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World News

27 percent of foreign firms seen laying off China staff

BEIJING (Reuters) - Official media said on Friday that 27 percent of multinational firms in China had already started laying off employees, citing a survey by a state-controlled employment firm.

The official China Daily newspaper cited a FESCO survey that had polled 356 of its clients across the country that included a wide range of industries.

The report did not say how many jobs could be lost, but the trend poses tricky legal and political problems for foreign companies as Beijing has asked firms not to dismiss workers due to the global economic turmoil.

China fears social unrest as 20 million migrant workers have already lost their jobs, and one in five firms in China’s once vibrant export hub in Guangdong may soon lay off workers.

“China has never experienced a mass layoff scenario of the type it is experiencing now,” said Susan Munro, a labour expert at law firm O’Melveny & Meyers based in Shanghai.

“We have had steady calls from clients about this over the past six months,” she said.

China’s labour law provides a procedure for a mass layoff -- defined as 20 employees or 10 percent of the staff -- but the provisions are filled with vague terms that leave much to the discretion of the government.

Intel said earlier this month that it was closing its microchip testing plant in Shanghai, eliminating 2,000 jobs while offering affected workers positions at other facilities in other parts of the country.

But large state run companies have the backing of government coffers to get them through, while private companies -- both Chinese and foreign -- have to consider their bottom line.

“That tends to paint the foreigners in a negative light,” said Munro.

China is still targeting economic growth of 8 percent this year, far short of the double-digit pace seen in recent years but also much better than most of the rest of the world.

Bayer AG said last week it would spend $129 million (90 million pound) on a research centre in Beijing, becoming the latest in a string of foreign drug firms to do so, as China is set to become the world’s fifth-biggest pharmaceuticals market by 2010.

Chinese firms with a large percentage of foreign customers have also been forced to shed jobs to remain competitive.

Suntech Power -- the world’s largest solar module maker which relies on Europe for 80 percent of sales -- said last month it had laid off 800 workers, cancelled bonuses for managers and encouraged employees to take unpaid leave.

About 200 Suntech workers responded with “limited work stoppages” over a few days after the announcement.

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