to no avail, that the bias toward employees would increase business costs and hurt job seekers.

Heated arguments lead to exhaustive reviews with input from all walks of life, continuing even after enactment in 2007. When the 2008 financial crisis swept the globe, Chinese manufacturers were hit hard and millions of workers were driven from production lines.

This, combined with China's low-end manufacturing industry being gradually transferred to Southeast Asia, brought renewed criticism and the law was blamed for not only driving up business costs, but for scaring away manufacturers, a view with which Lou apparently concurs.

"Incompatible with labor flexibility" is Lou's description of the act, with its emphasis on full-time long-term employment that has pushed away those export-oriented manufacturers who rely on seasonal orders and therefore on seasonal workers.

Before Lou 's TV tirade, on February 29 the Minister of Human Resources and Social Security had conceded that the law had decreased labor flexibility and increased business costs. Zheng Xiaohe, an NPC deputy who runs Anhui Tianfang Tea Industry Group agrees.

"The Labor Contract Law weakens employers' positions with respect to employees, and does not cover their diverse needs, for example temporary or hourly workers are not adequately dealt with," said Zheng.

"An employer who wishes to discharge an employee is under a number of obligations, but employees are not subject to similar strictures if they wish to quit, "said Gao Yafei, an entrepreneur and NPC deputy.

"The law leads to fewer and fewer openings for unskilled laborers. From an industry perspective, certain sectors could move wholesale to other countries because of rising costs," Lou said. "Who eventually bears the costs? The working class who the law was intended to protect."

Zhang Yansen, businessman and member of the CPPCC National Committee, said the spirit of the law was to protect employees, but it had crossed a line and needed to be amended. "There is no shame in it," he said. "It is only natural to have ups and downs in law making and amending, just like any other activity."

China's legislative power rests with the NPC and its Standing Committee. "Amending laws is outside the remit of the Finance Ministry. I talked previously in academic circles, but today I have been answering questions as a minister." Lou said. "Since you asked, I'm giving you an answer." Endi