Over the past decade, corporate social responsibility (CSR) has been an important agenda item in EU-China political dialogue and technical cooperation on promoting decent work and international labor standards. The EU has defined CSR as a process “whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.” The accelerated “going out” of Chinese multi-nationals, with the expansion of Chinese investments under the Belt and Road Initiative (BRI), has raised concerns about their social and environmental impacts on host countries.

Such attention has been especially acute concerning the concepts of “race to the bottom” and “weak governance zones.” Numerous controversies involving Chinese multi-national enterprises (MNEs) undertaking BRI-related projects in Africa and Southeast Asia have seen protests and antagonism from the local population in host countries, including allegations of labor abuses at Chinese-managed companies in Nigeria and a series of violent labor disputes in Myanmar. As the conduct of Chinese companies becomes subject to greater international scrutiny, Beijing has introduced a flurry of regulations, policies, and guidelines that are directed at Chinese firms (particularly, state-owned enterprises or SOEs) to act as good corporate citizens abroad. Chinese policymakers have sought to promote a discourse of CSR “with Chinese characteristics,’ particularly among SOEs.

In a new paper, we analyze the regulation of “decent work” in the host countries in which Chinese firms. We examine the emergence of a state-driven regulatory discourse of “CSR with Chinese characteristics” in recent years, which includes upholding international labor standards. We further analyze how Chinese firms have understood and put this discourse into effect, focusing on the labor practices of Chinese firms in Europe. We examine the potential of the EU-China Comprehensive Agreement for Investment (CAI) for promoting decent work.

Challenges for Decent Work of Chinese Multinationals Abroad

In addition to investing abroad, China has exported Chinese workers as dispatch or posted workers. Around 992,000 Chinese workers were stationed overseas by the end of 2019. Asia was the main destination in terms of the number of Chinese workers from all trades and the total number of dispatched workers, followed by Africa. Labor dispatch essentially entails a tripartite relationship between workers, a dispatch agency, and a host company [1]. Under the tripartite relationship, the dispatch agency is the workers’ employer, though in practice it can be hard for workers to identify if the agency or the host company ultimately holds liability when rights are violated. The failure to make explicitly clear who is a dispatched worker’s employer under the law, and therefore can be held liable, makes it difficult for workers to pursue enforcement of the law.  When labor disputes arise, these deficits in labor laws and protections surrounding dispatched workers can result in protests (e.g., in the case of Chinese dispatched workers’ protest in Equatorial Guinea) [2]. Other labor disputes involving Chinese workers abroad have led to direct intervention by the Chinese state (e.g., in Tanzania and Angola) [3]. Factors such as home country labor practices that undermine collective bargaining, weak regulatory environments in some host countries and ineffective enforcement due to reasons of a lack of capacity or political will can create an environment that fails to protect labor rights.

Chinese Investments in Europe

As Chinese investment in Europe grows, there have been concerns in some quarters over whether it may undermine European labor protections. An important development is the EU-China CAI, which was agreed to in principle on December 20, 2020 after seven years of negotiation. The CAI addresses for the first time China’s agreement to “ambitious provisions on sustainable development, including commitments on forced labor and the ratification of the relevant ILO fundamental Conventions.” However, finalizing labor rights provisions acceptable to both parties may prove challenging. China has only included labor rights protections in a small number of investment agreements, whereas the EU has made labor rights protections integral to its trade and investment policy [4].

The question remains on whether the final provisions will be as strong as the EU desires, as consideration and ratification of the CAI was suspended in May 2021 in response to the Chinese Government sanctions against the European Parliament Subcommittee on Human Rights and other European entities and officials in March 2021. It is understood that the moratorium on the CAI’s ratification will remain so long as the Chinese sanctions remain [5]. Nevertheless, while the CAI may currently be suspended, the agreement implores analysis. The CAI can be seen as taking further steps than most international investment agreements involving China with respect to promoting international labor rights and standards.

Conclusion

How Chinese firms are engaging with local and international norms in their investments abroad has significant implications for decent work in host countries and globally. Chinese policymakers have sought to promote a discourse of “CSR with Chinese characteristics,” particularly among SOEs. Further empirical research can shed crucial insights on whether Chinese firms will become standard makers in the context of BRI, the type of standards that will emerge, and the implications for existing international norms and standards across a range of areas. Given the pliability of the BRI, there is an opportunity for all stakeholders including the EU to advocate for social, labor, and environmental standards under BRI projects. Chinese investors’ experiences in Europe and the pending ratification of the CAI point to the possibility of preventing a race to the bottom. Such an approach will help to mitigate a variety of challenges and risks for all stakeholders involved in BRI projects and foster more sustainable and equitable development outcomes for host countries.

ENDNOTES

[1] Ka Ni Li, ‘Re-Conceptualizing the Notion of Employer: The Case of Labor Dispatch Workers in China’ (2015) 40 Brooklyn Journal of International Law 619.

[2] Yifeng Chen and Ulla Liukkunen, Enclave Governance and Transnational Labour Law – A Case Study of Chinese Workers on Strike in Africa (2019) 88 Nordic Journal of International Law 558.

[3] Ministry of Commerce of the PRC, Emergency notice on further strengthening the management of overseas labour dispatching work under the overseas contracting projects (2008).

[4] Kari Otteburn and Axel Marx, ‘A Glass Half-Empty or Half-Full? An Assessment of the Labour Provisions in the CAI from Chinese and European Perspectives’ (2022) 23(4) The Journal of World Investment & Trade 601, 604. See also Manjiao Chi, ‘Addressing Sustainable Development Concerns Through IIAs: A Preliminary Assessment of Chinese IIAs’ in Julien Chaisse (ed), China’s International Investment Strategy: Bilateral, Regional, and Global Law and Policy (OUP 2019) ch 6.

[5] Julien Chaisse and Matthieu Burnay, ‘Introduction – CAI’s Contribution to International Investment Law: European, Chinese, and Global Perspectives’ (2022) 23 The Journal of World Investment & Trade 497.

This post comes to us from Mimi Zou, a professor of law at the University of New South Wales and Glory Nwaugbala, a DPhil in law candidate at the University of Oxford. It is based on their paper forthcoming in Legal Transplants in EU-China Relations: Theory and Practice, Matthieu Burnay, Marina Timoteo, and Li Bin (eds) (Routledge). A version of this post appeared in the Oxford Business Law Blog, here.