• Wed
  • Dec 24, 2014
  • Updated: 7:54pm
BusinessChina Business
LABOUR

More vocal Chinese workers give foreign investors pause

Social instability in China has become a growing concern for foreign firms as staff protests and politics may jeopardise closing of deals

PUBLISHED : Thursday, 06 March, 2014, 9:53am
UPDATED : Monday, 10 March, 2014, 12:27pm

Social instability in mainland China is increasingly a major concern for foreign investors, with the deal-making process often involving more than just the buyer and the seller - as local governments and even workers are capable of tearing up carefully negotiated agreements at the 11th hour.

A recent example of how local politics and social discord can jeopardise multimillion-dollar deals in the world's second-biggest economy even after the buyer and the seller have signed an acquisition accord was the failure late last year of Charoen Pokphand, the industrial giant controlled by Thailand's richest man, Dhanin Chearavanont, to cash out of an investment in a retail business in mainland China.

Workers at CP Lotus had staged protests over wages and concerns about job security after the announcement of the mainland supermarket chain's sale to a local competitor, forcing Beijing's municipal government to step in.

Once you get attention from the government, it will be not just about business
SOURCE

People familiar with the deal said that made it impossible for the buyer and the seller to complete it before the deadline.

"I think it's a classic case showing how difficult foreign investors can find it to make money in China," one source said. "When you sell or buy something in China, or even just want to maintain your normal business in China, there are more non-business factors for you to consider."

In December, CP said it had been unable to complete a deal with homegrown chain Wumart Stores in which Wumart would have taken over a large number of CP Lotus stores in mainland China.

CP did not elaborate on why the two parties had failed to complete the deal before the deadline, only saying they had been unable to make "sufficient progress" on some key details. Wumart said the two parties had missed the deadline and it had no interest in extending it.

When the deal was first announced in October, Wumart said it wanted to acquire most of the CP Lotus supermarkets in mainland China in a share-swap deal worth HK$2.3 billion.

But a few days later, staff from at least eight CP Lotus stores in Beijing, worried about their jobs and salaries, launched a city-wide protest at their stores that lasted for many days. Some staff even tried to block senior CP executives from entering the stores to finish making arrangements for the handover to Wumart, local media reports said.

The case quickly attracted the attention of Beijing's city government, which urged CP to settle the strikes and protests quickly in the interests of "social harmony", a source said.

"Once you get attention from the government, it will be not just about business," the source said. "For any local governments, the first priority is to talk about politics and social stability rather than business."

It was not the first protest by mainland workers about their wages and benefits, and many foreign investors have been complaining that mainland China is no longer a place to find cheap labour.

In June, Chip Starnes, a businessman from the United States, was held hostage by workers at a mainland factory he had founded and invested in, when he tried to negotiate with them over lay-offs and compensation. The case made international headlines and received attention from Washington and Beijing.

Starnes was eventually freed unharmed after a peaceful resolution of the protest, but the case alarmed other foreign investors, who were surprised by how unstable the business environment in mainland China could be.

Xu Zhun, an assistant professor of economics at Renmin University in Beijing, said: "In the past, the government might have been friendlier to capitalists. But as the working class is now becoming stronger in China, the government may take a more neutral stance in some situations."

Additional reporting by Keira Huang

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guy.pant
Would seem ironic for Washington to speak against workers' rights in China.
 
 
 
 
 

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