It is time to get into compliance with your labor practices in China.
When the 2008 labor law was published it was as usual in China not fully enforced. Now, 9 years later the message from the PRC Ministry of Human Resources and Social Security (“MOHRSS”) is to get in line or get in trouble.
These Measures are set to take effect on January 1, 2017 and will apply to all China employers, domestic and foreign. So if you have employees or an operation in China and you have not already done so, now is the time to check that you are in full compliance.
Your local labor authorities will have the task to investigate all employers and rate them on an scale which will decide further inspection frequency.
Important criteria includes if there is an HR manual in the company defining its internal labor rules, labor contracts in place with 100% of the employees, compliance with rules on working times, overtime, female workers, underage workers and employer contributes all mandatory social insurances.
From 2017 around 6 000 European companies will be required to report their code of conduct activities. This includes how they work with suppliers in China and other low cost countries.
The new EU requirements about companies sustainability reporting were adopted in 2014 but are now taking effect. It affects EU companies with more than 500 employees but some countries have set lower limits. One of those countries is Sweden where the limit is 250 employees.
Environmental matters, social and employee related matters, safety, respect for human rights, anti-corruption and bribery should be covered. The reporting should include a description of internal policies including due diligence processes and also the outcome of these policies. Further the reporting should include the risks related to the matters described above and how the company manage these risks. Non-financial key performance indicators relevant for each company´s business should also be presented in the reporting.
“Few European companies have a good grasp of the actual situation at their suppliers in China and lack knowledge about the regulatory and practical environment”, says Per Linden, CEO of Scandic Sourcing in Shanghai.
Scandic Sourcing has worked for over 10 years on site in China and Asia with supplier audit programs and have developed methodology to work with continuous improvement programs for foreign companies suppliers in Asia. The Scandic Supplier Code of conduct program won the 2012 Swedish Chamber of Commerce innovation price. With new focus on sustainability reporting in Europe this becomes even more important.
As the Chinese stock market went plummeting in a 23% fall during the first week of trading in January of this year, doubts have been raised about the state of the Chinese economy and what broader implications a general slowdown might have. After giving a brief overview of the current situation, Scandic Sourcing talks to renowned financial journalist Roger Aitken to get a grip on where the Chinese economy is heading.
Stock market chaos
The Shanghai composite index is down almost 40% since its June 2014 high, and growth is continuing to decline especially in the manufacturing sector. Beijing’s unpredictable response to the issues are sometimes contributing factors to the fall such as the use of circuit breakers which shut down trading once the market had fallen below 5%. This new practice caused even more panic and was quickly suspended.
The January crash came after a weak year of 2015 that saw the lowest growth numbers in a quarter century, halting at 6.8% after a slow last quarter with especially poor growth in the industrial sector. This ties in to the broader story of China’s ambition to transition from a manufacturing driven economy to a consumption driven one. Thus, large parts of the Chinese service sector is growing, while traditional industrial sectors continue to decline.
What exactly is 'Smurfing'?
The shaky economy has also triggered a mass exodus of capital last year which continues in 2016 as well. Chinese citizens are not entirely free to take capital out of the country, though many are trying to do so illegally. Currently, the cap is set to $50 000/year. This is overcome by a procedure known as “Smurfing”, where wealthy Chinese employ the services of relatives to help them get money out of China. One woman, using than 140 relatives and friends was able to convert $7 million from renminbi into dollars. Over the last year, companies and individuals moved nearly $1 trillion from China which has continued to lessen confidence in the Chinese economy.
The Chinese central bank is fighting the pressure by selling dollars from its currency reserves and purchasing renminbi. China's foreign currency reserves is taking a toll, sinking by $108 billion in December and an additional $99 billion in January, to $3.23 trillion down from $4 trillion a year and a half ago.
To straighten out where things are headed and what implications China’s economic turmoil might have for the world at large, Scandic Sourcing talks to financial journalist Roger Aitken, former Financial Times staff writer in London who writes on markets, exchanges, trading and IT. Currently he contributes to Forbes and other titles.
If China’s economy keeps stumbling, is there a risk for a domino effect a causing global recession?
It seems like the extreme stock market turmoil has not caused any great harm to China’s economy and the individual Chinese saver. How come?
Scandic Sourcing has developed a new Procurement Solution on a subscription basis. For a monthly sum, your company gets a package of procurement and supplier management services to ensure that your supply chain in China runs safely and without interruptions.
Scandic Sourcing evaluates your supplier pool to identify potential risks and prevent interruptions in your supply chain. We make sure to communicate directly with the factory owners or the management to circumvent costly middlemen and third-party agents. We can communicate directly with all layers of the suppliers organisation to get you the best price and conditions and build transparent and long-term relations with the suppliers in the process to ensure favorable working conditions.
We also handle quote requests and organise the bidding process for new orders. We also do continous research to keep you updated on the cost structure for your industry in China, including raw material /material costs and market price.
Scandic Sourcing can be the partner in China you can trust; it doesn’t only save you regular trips to China or having to station employees here, but also makes sure your supply chain is managed cost-efficiently and that it is stable and risk free. The subscription service also includes reduced rates on our regular services such as supplier searches, field audits and supplier code of conduct programs.
The Swedish Plastic Component company KB Components is in a start-up phase in China and needed help to construct and decorate an office inside their factory in Wuxi, China. They hired Scandic Sourcing who provided a project manager to oversee the project, attain local permits, and handle negotiations with third parties. With the help of Scandic Sourcing’s project management, the office was constructed and completed within the time frame and the budget set out by KB Components.
KB Components is one of the leading suppliers in Scandinavia of advanced plastic components with their bulk of their operations located in Sweden and Lithuania. As part of a global growth strategy, KB Components is following their customers and establishing factories locally where their customers operate. Thus they have established a factory in Wuxi, West of Shanghai to reach the Chinese market. Their main focus is to construct a factory that is comparable in standard with other factories in the KB-group. KB Components also needed to establish an office in the factory to gather all parts of their staff under one roof and hired Scandic Sourcing to facilitate the construction, project manage the day to day construction, and to negotiate and handle the decoration of the office.
Scandic Sourcings project manager Edvard Olsson negotiates with the design firm in charge of decorating the office.
Edvard inspects the work inside KB's factory.
The project manager that Scandic Sourcing provided had three main goals: to ensure that the construction and decoration were done according to the client’s specifications and requirements, aim to have the factory ready for use by October 31, 2015, and to minimize the clients cost and risk. These targets were reached and the construction was finished on time, ready to serve KB Component's China expansion.
”Scandic Sourcing have handled and followed through with the project in a detailed and professional manner and have during the whole project had an open and clear communication. This has given us good insight and lessened our concern in the headquarters in Sweden, which has been important since this is a green-field operation", says Robert Ramner, CEO at KB Components about Scandic Sourcing's project management.
The finished result
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