[Joint House and Senate Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
                  DOES CHINA HAVE A STABILITY PROBLEM? 

=======================================================================

                               ROUNDTABLE

                               before the

              CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 27, 2009

                               __________

 Printed for the use of the Congressional-Executive Commission on China


         Available via the World Wide Web: http://www.cecc.gov

                               ----------
                         U.S. GOVERNMENT PRINTING OFFICE 

48-223 PDF                       WASHINGTON : 2009 

For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
DC area (202) 512-1800 Fax: (202) 512-2250 Mail: Stop SSOP, 
Washington, DC 20402-0001 



















                             CO N T E N T S

                              ----------                              
                                                                   Page
Opening statement of Charlotte Oldham-Moore, Staff Director, 
  Congressional-Executive Commission on China....................     1
Grob, Douglas, Cochairman's Senior Staff Member..................     2
MacKinnon, Rebecca, Fellow, Open Society Institute and Assistant 
  Professor, Journalism and Media Studies Centre, The University 
  of Hong Kong...................................................     3
Athreya, Bama, Executive Director, International Labor Rights 
  Forum..........................................................     6
deLisle, Jacques, Stephen A. Cozen Professor of Law, University 
  of Pennsylvania and Director, Asia Program, Foreign Policy 
  Research Institute.............................................    10

                                APPENDIX
                           Prepared Statement

Athreya, Bama....................................................    30


                  DOES CHINA HAVE A STABILITY PROBLEM?

                              ----------                              


                       FRIDAY, FEBRUARY 27, 2009

                            Congressional-Executive
                                       Commission on China,
                                                    Washington, DC.
    The roundtable was convened, pursuant to notice, at 2:06 
p.m., in room 628, Dirksen Senate Office Building, Charlotte 
Oldham-Moore, Staff Director, presiding.
    Also present: Douglas Grob, Cochairman's Senior Staff 
Member; Andrea Worden, General Counsel and Senior Advisor on 
Criminal Justice; Lawrence Liu, Senior Counsel; Kara Abramson, 
Advocacy Director; and Wenchi Yu Perkins, Senior Research 
Associate.
    Also present: Members of the audience: Brian Kendall, Andy 
Green.

          OPENING STATEMENT OF CHARLOTTE OLDHAM-MOORE,

  STAFF DIRECTOR, CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

    Ms. Oldham-Moore. Good afternoon.
    On behalf of the incoming Chairman of the Congressional-
Executive Commission on China [CECC], Senator Byron Dorgan, I 
welcome you to what should be a very interesting panel 
discussion.
    The topic of today's roundtable is social stability, one of 
the top concerns of Chinese officials this year. As posted 
analysis on the CECC Web site highlights, officials have 
expressed concern about slowing economic growth and rising 
unemployment, especially among China's 130 million migrant 
workers.
    In addition, tensions continue with ethnic Uyghurs and 
Tibetans, which are reaching a boiling point on the Tibetan 
plateau right now, and there are growing calls for political 
reform, demonstrated by the Charter 08 movement. The Chinese 
Government also faces increasing pressure from the Internet, 
which has emerged as a major channel for public discontent.
    2009 is also a year of several significant Chinese 
anniversaries. These include the 20th anniversary of the 
Tiananmen Square democracy protests and crackdowns, the 50th 
anniversary of what Tibetans refer to as the Tibetan Uprising, 
and the 60th anniversary of the founding of the People's 
Republic of China. In the past, anniversaries have served as a 
catalyst for public protest in China.
    The purpose of today's panel discussion is to closely 
examine the issue of stability and drill down into what exactly 
we mean by that word in the context of China. How significant a 
challenge does ensuring stability pose to China today? How 
concerned should the United States and its policymakers be 
about stability in China? Will China's concerns with ensuring 
stability affect its implementation of international human 
rights standards and the rule of law?
    We have a very distinguished set of panelists today who 
will discuss this issue from three important, but very 
different, perspectives. First, Rebecca MacKinnon will discuss 
the challenges posed by the Internet, and China's response. 
Bama Athreya will address unemployment and labor unrest in 
China since the onset of the global economic crisis. Finally, 
Jacques deLisle, who is visiting us from Philadelphia--we are 
very lucky to have him today--will discuss the legal and 
institutional tools China uses to ensure stability.
    I'm going to turn it over to my colleague, Doug Grob, who 
will introduce our panelists in greater detail.

 STATEMENT OF DOUGLAS GROB, COCHAIRMAN'S SENIOR STAFF MEMBER, 
          CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

    Mr. Grob. Thank you very much, Charlotte.
    On behalf of Representative Sander Levin, I'd like to 
welcome all of you here to the Congressional-Executive 
Commission on China's roundtable: ``Does China Have A Stability 
Problem? ''
    I'm very pleased and honored to be able to introduce to you 
today, to my left, Professor Rebecca MacKinnon. Thank you for 
joining us. Professor MacKinnon is a 2009 Open Society 
Institute Fellow, and an Assistant Professor at the University 
of Hong Kong's Journalism and Media Studies Centre, where she 
teaches courses on online journalism, and conducts research on 
the Internet, China, and censorship. Professor MacKinnon is a 
leading expert on China and the global Internet, and is 
currently writing a book on the subject. Previously, she served 
as CNN's bureau chief both in Beijing and in Tokyo. So, thank 
you very much for joining us today.
    Also to my left is Dr. Bama Athreya, whom we are very 
fortunate to have with us. Dr. Athreya is Executive Director of 
the International Labor Rights Forum, which is a nonprofit 
organization focusing on the improvement of the treatment of 
workers worldwide. She is a cultural anthropologist by training 
who has studied labor issues in Cambodia and Indonesia as well 
as in China. She also has lived and worked in China, and served 
as a panelist at a CECC roundtable in 2002, and we are very 
pleased to have her back. So, thank you very much. We look 
forward to your remarks.
    Finally, to my right, Professor Jacques deLisle. Professor 
deLisle is the Stephen A. Cozen Professor of Law at the 
University of Pennsylvania, a member of the faculty at the 
University's Center for East Asian Studies, and also Director 
of the Asia Program at the Foreign Policy Research Institute 
[FPRI] in Philadelphia. As I'm sure you all know, FPRI produces 
some fine analysis on a full range of topics, including, but 
not limited to, those on which it is the charge of this 
commission to monitor, analyze, and report. Professor deLisle's 
scholarship focuses on the law and politics of contemporary 
China, including economic and political reform and human rights 
in China. So, Jacques, we are very pleased that you could join 
us today.
    And so with that, I would like now to turn the floor over 
to Ms. MacKinnon.

STATEMENT OF REBECCA MacKINNON, FELLOW, OPEN SOCIETY INSTITUTE, 
 AND ASSISTANT PROFESSOR, JOURNALISM AND MEDIA STUDIES CENTRE, 
                  THE UNIVERSITY OF HONG KONG

    Ms. MacKinnon. Thank you. I study the Internet, but I still 
can't handle microphone technology. [Laughter.]
    As with everything in China, positives and negatives tend 
to exist simultaneously, which makes studying China 
particularly interesting. That is certainly the case with the 
Internet and sociopolitical change in China. I think in the 
West we tend to focus on the relationship between the Internet 
and China as sort of more as the negative side, that it's a 
challenge to the regime, that it enables a platform--a very new 
platform--for the airing of grievances, for exposing official 
abuse and protest.
    But the Chinese Government has so far managed, through 
censorship and manipulation, to stop localized incidents from 
metastasizing into national movements. This is in part due to 
the Chinese Government's success--while technically censorship 
is not perfect, it works well enough when combined with 
surveillance and law enforcement that dissent that is expressed 
on the Internet and is expressed every day does not get turned 
into nationwide political movements, for the most part, or they 
are nipped in the bud before they can turn into specific 
action.
    Another point is that, although the economic crisis, as 
Charlotte mentioned, poses a particular challenge to China this 
year, and we have this anniversary year with the 20th 
anniversary of the 1989 crackdown, and many other anniversaries 
coming up, the Chinese Communist Party has really displayed an 
ability to learn and adapt to the Internet age and has been 
experimenting with innovative new approaches to using the 
Internet as a tool for maintaining legitimacy.
    So what is important to, I think, recognize, is that the 
Chinese Government does not just view the Internet as a threat, 
or bloggers as a challenge to regime power in absolute terms. 
This is also viewed as an opportunity and one could in some 
ways almost make the argument that it's possible that the 
Chinese Communist Party could maintain its power longer thanks 
to the Internet than if the Internet didn't exist. So, there 
are a lot of different conflicting trends going on.
    Now, the topic of this panel is stability. Of course, if 
you look at the number of mass incidents going on, in 2005 the 
Minister of Public Security said that there were roughly 74,000 
protests or mass incidents happening around China. Last year, 
there was a government report that listed 127,000 mass 
incidents happening around China. Again, absolute numbers are 
really hard to know.
    The fact is that unrest is increasing. Unrest has always 
been there, but it is increasing. But what does that really 
mean? Because what we're seeing is that the government is 
taking an 
increasingly sophisticated approach in terms of managing 
information about protests and managing how people are able to 
react to protests.
    The government's approach is clearly not just about 
smashing heads and suppressing information, but also trying to 
emphasize to localities that the causes of the discontent need 
to be dealt with, and holding local governments responsible for 
preventing unrest. This is where the Internet comes in. The 
approach is that the governments need to do a better job at 
paying attention to the conversations taking place on the 
Internet, to noticing when incidents are likely to happen.
    So, a couple of examples. In July 2008, last year, there 
was a major riot in Weng'an County in Guizhou province 
involving about 30,000 people, and it was sparked because a 
young woman turned up dead in a river. The official coroner's 
report was that she had committed suicide, but it was widely 
felt by locals that she had been killed by some young men who'd 
been with her when she somehow fell, or jumped, or whatever off 
a bridge, and that these young men were relatives of members of 
the Public Security Bureau locally. A riot ensued that resulted 
in the trashing of the local Public Security buildings. There 
were pictures around the Internet of this burned-down building, 
cars overturned, and so on.
    What was very interesting, is the government had failed to 
prevent this protest. But then the government reacted in a 
number of ways to keep it from turning into a larger, 
nationwide movement. One level of this had to do with 
censorship, and of course the Public Security rounding up 
people who were the troublemakers, but in the blogs and the 
chat rooms soon after the Weng'an incident happened, in the 
chat rooms themselves, posts that were talking about Weng'an 
were taken down. So, domestically within China it's not just 
about blocking information.
    So while the Voice of America and Radio Free Asia might 
write about the Weng'an protest and post a story on their Web 
site, and then if somebody in China wants to look at it, it's 
blocked. They can't access it unless they know the technologies 
to do so.
    Domestically, if domestic Web sites are talking about the 
Weng'an protest, the content is removed from the Internet 
completely because the companies running these Web sites are 
required to remove the content. So it's not just about 
blocking, but it's about the self-censorship that's carried out 
by the companies themselves.
    So that's kind of one level at which news or conversations 
about this riot, and the meaning of the riot, and the causes of 
the riot, and the larger political implications of the riot, 
conversations were prevented from spreading too widely.
    Second, what happened was very interesting. The government 
allowed the official media to do fairly extensive reporting 
about what had happened. Xinhua News Agency and a number of 
other official media wrote extensive investigative reports 
based on police interrogations of the suspects, pointing to the 
fact that the rioters had been misinformed and misled by 
rumors, and so on.
    So while the unofficial information was widely suppressed 
on the Internet, the government moved proactively to make sure 
that all the Web sites in mainland China had lots of 
information from the Chinese Government's point of view.
    What this points to is a much more sophisticated 
information strategy. When I was in China in the 1990s 
reporting from Beijing, reporting for CNN, and we tried to find 
out what was happening in the provinces, it was very hard. The 
Xinhua News Agency almost never reported this kind of thing. 
Now it's quite normal that the state media does report this 
type of thing, and this is driven by the Internet. The 
authorities know that if the official version of what happened 
doesn't get out there quickly, then the unofficial version will 
dominate. So the state is adapting to this new information 
environment and putting its version of events out there is not 
just completely blocking everything out.
    Another case that's very interesting to point out is an 
incident that happened very recently when a man died in a 
detention center in Yunnan province in southern China. A report 
got out onto the Internet that the official police report 
ascribed his death to, he basically smashed his head against 
the ground while playing a game of hide-and-seek with some 
fellow inmates. People started getting quite outraged around 
the Internet, thinking that this was yet another time when the 
government lies to people.
    The local propaganda authorities dealt with this in a very 
creative way. They posted on their Web site an invitation for 
bloggers and netizens to sign up to join an investigative team 
to go to the detention center and take a look for themselves 
and talk to authorities there, and then the local media widely 
reported what was basically a dog-and-pony show that local 
bloggers were taken to see.
    But then the story turned into--and the discussion online 
was defused from, the government lies to us and covers 
everything up and they're bad and evil, to, those bloggers who 
are really government patsies, going along with this dog-and-
pony show, and it just kind of defused the conversation a great 
deal.
    And also there was a lot of conversation about the 
brilliant young propaganda officials in Yunnan province who are 
very sophisticated and are opening up to citizen supervision, 
and isn't this great. So it turned into an argument between 
people who thought this was a sign of government getting more 
open versus a sign that the government was just manipulating 
people in a more sophisticated way. But what this did, is 
defuse the problem.
    So we're seeing a great deal more sophistication, of 
course, combined with the fact that, as you mentioned, Charter 
08--Liu Xiaobo, who's one of the drafters of it, and people 
like him, people who could take these localized incidents such 
as Weng'an and point to them and say, well, if we had had local 
elections and locally accountable officials, and if we had 
basically all these things that the Charter 08 calls for, then 
we wouldn't be having these problems in Weng'an anyway, so it's 
a larger, systemic thing, we need a movement, and so on. People 
like him are silenced. Or there's another gentleman named Huang 
Qi, who was put in jail last year as well, who tried to form a 
Netizen Party, tried to form another opposition party.
    So what's very interesting is that you've got, on one hand, 
the government has largely lost control over popular culture 
thanks to the Internet. They've enabled a much larger space for 
public discourse in the Internet simply because there's no way 
they could stop that larger space from happening. You can't 
control all the conversations. Daily, when I'm reading Chinese 
blogs, I'm seeing some pretty edgy conversations about 
politics.
    But what they do, is they focus on the types of 
conversations that are going to lead to action, the certain 
individuals who are getting too popular, who might turn into 
opposition leaders, people like Hu Jia, the AIDS activist who 
is also now in jail, been sentenced, people like that. Those 
are the concentrated targets.
    Another, a rights-defending law firm, the Yi Tong law firm 
in Beijing, one of the lawyers there is a gentleman named Liu 
Xiaoyuan, who writes prolifically on a blog every day about 
criminal defense cases and about black jails. He wrote 
extensively about the Yang Jia murder case, where a man was 
executed after having killed a number of policemen, but the 
whole issue was, was he given due process, and this kind of 
thing. He wrote extensively about this. His law firm has been 
shut down for six months by authorities.
    So there are efforts to kind of intimidate and silence 
people who could serve as ringleaders, yet there is a feeling 
among many people in China--I mean, the people are writing on--
there are 30 to 50 million bloggers in China writing every day. 
It's a minority who are talking about politics, but still, most 
of those people are not worried about the police coming and 
knocking on their door, even if they're telling jokes about 
CCTV having burned down and other things that are somewhat 
politically edgy, that the vast majority of people on the 
Internet are feeling so much more freedom than they had, that 
this is providing something of a safety valve in terms of, 
people do feel that there are many more things they can do 
before they get so angry they're running into the streets.
    So again, where this all goes longer term is much harder to 
say, but in the shorter term you're seeing the government 
trying to really use the Internet to win over the hearts and 
minds. And also all of the major Web portals and Internet 
companies who run blogging services and chat rooms, all of them 
have employees who give regular reports to the State Council 
and to other organs about, what are the major concerns of our 
users that they're writing about.
    So the government is very much taking seriously the chat, 
the chatter, that is happening on the Web and using this as an 
early-warning mechanism to find out about problems that may 
eventually turn into unrest. This is one reason why Hu Jintao, 
this summer, paid a visit to the Strong Nation Forum, which is 
a very popular sort of nationalist Web forum run by The 
People's Daily, and did a chat with netizens, and it was very 
heavily publicized. He said, we need to listen to people's 
voices extensively and pool the people's wisdom when we take 
actions and make decisions. The Web is an important channel for 
us to understand the concerns of the public and assemble the 
wisdom of the public.
    The People's Daily has set up a fan site for Hu Jintao and 
Wen Jiabao. I think it's called ``Babao zhou,'' or something 
like that. It's very strange. So there's a real attempt to show 
that we, the government, are cool too, and we're there in the 
Web, and we're your friend, and we're also trying to help 
protect your children from pornographers and other things, and 
there are a lot of bad guys out there, too, and we're here for 
you and we're engaging and we're becoming more open than we 
used to be, while at the same time there's no democratic 
reforms. Local elections have been rolled back since the late 
1990s and in the legal system there has been no meaningful 
progress toward independent courts or anything else, which I'm 
sure Professor deLisle will talk about more.
    Ms. Oldham-Moore. Thank you. That is quite interesting.
    Bama Athreya, please feel free to begin.

 STATEMENT OF BAMA ATHREYA, EXECUTIVE DIRECTOR, INTERNATIONAL 
                       LABOR RIGHTS FORUM

    Ms. Athreya. Thank you very much. It's nice to be here 
today. Thank you for the invitation to address the Commission.
    I am the director of the International Labor Rights Forum. 
I just want to say before starting my comments that we are an 
advocacy organization. We're based in Washington, DC, and we 
work in several countries.
    We have had programs in China for the past few years, 
working with legal practitioners, principally in the law 
schools, to strengthen enforcement of China's labor 
legislation.
    That apart, though, the main thrust of my comments are 
going to be on what is happening in the private sector and the 
crisis and its effects on employment, and its attendant effects 
on stability among worker populations, particularly in the 
export processing areas.
    So it is a very different sort of a presentation than 
Professor MacKinnon's--her remarks were fascinating by the 
way--and really the focus is on what is happening in the 
private sector and what are some of the policy responses that 
might help to address the problem.
    Now, this is a global problem, so let's be clear that we 
are seeing reports around the clock on the effects of the 
global economic crisis on export processing workers virtually 
throughout east and southeast Asia, millions of layoffs in 
virtually every country that had previously been dependent on 
exports for growth in light manufacturing, and China as well. 
We've seen over the past, going on 20 years now, a strategy for 
growth that was heavily premised on exports to consumer markets 
in the West, and very heavily on the U.S. consumer market.
    So it is no accident that, given the contraction of the 
U.S. economy and the downturn in U.S. consumer spending, and 
particularly on those light manufactured products that have 
been the lifeline for the creation of these zones and factories 
for the past several years--toys, sports shoes, garments--that 
you would see dramatically rising unemployment, that you'd see 
millions of workers being laid off in southern China, so, just 
keeping that context in mind.
    We are concerned with the global economic crisis. We are 
concerned with the policies that need to be in place to provide 
the adequate safety nets for these millions of workers who are 
now losing their jobs, and are losing their jobs in a context 
where they have very little access, frankly, to existing safety 
nets or legal protections.
    I'm just going to cite a few of the most recent statistics. 
In an article of this month, Chen Xiwen of the Central Rural 
Work Leading Group, which is a government advisory body, said 
that as many as 26 million migrant workers are now ``coming 
under pressures for employment.'' Okay. So think about just the 
scale of the potential unemployment problem. These are migrant 
workers, and so presumably they have been employed up until 
this point in light manufacturing for export in southern China.
    On December 16 of last year, the China Daily quoted 
Professor Chen Guangjin as putting the unemployment rate for 
new college graduates at ``over 12 percent.'' China's 
statistics agency has committed to a comprehensive survey of 
China's labor market, starting in big cities and extending to 
the whole country by the end of 2010. Those results will be 
very interesting.
    But again, we really want to focus on what is happening in 
export sectors, as we are talking about tens of millions of 
workers who are employed in those sectors and who are now 
either losing their jobs, or in danger of losing their jobs.
    Not surprisingly, there has been significant unrest that 
has been a result of the wave of unemployment. One of the most 
notable cases, and widely reported, took place last fall when 
taxi drivers in Chongqing, Sanya, Yongdeng, Shantou, Guangzhou, 
and elsewhere, so several cities, several locations at once, 
went on strike over high rental fees, problems with police, and 
competition from unlicensed drivers. So, this was a very 
interesting wave of strikes among the taxi drivers. An 
interesting case because, you know, reflecting a little bit 
back to Professor MacKinnon's comments, the government response 
was at the time to allow the strikes to happen, to sort of 
allow the pressure to be blown off in this way.
    Laid-off employees at some of the world's largest toy 
plants have protested by the thousands for unpaid wages. So 
what has happened, and what is actually quite common in these 
export sectors, is that factories shut their doors, and they 
shut their doors and workers are very often owed back wages, 
because very often workers go into these factories and pay 
bonds or agree to have wages withheld up front as a condition 
of employment. So when the factories precipitously shut their 
doors, workers not only lose their jobs, but they are owed back 
wages, so they are losing a month, two months' wages and being 
put out on the streets with no social safety nets.
    In some instances, local governments have paid workers part 
of the money owed to them. This is in some instances. We are 
seeing very spotty responses by local governments, and more on 
that in a minute. Workers have blocked roads--we have seen 
different types of creative actions--in attempting to cross 
into Hong Kong to bring their complaints to factory owners who 
are based in Hong Kong, in some cases.
    We have also seen small factory owners protesting, as the 
nature of subcontracting in the global manufacturing chains 
means that oftentimes you have these small factories that are 
perhaps partially locally invested and that are vulnerable 
because they are subcontractors to contractors who may 
themselves be owed money. So what I'm saying is, you've 
manufactured your toy, but you haven't gotten the costs for the 
toy yet. Those come later.
    Well, when the bigger company goes out of business or 
simply cuts the orders, the factory owners themselves may be 
owed costs for products they have already produced, and which 
is one of the reasons why the workers get put out on the street 
without back wages. So, we have even seen protests by small 
factory owners, and that's been very interesting.
    One of the things that I want to note and really focus a 
bit on is the pressure this puts on local authorities in terms 
of enforcement of labor laws. There have been some very 
interesting debates over labor laws in recent years, and I want 
to go back and talk a little bit about those and what the 
current context might mean for labor law enforcement or non-
enforcement.
    There was a Labor Contract Law that is a fairly recent law 
and has been the subject of great discussion in the 
international press, as well as domestic press. It was an 
interesting law insofar as one of the things that happened, was 
there was a public comment period. That was an unusual thing to 
happen. When the law was a draft law, there actually was a 
public comment period.
    Well, one of the controversial things that happened--oh, I 
should just back up for a minute and say, what the law does, is 
it establishes normal labor relations in the country.
    In private enterprises, in the private sector in China, 
most workers had not technically been covered by China's labor 
law up until--I think the law was passed two years ago, 2007. 
So, up until two years ago. There was no formal employment 
relationship that was recognized by law for workers in many of 
these new enterprises that were in the private sector, or 
quasi-private sector, and set up for export.
    The Labor Contract Law took an important step toward 
identifying and formalizing those labor relationships so that 
those workers would enjoy the coverage of basic labor laws 
governing minimum wages, maximum working hours, et cetera.
    When the comment period occurred, some comments were put--
in very critical comments--in by the U.S. Chamber of Commerce 
and the European Union Chamber of Commerce, pretty much 
objecting to the formalization of labor contracts with workers 
in these light manufacturing enterprises. Because those were 
public comments, they were identified and taken out to the 
public and became a subject of some controversy.
    So I note all of that because one of the things that is 
happening is we are seeing some push-back now by employers that 
are claiming that the Labor Contract Law will make them 
uncompetitive in this global economic crisis, and I want to 
talk a little bit about that.
    Some foreign businesses have cited stricter labor 
regulations, meaning the Labor Contract Law and some other new 
laws that have been promulgated recently, as a contributor to 
factory closures. For example, Bloomberg News reported on 
February 11 that toymakers Mattel and Hasbro had complained of 
drastically higher worker costs hurting their profits in China. 
So the excuse being given for the factory closures, at least in 
some context, is, oh, there are these new labor laws, they make 
it so tough for foreign businesses to find China profitable 
anymore, and so therefore we have to close our doors.
    Now, the reality, if you look at the statistics on toy 
sales for the last holiday season, is that this is a global 
problem. It is not a China labor law problem. We are concerned 
that U.S. companies like Mattel and Hasbro may be perhaps 
profiting from misery by arguing that the reason why they have 
had to diminish toy production in China is because of new labor 
laws rather than admitting that they would have had diminished 
toy production in China in any case because they are selling 
less toys.
    I would also just want to note that in January, just a 
month ago, Guangdong province, which of course is where much of 
this light manufacturing is located, put limits on law 
enforcement's ability--official limits--to freeze enterprise 
owners' bank accounts and detain enterprise owners. Okay. Now, 
this is significant because in situations where factories close 
and workers are owed back wages and they may want to appeal to 
authorities to obtain those back wages, the ability of 
authorities to access owners' bank accounts, of course, would 
be relevant to settling such cases.
    So now if Guangdong province is saying we don't want you to 
be able to do--for the moment, let's just not be able to do 
that, I mean, this is a clear sign that they recognize there is 
a problem: there are layoffs, workers are not getting their 
back wages and they might perhaps ask owners/enterprises to 
have access to the bank accounts, we don't want this to happen 
in the interim.
    Now, we actually are concerned that this would lead to 
greater unrest, so it's interesting that these sorts of 
regulations to protect enterprises and employers, we're seeing 
them come into effect in some places.
    I will talk about the labor cost issue. Does the 
enforcement of labor law actually raise labor costs? We don't 
have that much data. I would certainly want to argue that if 
that's the case, then we might anticipate that employers would 
routinely violate labor laws because, of course, abiding by 
laws, no matter what the laws say, would increase your labor 
costs.
    There was once an interesting sample survey that we found 
by Yao Xianguo, who is the Dean of the College of Public 
Administration at Zhejiang University. This study found that 
companies that were in compliance with pre-existing labor 
legislation only saw labor costs rise 0.69 percent when the new 
Labor Contract Law went into effect. So if companies were 
already in compliance, the marginal cost of complying with the 
new Labor Contract Law was less than 1 percent, so I think we 
have to say that's a wash.
    I want to just skip to a few of the potential 
opportunities. I actually want to make one large point, first. 
We would argue that what the evidence shows is that what 
companies are really concerned about with the new Labor 
Contract Law, as it formalizes employment relationships, it 
does another thing. It obviously formalizes workers' rights to 
bring complaints under the law, and frankly to affiliate with 
one another as well.
    What companies are really afraid of with the Labor Contract 
Law is not rising costs, per se, it is the potential for an 
empowered Chinese workforce that asks for its rights under the 
law. We were fascinated that one of the other things that 
happened shortly after the Labor Contract Law was passed, and 
even during the debate, was workers themselves in these export 
processing zones, in fairly significant numbers, started to 
access workers' education centers throughout the province for 
information about the new law. They were interested in the new 
law. They wanted to know what it said. They wanted to know how 
it covered their rights.
    As time is limited, let me just skip quickly to a few 
things that we would recommend the Chinese Government do, and 
that we would recommend the U.S. Government consider as well in 
this 
period of growing unemployment and potentially weakened or 
diminished protection for workers under the law.
    We would certainly advise strict implementation of Chinese 
laws and consistent implementation of the Labor Contract Law, 
and other pre-existing labor legislation, and particularly in 
the zones that are being hardest hit with the unemployment 
problem.
    We would also be very keen to see, in the new strategic 
economic dialogue that is taking place between the U.S. 
Government and the Chinese Government, that labor issues should 
be a cornerstone of that dialogue, a cornerstone, because 
stability of employment and decent work--decent work, which 
means work that abides by all international labor standards and 
that includes a role for enforcement of regulation--would, in 
fact, be extremely critical to China's economic stability in 
the future. So we hope the economic dialogue would involve 
labor advocates on both sides and would, in fact, incorporate 
labor issues as a major component of its dialogue.
    Since my time is limited I will conclude there, but thank 
you once again for the opportunity to provide these remarks.
    Ms. Oldham-Moore. Thank you, Bama. We'll come back for 
questions on these topics as well.
    Professor deLisle?
    [The prepared statement of Ms. Athreya appears in the 
appendix.]

        STATEMENT OF JACQUES deLISLE, STEPHEN A. COZEN 
         PROFESSOR OF LAW, UNIVERSITY OF PENNSYLVANIA, 
        DIRECTOR, ASIA PROGRAM, FOREIGN POLICY RESEARCH 
                           INSTITUTE

    Mr. deLisle. Thank you. It's a pleasure to be here. The 
virtue of going last is that some of the points I wanted to 
cover have already been covered, so I might be able to stay 
somewhere near my time limit, with any luck.
    Professor Grob invited me to take a broader approach, and I 
think I will, partly because he said I could, but also partly 
because the question I've been asked to answer, which is the 
legal and institutional aspect of China's possible stability 
problem and the regime's capacity to deal with threats to 
stability, depends on how bad you think the problems of threats 
to stability are. I think the problems are rather easily and 
often exaggerated.
    What I want to say, basically, is that China has threats to 
stability, but doesn't really have a stability crisis. The 
wheels are not about to come off. I want to go through what is 
essentially a bad news/good news story, in that order, and on 
each side touch upon three related points, with an emphasis on 
legal and institutional issues: first, economic growth and 
inequality; second, the legitimacy of the kind of inequality we 
are seeing in China; and finally, the capacity, or lack of 
capacity, of legal institutions and other political 
institutions to deal with the resulting stresses.
    First, the bad news. You all know what it is. On the growth 
side, we're dropping from an average of 10 percent, 10 percent 
plus, to a situation in which 7 percent is considered a bit of 
a stretch. Chen Xiwen and others are talking of 20 to 30 
million migrant workers losing their jobs, and other jobholders 
and jobseekers in the more formal sectors are in trouble, too.
    As you have heard, China's economic growth remains very 
dependent on exports and the export demand has fallen off. This 
is not merely a problem of a temporary downturn in global 
demand; there is a set of broader structural issues behind it. 
As you heard, some of the foreign-funded or foreign-sales-
dependent companies have burnt some bridges. They have left 
behind some bad feelings and some unpaid debts. The debts are 
hard to collect legally, but they and the broader sense that 
such firms behaved unfairly and unreliably could have long-term 
consequences.
    Beyond that, Chinese exports face a couple of other 
problems: one is China's worsened reputation for toxic, 
poisonous, dangerous exports. A positive reputation is going to 
be hard to recoup, and China does not yet really have a good 
mechanism for fixing the underlying problem, bureaucratically 
or legally; another is the specter of protectionism from 
trading partners, including the United States--surely 
exaggerated, after one hears the occasional bit of 
congressional testimony about sanctions responding to China's 
currency manipulation and such, but not entirely unfounded. In 
downturns protectionism generally spikes upward, and it can 
have considerable staying power where the United States and 
others among China's trading partners may be facing longer-
term, more structural adjustments in their economies. These 
tendencies toward protectionism are a genuine worry for China.
    In addition, growth in China remains significantly driven 
by foreign investment, but many foreign capital providers are 
in crisis or wary. Even though much of outside investment in 
recent years has shifted to production for domestic sales, 
there is still a significant component that focuses on exports. 
Also, there are serious worries in the foreign investing 
community about legal changes that have made it harder or more 
uncertain for investors--forms of de facto protectionism for 
Chinese companies, through things like more restrictive 
provisions in the catalog of foreign investment opportunities 
that came out in 2007 and signs of anti-monopoly law review 
perhaps being used especially aggressively against foreign 
acquirers.
    Relying on domestic demand is the long-term solution for 
China's economy, but it's not easy to achieve in the short-
term. The $600 billion Chinese Government stimulus plan 
includes not all that much new money as far as we can tell, and 
the money may not be well used. Some may be used for more 
highways to nowhere.
    The consumer side of domestic demand is hard to increase. 
People save a lot in China because of the lack of a social 
safety net, and the lack of developed consumer credit markets. 
Without fixing those intractable problems, it will be very hard 
to raise consumer spending to fix the growth problem.
    Inequality. Well, you know the numbers there, too. The Gini 
coefficient for China is around 0.48, maybe even higher. China 
ranks 93rd out of 125 countries in terms of its degree of 
equality in the World Bank rankings. Urban/rural income ratios 
are more than 3:1, richest-to-poorest province per capita 
income ratios are around 10:1. These are huge gaps.
    The impact of the current trend toward higher unemployment 
on overall inequality is unclear because some of the people who 
are losing jobs are not the worst off. So, the overall 
distributional 
effect--of the sort captured in a Gini coefficient--may not 
show a major change, but a surge in job losses among the 
relatively poor is still potentially a serious problem. We also 
have the looming problem of farmers facing water shortages and 
other forms of environmental degradation and some of the least 
well-off Chinese, therefore, facing bad conditions.
    There are signs that the legitimacy of inequality may be 
dropping in China. For a long time, a popular view has been, in 
effect, ``You get rich because you're harder working, or 
luckier, or smarter.'' There are at least anecdotal indications 
that that perception is, at least, shaken. We can see the 
publicity that recently attached to incidents of corrupt 
officials in China--Chen Liangyu, deposed Party Chief of 
Shanghai, is the latest poster boy for this--and to a more 
diffuse sense seemingly in Chinese society, that wealth comes 
too often from personal and political connections.
    We can look at things like the Pew survey. Although there 
are questions about how much we can rely on the survey as an 
accurate measure of Chinese opinion, it is likely informative 
in a general way about the attitudes of urban, relatively 
educated Chinese, at least. We see 89 percent identifying 
inequality as a major problem, and 78 percent identifying 
corruption as a major problem. These are worrisome numbers.
    If you look at the U.S. media, you can see some nice 
juxtapositions that capture jarring gaps and contrasts. I heard 
National Public Radio reporting this morning about a Los 
Angeles house-buying expedition by some nouveau riche from 
China. At the same time, you can pick up the New York Times and 
see a story about unemployed Dongguan factory workers trying to 
figure out how they're going to make ends meet. In addition, 
there are the reported 120,000 ``incidents'' per year of some 
form of social unrest, many of them reflecting complaints about 
inequality, injustice, or unjust inequality.
    What's the bad news in terms of legal and institutional 
means for coping with these problems? A good set of laws and a 
good legal system that can address the sources of discontent 
and the illegitimate instances of inequality can go a long way 
toward fixing some of the problems or defusing pressures that 
might lead to instability.
    Here, the recent news is not entirely good. Wang Shengjun, 
as the new head of the Supreme People's Court, is not his 
predecessor, Xiao Yang. He's a good deal more revanchist, by 
any measure and has taken it upon himself to emphasize the need 
to look to public will, which often means party interpretations 
of public will, in 
adjudicating criminal cases, and particularly to be tough on 
crime and in death penalty cases. He emphasizes those issues 
more than the rule of law agenda that we saw receiving greater 
attention 
before.
    The Politburo Standing Committee member in charge of the 
law portfolio is Zhou Yongkang, a former Public Security 
Minister, who seems cut from the same cloth as his predecessor, 
Luo Gan, who also stressed law and order and famously said that 
weaknesses in China's legal system created opportunities for 
enemies who would Westernize or divide China.
    Li Keqiang, likely the next premier, has a legal education, 
but it is largely a ``zhengfa,'' legal/political education, 
which is not exactly what gets taught in Chinese law schools 
today. It is a rather different background from what ``legal 
training'' connotes in other systems. China also has been 
developing emergency powers laws to give greater powers, 
greater formal powers, to deal with unrest.
    There is now clearly a chilly climate for those who have 
tried to raise some of the rights concerns you've heard 
mentioned earlier on this panel. Gao Zhisheng, one of the 
leading crusading or ``rights protection'' lawyers has 
disappeared yet again; the Yitong law firm, as you have heard, 
is in trouble.
    There is another possible marker of concern about the 
capacity of legal and other institutions in Charter 08 and the 
goals it sets forth. We had a fairly quiet period for this kind 
of criticism from intellectuals, but with Charter 08, we see a 
bunch of them coming out of the woodwork, 300-plus signing it 
initially, and putting forward an extraordinary, if long-term, 
list of aims; a truly constitutional order, democratic reforms, 
the rule of law, government 
accountability, Bill of Rights-like freedoms and so on. This is 
an extraordinary and fundamental package of reform goals 
articulated in an exceptionally public form.
    Relevant for our purposes here is something you've also 
heard mentioned earlier on this panel, which is the gap between 
the official views of what is right and what is legal, on one 
hand, and popular views, on the other. Rebecca MacKinnon has 
talked about the attempt to close that gap, but the gap is 
real. In many highly celebrated and politically charged 
incidents in recent years, we've seen this divergence between 
the law on the books and popular perceptions. It's pretty 
striking.
    There appears to be a consensus that Chen Liangyu is 
corrupt, but that he was singled out for prosecution for 
political factional reasons as well as for his illegal 
behavior. That's certainly a widely held view in China. In the 
Chongqing Nail House case, the famous Wu Ping and Yang Wu were 
invoking property rights that weren't actually the law yet. The 
law hadn't come fully into line with protecting those, even 
though the constitutional underpinnings were there and 
implementing legislation was soon to come into effect. Although 
their resistance to demolition of their house and their quest 
for greater compensation lacked a firm legal basis in the 
principles they invoked, their stance won sympathy and support 
from a large audience.
    The Sun Zhigang incident--the horrible case of a student 
who died from abuse in custody after being mistaken for a 
migrant--is another example. Yes, what he suffered was abuse 
even by the rules at the time, but he was detained and killed 
under a system of ``custody and repatriation'' that was a kind 
of procedural or due process black hole and was much criticized 
but that was not illegal at the time, and indeed, was perfectly 
clearly authorized.
    Yang Jia, the Shanghai cop killer, the type of person who 
ordinarily would be an unsympathetic figure, except for the 
fact that, in China today, the police are not terribly popular 
because of reported abuses and clear instances of abuse, and 
the sense that Yang was not given much due process and was not 
properly identified as mentally ill and so treated. There are 
other similarly illustrative cases that Professor MacKinnon and 
others have cited.
    Let me switch, in the time I've got left, to the good news, 
to why I think that although there are all these problems and 
these problems do feed discontent, unrest, and possible threats 
to stability, China does not face a crisis in which we're 
likely to see serious social instability.
    Why? First, growth. Seven percent growth ain't bad. Most of 
the world gets by on a lot less than that. The 7 or 8 percent 
minimum is an untested article of faith among many who watch 
China's economy, and I've never heard a convincing case for why 
China needs 7 percent when pretty much everybody else, even in 
the developing world, gets by with less, and when China is not 
facing a huge bulge of people coming into the workforce the way 
countries with a different, broader-based age pyramid are.
    The view is based on the assertion that the regime's only 
basis for maintaining stability is that it delivers 
uninterrupted, rapid growth in per capita income and that there 
is no partial substitute for it. I think that's an aggressive 
assumption that has yet to be proven.
    Second, the regime can do, and has incentive to do, a lot 
to sustain fairly high growth. It is in good fiscal health, 
certainly by world standards. The government has significant 
financial resources to spend on stimulating the economy and 
backstop troubled institutions. There are long-run reasons for 
the regime to pursue policies that will also have short-run 
stimulative effects: to shift growth to greater reliance on 
domestic demand and a more consumer-driven economy; to build a 
social safety net that will drive down saving and drive up 
consumption. The regime has shown itself capable and willing to 
engage in inflationary lending and spending to get a sluggish 
economy going, in part because China's leaders know they can 
rein it back in, as they have by hitting the brakes to curb 
escalating inflation several times already in the reform era.
    The newly unemployed migrants, so far, are going home. 
That's a good thing for stability. That is, unemployed and 
unhappy people--especially unattached young men--living in 
cities are, in large numbers, a potential threat to all but the 
most stable and well-institutionalized regimes. Notwithstanding 
the rural roots of the Chinese revolution, if you've got to 
take your pick, you're better off having migrants go back to 
the farms or smaller cities where they are more dispersed, 
where there is at least some basis for subsistence and where 
there is a supportive, and constraining, social network. If the 
economic downturn goes on long enough and becomes bad enough, 
then we may have a stability problem, but for now the migrants' 
exodus provides something of a safety valve.
    In terms of inequality, inequality isn't, per se, 
explosive. There are many other countries or economies in 
China's range in the Gini coefficient. They include Nepal, 
Rwanda, Mexico, Costa Rica, and Hong Kong. I defy you to tell 
me what metric that groups those entities together tells you 
about inequality and stability. Maybe it just tells you the 
Gini coefficient is a terrible measure of politically relevant 
types of inequality.
    There are also some significant ameliorative efforts 
undertaken by the regime. We have seen the elimination of the 
``sannong''--the three burdens--on the countryside, on farmers. 
There are attempts to deal with excessive expropriation and 
under-compensation for expropriated land rights and a real 
attempt to create stronger land rights and land tenure, 
particularly in the countryside. In the urban areas, the regime 
had largely given up, as of a few years ago, on repatriating 
migrants and tried to build down institutional and physical 
infrastructure to accommodate and integrate them. Now that many 
migrants are going back to their places of origin, some of the 
pressure is off of that effort. There were some significant 
moves, as you have heard, to extend greater labor rights to 
workers in the private economy and to build a social safety net 
as well.
    These initiatives haven't been entirely successful or 
comprehensive in aim, but in the short run the perception that 
there is some progress, and that the regime, at least at the 
center, is really trying, buys it some space.
    In terms of the legitimacy of the conditions of inequality 
and their potentially producing instability, there is a lot of 
robustness still to the notion that at least some of the rich 
succeeded not for corrupt or bad reasons but for good, 
legitimate ones. There are plenty of entrepreneur heroes, some 
a little colorful, or a little troubling, but not seen as 
having illegitimately won fortunes.
    Zong Qinghou, for example, started selling beverages out of 
a tiny store and he went on to create Wahaha, a giant--if to 
American ears somewhat sinisterly named--company, one now in a 
pitched battle with international food products giant, Danone. 
As the Chinese economy becomes more and more privatized, or at 
least as private or semi-private firms play a larger role, the 
perceived connection between wealth and preexisting political 
clout may weaken.
    If you look at the Pew surveys and the Gallup surveys, 
which again have their problems as reliable measures of Chinese 
public opinion, and surveys conducted by Chinese entities, 
which also have some problems, you do find some pretty 
remarkable numbers that should not be dismissed out of hand. 
The Pew survey famously recorded last year that 80 percent-plus 
of Chinese thought their country was on the right track--the 
highest rate among countries surveyed; 80 percent of Americans 
thought the opposite, that is, we thought our country was on 
the wrong track.
    Sixty-five percent responded that they thought the Chinese 
Government was doing a good job on major issues. In the Gallup 
poll, 50 percent think the future is going to be very good for 
them. These numbers may have come down some with the arrival 
and deepening of the global economic crisis and there are 
questions of accuracy, but they're still pretty striking.
    There is a popular sense in China that local officials are 
the problem. This view is, ``The central government is okay; 
it's the local, lower-level guys near me who are the problem.'' 
That's a very helpful thing for the regime and the leadership 
at the center. There may now even be an emerging sense that 
some of the problems that China faces in the current crisis are 
just ``facts about the world.'' It's a global crisis; it's not 
a regime failure. Again, that can buy some political space for 
the regime.
    Moreover, the leadership seems fairly united in dealing 
with the difficulties it faces. We don't seem to be in a period 
of serious elite factionalism.
    There is a remarkable savviness, as you've heard earlier 
concerning the Internet, in this regime and its ability to spin 
things publicly. Think of how well SARS was handled, as a PR 
matter at least, compared to what you would have seen earlier, 
and how the Sichuan earthquake was handled, with Wen Jiabao 
going out and picking up the phone and yelling orders to spur 
rescue efforts. Such measures matter for creating a sense that 
the government, at least at the central level, cares and is 
trying to do something for the beleaguered people.
    This is a proven, capable regime. We have seen 30 years of 
remarkable success in what has been a white-knuckle ride of 
breathtaking change, occasionally daunting crises and many more 
potential crises. Who would have bet that there would be as 
little instability as there has been, given the transformation 
China has gone through?
    Affluent individuals and intellectuals, concentrated in 
urban areas, are remarkably pro-status quo groups. They are not 
a source of instability at the moment. Through a combination of 
co-optation and fear, the regime has done a pretty good job of 
removing these key elements in relatively plausible scenarios 
that have discontent and unrest turning into a real crisis.
    For the urban professional and middle classes, regime 
policies of distributing largess and employing people and 
making the case that the policies that have benefited the urban 
areas depend, to some extent, on the existing order remaining 
in place have been broadly successful. That is reinforced by 
affluent urbanites' fears of a redistributionist peasant mob, 
which would gain influence if there were democracy. For 
intellectuals, the regime-proffered deal has been: you get a 
nice job if you stay within the zone of acceptable views, but 
if you step outside of it you're going to wind up in jail or, 
at least, in diminished circumstances.
    My final point is about the legal institutions and the 
positive stories concerning their ability, perhaps, to cope 
with the challenges I have described. There are a lot of 
mechanisms that have grown up over the reform area, although 
some have faced retrenchment recently, that do provide a lot of 
steam valves, relief from particular abuses, ways to monitor 
discontent and therefore cope with it, and ways to allow 
popular input into governance.
    They range from things like the implementation, albeit 
imperfectly, of the village elections laws; to the 
administrative litigation law which brings 100,000 or so cases 
forward a year, with 20 to 40 percent plaintiff success rates, 
and arguably a deterrent effect beyond that; to some tolerance 
for collective class action-like suits by expropriated holders 
of property rights; to contracts cases that look like disputes 
over commercial deals but really are pushing back against 
government abuses if you scratch the surface; to the 
legislation law, which provides for public hearings; to 
experiments with grassroots deliberative democracy. All these 
things, and ``xinfang''--letters and visits--as well, imperfect 
as they are, have offered some mechanisms to provide redress 
and a sense, at least, of influence, and in some cases real 
influence, to ordinary people with grievances.
    If you look at the general picture of legality, there are 
many problems, but, as what I have just said suggests there is 
a happy side of the legal-institutional story that augurs well 
for stability. China now ranks, by the World Bank rankings, in 
the mid-40s percentile for rule of law. That's not bad. It is 
above low- or middle-income country averages, and it's above 
much of the world that we don't think of as being lawless. 
Cases that I mentioned earlier, like Sun Zhigang and the Nail 
House case, and even Gao Zhisheng, before he got into politics, 
when he was doing more narrowly legal work, suggests that there 
is some scope for seeking legal redress of grievances that, 
unaddressed, could foster instability.
    Each of those cases helped lead to changes in the law or 
were bound up with ongoing changes in the law that provided 
some avenues and some remedies. More broadly, there are good, 
self-interested reasons on the regime's part to provide 
remedies that work--good Leninist reasons for why the regime's 
leaders would want to provide a system that works and provides 
some redress and input for the public.
    That said, finally, the harsh side of the legal story that 
I was talking about earlier has its uses in maintaining 
stability. It's a very effective way of cracking down on those 
who would challenge the Party-state's Leninist organizational 
monopoly, a monopoly over organized politics, if not all 
expressions of dissent. We saw it in the handling of Falun 
Gong. We've seen it in the periodic shut-downs of petitioners 
who come to Beijing or provincial capitals with their 
complaints, and we've seen it in the handling of the Yitong law 
firm, Gao Zhisheng, and others who have pressed legal rights 
and asserted legal restrictions on the state.
    With that, I will stop. Thank you.
    Ms. Oldham-Moore. Thank you, Mr. deLisle. That was an epic 
treatment of the topic. It was fabulous.
    I'm going to go to Lawrence Liu, our senior counsel at the 
Commission. He will get us started with the question and answer 
period and then we'll turn to the audience.
    Mr. Liu. [Off microphone]. I'd just like to, first of all, 
thank you for your excellent presentations. My question is 
about Charter 08 and to the extent that Charter 08 actually 
poses a threat to stability in China given your perspective and 
observations of China or whether China might be better off 
allowing citizens greater freedom of expression.
    Ms. Oldham-Moore. I'm going to recap what Lawrence just 
said, for those in the back who couldn't hear. His question was 
regarding the Charter 08 movement. China's response to it 
appears to be that it is a threat to social stability. Do the 
panelists believe it is a threat? Would China be better served 
by responding, allowing more of that kind of activity, not 
less?
    Mr. deLisle. I'll try to start the answers from the panel 
on this. I think it falls into either of the two categories 
that push buttons, and therefore get a reaction. One, is it is 
advocating radical systemic change. I mean, we're not talking 
trimming around the edges.
    You all remember back in the days of Wei Jingsheng, where 
he would say all sorts of caustic things about the regime and 
then say, ``But I'm only trying to improve socialism; I'm 
trying to work within the system and make it live up to its 
principles.'' Well, Charter 08 is pretty thorough-going stuff. 
I mean, you go through, what is it, the 19 demands, I guess, 
and it's hard to figure out what's left standing, in some 
sense, of the existing system. I mean, separation of powers, 
rule of law, constitutional review, democracy, accountable 
government. So, it really does step beyond the pale of 
acceptable friendly amendments.
    There is that, and I think also it is a whole bunch of 
people, including these, as Rebecca quite rightly said, well-
known intellectuals who are potential rallying points. There's 
the specter of Tiananmen, the 20th anniversary of which is 
coming up, that still looms. There is the sense that this is 
the alliance that caused problems before, intellectuals with a 
following who say some pretty radical things interacting with 
an underlying set of sources of social discontent and 
dissatisfaction with regime behavior that leads to this kind of 
synergy, and I think sometimes, a misreading of what the 
movement is about. But still, that's the sort of recipe for 
possible unrest that China's rulers worry about.
    Ms. MacKinnon. Just to add to that, I spent nearly a month 
in China in late December and January and was talking to quite 
a lot of people, quite a number of people who had signed 
Charter 08, plus just sort of a range of other people, about 
their opinions on this. One point to make is that of course the 
Charter 08 is not calling for a specific action now, right? It 
sort of sets out a goal for the distant future.
    One of the criticisms that I heard from many intellectuals, 
some of whom actually signed the thing, was that this was like 
a ``xing wei yi shu,'' it's like performance art. You know, you 
put it out there, but what does it actually mean? It sounds 
really great, looks really great, we agree with it, but we're 
here, it's there. How do you get from here to there? That's the 
big question.
    Many of the people I know who have signed it, some of whom 
have been questioned, some of whom haven't and so on, say, 
``Yes, I like this goal over here, but I don't want revolution 
now, today, to get to there because I have kids in school, I 
have this and that, I have--you know, so on.'' We need a debate 
to figure out how do we build this road to get to there? So a 
lot of the conversations I was hearing around Charter 08 
related to, okay, we need to figure out, if that is where we 
want to go, how the heck you go there without jeopardizing 
everything, without the country completely collapsing.
    It's very nice to have this goal out there that many of us 
agree, that sort of the liberal thinking part of the Chinese 
sort of society agree--there's another, less liberal segment of 
intellectuals and others who don't necessarily agree. But for 
those who do agree, if we move too quickly will we end up like 
Russia, which is, you have a democratic revolution, but then 
the mob takes over and you never get there. So how do we make 
sure that doesn't happen?
    So there's a lot of debate and discussion about, yes, we 
want to go there, but how do we do it? There isn't much 
consensus. There's more consensus about, within the liberals in 
China, the end goal than there is how to get there. So I think 
that is one point. That is one reason why, as an immediate 
threat, it's not such an immediate threat because there is 
absolutely no consensus about what to do or whether to take any 
kind of immediate action, or whether this is just kind of an 
ultimate goal that people should gradually work toward, but not 
do it in a way that is overly disruptive because China is not 
ready for it. You often hear people saying that kind of thing 
inside China.
    But on the other hand, it sets out a clear set of goals and 
the party has failed to set out, where should China be in 50 
years? Where should China be? What should China look like? 
There is actually broad consensus that corruption is a problem. 
The status quo is not particularly acceptable. Communist Party 
officials will admit, we've lost control of the provinces. 
There are all these problems we need to fix, we've got to deal 
with.
    But, so, okay. What is the goal 50 years down the road? 
They can't really tell you, other than that China will be 
bigger, stronger, better, faster, and it will be a world power. 
But what does that mean for the average Chinese person? They 
can't really give you an alternative vision that's more 
attractive than this vision over here. So in that sense it is a 
big challenge, but it's more kind of a hypothetical or kind of 
long-term challenge than it seems to be an immediate threat.
    But to get back to your point of, has the crackdown on 
signatories of Charter 08 called more attention to it or 
actually kind of served to be counterproductive from the 
Chinese Government's point of view, probably so. I have read a 
number of blog posts by different people who said that they 
weren't originally planning on signing it because they agreed 
with some of its provisions but not all of them, or had issues 
with Liu Xiaobo, or this, and that, and the other thing, but 
they ended up signing it because when they started writing 
about it they got censored, and it made them so mad that they 
decided to sign it anyway. Or, I wasn't going to sign it, but 
my friend who signed it got called in for tea by the police, 
and that really made me mad so I signed it to support my 
friend, you know, that kind of thing.
    So one could argue that had the government just kind of not 
paid too much attention to it or employed more kind of spin 
tactics as opposed to hard censorship and questioning tactics, 
actually maybe fewer people would have signed it and there 
would have been more argument about what people think of Liu 
Xiaobo or what they think of specific provisions and so on. But 
the questioning of people, and also censoring of blog posts and 
forum posts talking about it, made people rally and more 
solidarity around the general idea and argue less about 
specifics.
    So if there hadn't been censorship, if there hadn't been 
pressure put on people, maybe we'd see a much more detailed 
fight going on about, okay, yes, that's great, but it's 
performance art. What do we do tomorrow? We might see, 
actually, more arguments about that rather than more people on 
the liberal side of society rallying around it.
    Mr. Grob. Rebecca, if I could just jump in here for one 
second to ask for clarification. Based on your discussions and 
your understanding of the debates concerning Charter 08 in 
China today, is Charter 08 being discussed in terms of 
stability? Is it being discussed as a response to a stability 
problem, as a solution to a stability problem, or as a 
stability-preserving road map for change? I mean, are the words 
``Charter 08'' and ``stability'' being uttered in the same 
breath by anyone other than the government?
    Ms. MacKinnon. I think you hear ``Charter 08'' and 
``corruption'' uttered together much more than ``stability'' in 
general conversations. I think that arguments or discussions 
about democratic 
reforms in the past have hit on the stability issue. So when 
the village election reforms were moving forward or were making 
the greatest amount of progress in the late 1990s, some people 
in the Civil Affairs Ministry who were really trying to push 
forward on this, one of their justifications was that in 
villages that had truly free, fair, competitive, secret-ballot 
elections, that there was less unrest. Those areas were more 
stable than places that didn't have quality competitive 
elections.
    So that argument has been made in the past. I have not seen 
it so much related to Charter 08. It's more been about justice 
and anti-corruption, kind of social justice terms, is what I've 
seen the conversation in, although certainly you do see 
intellectual arguments being made about, if we really want a 
stable society long term, we need multi-party democracy because 
that's the only way to have an accountable government. I mean, 
that argument is always there, and has been around for a 
while--obviously not in mainstream press or anything, but 
you've heard it for a while. That hasn't been the emphasis. But 
other people may have been hearing different conversations and 
it would be interesting to hear.
    Mr. Grob. Thank you. Thank you.
    For those who may not be familiar with it, Charter 08 is a 
document outlining what has been described as a ``blueprint'' 
for political change in China. It was initially signed by over 
300 Chinese citizens, and since has been signed by thousands 
more, both inside China and outside of China. It was released 
on the eve of December 10, the anniversary of the Universal 
Declaration of Human Rights, and was modeled, ostensibly, after 
the founding of Charter 77 in Czechoslovakia. If you are 
interested in reading more about this document, please visit 
our Web site: www.cecc.gov.
    Ms. Oldham-Moore. Okay. Thank you.
    Questions from the audience? When you stand up, please 
state your name and affiliation, if you like.
    Voice.  [Off microphone].
    Ms. Oldham-Moore. That's beautiful. I can't restate it. 
Andrea?
    Ms. Worden. [Off microphone]. I just wanted to give a plug 
for Rebecca MacKinnon's blog, which you can find at http://
rconversation.blogs.com/. Among other things it contains her 
brilliant analysis of Charter 08.
    Ms. Oldham-Moore. Okay. Thank you.
    Voice. [Off microphone]. Yes. I have a question for 
Professor Jacques deLisle. How much do you trust this Pew 
survey which--where was that survey done? How was it done? Does 
it reflect the current state of the Chinese--peasant workers?
    Ms. Oldham-Moore. A question for Jacques deLisle regarding 
the Pew study on right track, wrong track in China, the 
credibility of that survey, for Jacques deLisle.
    Mr. deLisle. I think there are all sorts of problems with 
the Pew survey if you're taking it as an accurate measure of 
Chinese opinion. Is it really 80 percent? Almost certainly not. 
There are the obvious problems with any survey in China, that 
there are obviously acceptable answers and somewhat less 
acceptable answers, and how much confidence do the respondents 
have in giving a straight answer without fear of repercussions. 
It is a skewed sample. I mean, it is skewed for urban, better-
off Chinese, and all that.
    So I wouldn't quote it for any particular percentage, but I 
don't think it is insane because it does pick up a lot of 
answers that say things are bad. It says corruption is very 
high and inequality is a very serious problem. The numbers are 
as high for that as they are for the sense the country is 
headed in the right direction, or the government is doing a 
good job.
    And, yes, there are reasons to think that's a politically 
acceptable package of answers, but there are other surveys that 
point more or less in the same direction. There are some 
internal Chinese surveys done that certainly back up the notion 
of great distrust of local government, and correspondingly 
relatively high trust in the central government, and there's 
lot of anecdotal stuff that supports it.
    Whatever you make of surveys, it remains a striking fact 
that stability has been maintained and legitimacy seems 
relatively high, and that stability is only partially 
attributable to harsh, repressive methods. So I wouldn't quote 
the Pew survey as gospel by any means, but I think it is one 
set of perhaps misleadingly concrete quantitative measures of a 
qualitative phenomenon that I think does exist.
    Ms. Oldham-Moore. Thank you.
    Wenchi Yu Perkins? Please.
    Ms. Perkins. [Off microphone]. My question is for all 
panelists. Whether we think China has a stability problem or 
not, we probably all agree that the Chinese Government is 
concerned about stability. Due to the economic downturn, the 
Chinese Government has introduced a number of measures 
providing social safety nets to migrant workers and college 
graduates. I'm curious about your view on such government 
response. Some argue that the conservatives in the government 
introduce those measures out of the concern of social 
instability, whereas some reformists believe that there is no 
better time to push through certain reforms during financial 
crisis. I'm curious about your analysis. Some of the new 
policies are very creative, such as lifting household 
registration--hukou--restrictions. There's even one State 
Council Circular issued on February 13 that requires companies 
to consult with the All-China Federation of Trade Unions 
[ACFTU] if they plan to lay off more than 20 employees or more 
than 10 percent of all company employees. These are interesting 
developments even though the enforcement might be a different 
issue.
    Ms. Athreya. That was a terrific question. And it's true. 
It's been very interesting. There has been an immediate policy 
response and recognition that there would have to be some type 
of social safety nets put in place in other measures. I think 
that's a fascinating response because, first of all, it's an 
acknowledgement--there's much to be said about this beyond just 
a couple of minutes--of the potential unrest that can be caused 
by economic hardships. And certainly we would endorse that, and 
we've seen evidence of that in our own country and elsewhere in 
the world, I think, the recognition by the Chinese Government 
that this is the problem and we'd better deal with it.
    In a way, there's no virtuous cycle except for serious 
policy measures. If you let the strikes happen, you let the 
steam off, you need a policy response at the end of the day or 
it snowballs. Or if you try to put the lid on too tight, we're 
not going to enforce labor regulations at all, then you 
potentially generate more protests.
    The interesting thing that remains to be seen about the 
policy response beyond the enforcement question--let's assume 
good faith on enforcement--is, will then you start to create 
expectations? Because once you've got, as you say, this 
opportunity for dramatic new policies to be put in place, 
you're not going to revoke them later when growth goes back up 
from 6 percent to 10 percent, or whatever.
    They are going to remain in place. They're going to build 
new expectations of society and of workers for continued 
protections in good times or bad. So I think I don't have a 
crystal ball, the jury's out on that, but it will be 
interesting to see. In a way, you almost have to go down a road 
toward a type of industrial relations framework that is 
arguably more open and more in line with international 
standards at the end of the day.
    Ms. Oldham-Moore. Thank you.
    Anybody else from the audience?
    Mr. Kendall.  [Off microphone]. A question for Mr. deLisle. 
You mentioned, you just kind of touched on, the relationship 
between the central government and the local governments. With 
the new stimulus package that the Chinese Government has put 
through, and we hear the debate here in the United States all 
the time about where the resources are going, I'm wondering if 
you've seen or if you understand that there will be a change in 
dynamic between the central government and the local 
governments, which have had a lot of autonomy in certain policy 
areas, whether there's going to be sort of a desire to pull 
that back.
    Ms. Oldham-Moore. To quickly recap his question regarding 
the Chinese stimulus package, the tension between the local 
governments and the central government, and where does he think 
the resources might be going, and those kind of bureaucratic 
pressures. Are they changing?
    Mr. deLisle. I don't think we really know all that much 
about it yet. I mean, the last time I looked really closely at 
this issue, which was a month or more back, the debate was 
still going on about what exactly was in this package. Yes, 
there was $600 billion, but there was still a debate over how 
much and what--so the sense is, oh, 25 percent is 
infrastructure, probably 25 percent is genuinely new spending 
as opposed to work that was already budgeted or things that 
people thought were likely to happen in the ordinary course. 
People had numbers all over the map. So, the jury is still out 
on that.
    But your broader point is certainly a recurring issue 
within the reform era. I mean, as everybody in this room I am 
sure knows, the genius of the early years of reform was 
decentralizing power down to more local governments, and it's 
been a pain in the neck ever since, the attempt to rein it back 
in. I think the lessons of the stability problems or 
potentially stability-threatening moments of the last several 
years have been to reinforce that concern about local 
governments being non-responsive and unaccountable.
    So if you look at much of the criticism of the way SARS was 

handled, the blame was steered toward local officials who 
either underreacted or overreacted. There was a very 
interesting debate surrounding the emergency response law and 
what had been initially proposed as an emergency powers law of 
a broader sort during the last several years. Much of the 
debate was focused on finding ways of exercising tighter 
control over local officials who were seen as going off the 
rails.
    Those moves also are means for dealing with the stability 
problem, and show that it's a real concern. I think there's 
every reason to believe that that concern will continue, as 
there are good reasons to fear more local incidents of unrest.
    Now, there is a bit of a tension there, of course, as 
Professor MacKinnon has alluded to. The central leadership 
wants to hold the local officials responsible, and if it really 
does rein them in, it becomes harder to shove blame down the 
chain. But there is a robust history now of feeding people's 
preexisting views that the local guys are the problem and the 
central guys are really the people's friends. You can debate 
the second half of that, but they have done a pretty good job 
of selling at least the first half of it.
    On the resource side, again, it was something which was a 
huge crisis for a good chunk of the reform era a decade or so 
ago. There was this problem of the declining double-ratios, 
that is, the share of GDP that the government captured was 
falling toward single-digit levels and the share of total 
government take that was getting to the central fisc, as 
opposed to sticking with local governments, was plummeting as 
well. With some tax reforms and some other restructuring 
measures, they fixed that problem to a significant degree, but 
there's always this revenue-leaching issue.
    I think the problem with handing out stimulus package funds 
is, if you let it go down to the local level where inevitably 
the program is implemented and the money spent, you can do that 
but risk a return of familiar problems. The risk should not be 
exaggerated. I think, given the size of the Chinese economy 
today, the new revenue that will be under the control of local 
governments through the stimulus package is probably not huge, 
relatively. The bigger issue is going to be that if the 
authorities choose to try to get growth going again through 
another cycle of cheap credit and potentially inflationary 
moves, then where does that increased bank lending go? A lot of 
that goes to entities that are linked to local governments.
    Ms. Oldham-Moore. Thank you.
    We have just a few minutes left. Kara Abramson, then Andy 
Green. Go ahead.
    Ms. Abramson. [Off microphone]. Thank you very much. I'd 
like to ask the panelists to address how the issue of stability 
plays out in the Xinjiang Uyghur Autonomous Region and Tibetan 
areas, whether in the area of Internet controls, legal 
institutions, or labor rights.
    Ms. Oldham-Moore. A small question. Very small. Kara asked 
about how these issues of Internet, freedom, labor, and 
institutional structures play out in the ethnic areas of 
Xinjiang and Tibet.
    Ms. MacKinnon. Well, just on the Tibet question 
particularly, because this was a very big topic on the Chinese 
Internet last year when you had the unrest in Tibet, and then 
the international criticism, the international reporting of 
what had gone on, and then a vigorous debate on the Chinese 
Internet about whether the Western portrayal of what was 
happening was correct. I think the ethnic minority issues, to 
frame it as the Chinese Government would, the issues related to 
Tibetans, or Uyghurs, or other groups, are tough, because what 
we're seeing on the Internet happening is that voices that 
might be sympathetic to independence or autonomy are censored 
very quickly.
    If they're not censored, they're shouted down very quickly, 
because in addition to censorship, in addition to a more 
sophisticated spin, you also have many tens of thousands of 
people who are now either paid or volunteer pro-government 
commentators whose job it is, or whose volunteer role it is, to 
spin conversations on the Web in a pro-government direction.
    Plus, you have a phenomenon that has come to be known as 
cyber-nationalism, where there are quite a lot of people in 
China, for reasons similar to why you get very, kind of, 
nationalistic people in the United States who don't want to 
hear bad things about their country, you also get a lot of 
people in China who want China to be great, want the world to 
love China, and don't want to hear anything bad about their 
country and don't want to hear anything about foreigners 
criticizing China.
    So those types of views end up getting free reign, whereas 
the more liberal views, the views that are more sympathetic to 
ethnic autonomy or independence, don't get heard, are either 
censored or drowned out, so it gets into this more skewed 
situation.
    But what basically the result was last spring was that if 
you had done a poll of people who were capable of speaking on 
the Chinese Internet last year, they probably would have voted 
to just send the PLA in and go even further. There was very 
little sympathy among the Han Chinese who could be heard on the 
Chinese Internet toward the challenges faced by the indigenous 
Tibetan population.
    So this is kind of one of the issues, too, is that I think 
sometimes there's a perception in the West that if we kind of 
speak out for the groups that are suppressed, that there would 
be widespread sympathy for this among the Chinese population, 
but oftentimes people tend to rally around their governments.
    There is also increasingly a sophisticated kind of set of 
media criticism that goes on in China, and there is a group of 
students who have set up a Web site called Anti-CNN, which some 
of you might have heard of, that was established during the 
aftermath of the Tibet unrest, when the international media--
you know, it has its errors in reporting news about China.
    In addition to Jack Cafferty calling the Chinese Government 
``goons and thugs,'' which many people in China took offense 
at, you also had situations where, for instance, a major news 
agency had some video and some photos of Nepali police rough-
handling some Tibetan protesters. This was mislabeled as 
Chinese police rough-handling Tibetan protesters. It was all 
over the Western media, because it was agency material, and 
this was upheld as a prime example by many people in China as 
an example of how the Western media was just out to get China, 
and just doesn't want China to succeed, and is just spreading 
lies about the nature of the Chinese Government.
    So, that is a problem, too, is there are a lot of people in 
China who are seizing upon errors in Western media coverage and 
saying, ``See, they're just lying about us, they want to keep 
us down, they don't want our Olympics to succeed, they don't 
want us to be successful, they're racist, et cetera.'' It gets 
very strong. So, yes. It's a complicated issue.
    Ms. Oldham-Moore. Thank you.
    Ms. Athreya. We don't work in the Autonomous Region, so 
I'll pass on that one.
    Ms. Oldham-Moore. Okay.
    Jacques deLisle?
    Mr. deLisle. I would just say that in special autonomous 
regions, the word ``autonomous'' should be seen as an ironic 
term. I mean, they are among the least autonomous areas. Almost 
any metric you pick, including other things I looked at a bit 
more, such as access to legal advice, quality of institutions--
there's a pretty clear gradient that tracks wealth. It does 
globally, and it also appears to do that within China. There 
are some idiosyncratic blips, but by and large the sense is the 
quality of institutions is much higher in the more affluent 
areas. The inland areas are poorer, and that creates these 
problems of weaker institutional capacity. In addition, they 
are seen as restive areas, posing greater stability challenges.
    The Olympics provided the occasion for trotting all of this 
out. I mean, there was the quite hard line on Tibet that you 
saw not only in official China but also among Chinese students 
in the United States, where Chinese authorities were not 
pulling their strings. There also was the regime's raising the 
prospect of terrorism from Xinjiang to justify some of the 
quite elaborate, shall we say, quite robust security measures 
around Beijing.
    Ms. Oldham-Moore. Thank you.
    Andy Green, you have the last question.
    Mr. Green.  [Off microphone]. I'm Andy Green. In Hong Kong, 
there has been real anger about the Lehman mini-bond crisis. 
These instruments were sold to investors in Hong Kong as 
secure, low risk investments, but they were actually risky 
derivatives, and people lost a lot of money. This has led to 
popular protests in Hong Kong and demands for compensation 
through the political rather than the legal process. I'm 
wondering whether this could happen in China. With the fall of 
the stock market in Shanghai and some of the other financial 
issues--money flowing out of China in record numbers--if 
investors in the middle to upper middle class have lost a lot 
of money, will they be a source of instability, especially as 
there are many of them in Shanghai or Beijing? If they cannot 
pursue their claims in court but rather take them to the 
political process, will that be a problem?
    Ms. Oldham-Moore. Thanks.
    Anyone want to take that?
    Mr. deLisle. I can give a partial response. It seems to me 
there are two potential problems here that your comments point 
to. China has done very well through money coming in from the 
outside and through money generated in China staying home. Now 
we see some problems with both of those, and that can have, 
obviously, ripple effects throughout the economy. To the extent 
that performance legitimacy remains what it's all about, and it 
does to some extent, then anything eroding wealth or growth is 
obviously a threat.
    If the crisis really takes down the urban newly rich in 
China, then it will be hurting a group that really has been the 
social niche that, in many countries, has been a big part of 
the drive for political change, as we saw in democratization in 
other countries in east Asia. This group has in a sense been 
bought off through an implicit social contract that says, ``You 
get to keep your money, and we have enough legal protections 
that you're not going to get expropriated and you're not going 
to get dragged into jail in the middle of the night if you're 
not doing anything political. You enjoy a sphere of autonomy 
and protection. In return, you don't demand radical political 
change or challenge Party leadership.''
    If that all comes unstuck, then the deal I was describing 
earlier, the combination of, for intellectuals, decent jobs, 
and the threat of jail, or at least harassment, if they go too 
far, and, for the regular professional classes, you keep your 
money and, if either chaos sets in or we democratize too 
quickly even if chaos doesn't set in, that's bad news for you.
    What the affluent urbanites and intellectuals are getting 
economically to not pursue an agenda of political change--if 
that comes off the table, if the regime's side of the bargain 
goes unfulfilled, then there is potentially a big problem. But 
it seems to me that everybody who has been anywhere near the 
Shanghai Stock Exchange, for many years now, is used to a fair 
amount of volatility. Right now, the rest of the world is 
starting to look more like Shanghai rather than Shanghai 
looking different than it did before.
    Ms. Oldham-Moore. Yes. Thanks so much.
    I want to thank Rebecca MacKinnon, Bama Athreya, and 
Jacques deLisle for joining us today. It was a very complex 
topic, and a great deal of food for further thought has been 
generated today. Please check our Web site for the transcript 
of this panel discussion.
    Thank you, audience, for coming. [Applause.]
    [Whereupon, at 3:32 p.m. the roundtable was adjourned.]
                            A P P E N D I X

=======================================================================


                           Prepared Statement

                              ----------                              


                   Prepared Statement of Bama Athreya

                           february 27, 2009
    The global economic crisis has led to large-scale job loss in 
China, owing mainly to a sharp fall in global demand for the country's 
products. This has had a particularly severe impact on certain segments 
of the population, such as migrant workers end students. On February 2, 
2009, Chen Xiwen of the Central Rural Work Leading Group, a government 
advisory body, said that as many as 26 million migrant workers ``are 
now coming under pressures for employment.'' China Daily quoted 
Professor Chen Guangjin of the Chinese Academy of Social Sciences as 
putting the unemployment rate for new college graduates at ``over 12 
percent'' on December 16, 2008. These numbers are rough, but China's 
statistics agency has committed to a comprehensive survey of China's 
labor market starting in big cities and extending to the whole country 
by the end of 2010.
    There have been numerous strikes and protests. Last fall, taxi 
drivers in Chongqing, Sanya, Yongdeng, Shantou, Guangzhou and elsewhere 
went on strike over high rental fees, problems with police and 
competition from unlicensed drivers. Laid off employees at some of the 
world's largest toy plants have protested by the thousands for unpaid 
wages. Local governments have had to step in and pay workers some of 
the money owed them as employers disappear overnight. Workers have 
blocked roads and attempted to cross into Hong Kong to bring their 
complaints to factory owners based there. Small plant managers have, in 
turn, protested for money owed them by larger factories.
    All this has put severe pressure on the implementation of China's 
labor laws, especially legislation enacted in 2008, such as the Labor 
Contract Law, Law on Labor Dispute Mediation and Arbitration, 
Employment Promotion Law, and the Draft Regulations on the Growth and 
Development of Harmonious Labor Relations in the Shenzhen Special 
Economic Zone. In January, Guangdong Province put limits on law 
enforcement's ability to freeze enterprise owner's bank accounts and 
detain enterprise owners for minor offenses. Already in November, the 
central government allowed local authorities to delay minimum wage 
increases. Meanwhile, companies have disingenuously cited stricter 
labor regulations as a contributor to factory closures. For example, 
Bloomberg News reported on February 11, 2009, that toymakers Mattel and 
Hasbro have complained of higher worker costs hurting their profits in 
China.
    In fact, China's new workplace regulations are not to blame for 
layoffs. According to a sampling survey by Yao Xianguo, the Dean of the 
College of Public Management, Zhejiang University, companies that were 
in compliance with pre-existing labor legislation only saw labor costs 
rise 0.69 percent as a result of the Labor Contract Law. Companies are 
really afraid of an empowered Chinese workforce--not the specifics of 
labor legislation. Layoffs are the result of global economic stress.
    It is typical of businesses to take advantage of crises by 
intimidating governments into backing down on workers' rights and 
cutting taxes. But if China wants to kick-start its economy, it must 
both spur consumer spending by putting more money in the pockets of 
working people and make public investments in physical infrastructure 
and social services. The country has taken positive steps toward 
shoring up infrastructure in its stimulus package. China should also 
move forward on building a new national social security system as it is 
contemplating, because the difficulties migrant workers face in 
transferring social security payments home has become a major issue in 
labor law. It should strictly implement legislation like the Labor 
Contract Law. And it should allow government agencies, unions, workers' 
service centers, and universities to play their full roles in ensuring 
workers' rights are respected.
    The United States, in turn, should set a positive example by itself 
ratifying all the ILO's core labor standards and passing legislation 
like the Employee Free Choice Act. It should ensure that U.S. companies 
contemplating slowing production in China that all wage arrears owed 
their Chinese workforces are paid along with legally mandated severance 
packages. The lively dialogue that preceded the passage of the Labor 
Contract Law in 2007 was healthy, but American multinationals must not 
force labor flexibility and other discredited practices on the Chinese. 
Improving working conditions in the United States and China should 
become a cornerstone of the Strategic Economic Dialogue. This 
conversation should include representatives of unions and civil society 
from both countries. Finally, the U.S. Government should continue to 
support the growth of a civil society in China, as it has in other 
parts of the world.

                                 
