This article has been written by Ayushi Ajay Sharma pursuing the Diploma in International Business Law from LawSikho. This article has been edited by Zigishu Singh (Associate, Lawsikho) and Ruchika Mohapatra (Associate, Lawsikho).
China implements a socialist market economic regime. Agriculture, banking, finance, insurance, real estate, construction, e-commerce, infrastructure, banking, and technology are all a part of the world’s second-largest economy.
Chinese corporate culture is strongly influenced by Confucianism. Confucianism is a traditional Chinese religious system that emphasises on human ethics and morals. Confucianism is a moral code for living a good life and having a good character. As a result, the Confucian notion of Guanxi largely suggests the need for a connected network built on the principles of solidarity, loyalty, modesty, and civility. Secondly, in both business and privacy, China’s hierarchy is strictly vertical and widely respected. Thirdly, in order to safeguard individual reputations, influence, and dignity, Chinese people will take care to save face.
However, it should be noted that these ideals have not slowed down in the previous decade, despite the fact that modern Western corporate techniques have gained ground. As a result, China is increasingly observing worldwide convergence on business cultural rules and international business values. The Chinese are notorious for being risk averse. The decision-making process is governed by strict procedures. After multiple meetings, all relevant persons make decisions, and subordinates are not required to share their opinions. Because decision-makers will analyse problems, alternatives, and solutions from a long-term social perspective, the process may appear to be slow. Your Chinese partners will frown on you for making rash decisions. Hierarchical distinctions must be recognized and attempting to get around them will nearly always cause delays in decision-making. Rather than negotiating contracts, Chinese people prefer forming long-term partnerships. Failure to develop a personal foundation for a professional relationship may result in a failure to fulfill business goals. The process of establishing a connection might take anywhere from a few days to several months. Formal meetings, as well as home visits, invitations to sporting events, long meals, and beverages are all part of the package.
China’s pattern of growth
GDP growth has averaged about 10% per year since China began to open up and reform its economy in 1978, and more than 800 million people have been pulled out of poverty. Access to health, education, and other services has also improved significantly over the same time span. China’s rapid economic expansion has outpaced institutional development, and there are significant institutional and reform gaps that must be addressed in order for China to maintain a high-quality and long-term growth path. To further support the market system, the state’s role must evolve and focus on delivering stable market expectations and a clear and fair business climate, as well as strengthening the regulatory system and the rule of law.
Many of China’s difficult development challenges, such as transitioning to a new growth model, increasing ageing of population, developing a cost-effective health system, and promoting a lower-carbon energy route, are applicable to other countries. Through trade, investment, and ideas, China is exerting a rising effect on other developing countries.
Following 2.3 percent real GDP growth in 2020, China’s economy is expected to increase by 8.5 percent in 2021, mainly due to base effects. The pace of growth is decreasing, owing to the lingering effects of policy and macroprudential tightening, as well as floods and the latest Covid-19 Delta variant epidemic. Although lingering stricter restrictions and cautious sentiment as a result of the recent Delta outbreaks would weigh on consumption recovery, their impact is projected to be mainly compensated in the second half of the year by robust foreign demand and moderate policy support. Near-term risks have shifted to the downside, with periodic outbreaks caused by more transmissible COVID-19 mutations posing a considerable economic threat. Given unfavourable demographics, sluggish productivity growth, and the legacy of excessive borrowing and pollution, China’s economy is likely to face structural headwinds in the medium future. Short-term macroeconomic policies and structural reforms are needed to re-energize the trend to more balanced, high-quality growth.
The administration recently emphasised promoting common prosperity as a fundamental economic goal, indicating a likely shift in policy objectives toward addressing income disparity. Over the medium run, policies aimed at reducing high inequality through more equitable taxes and a reinforced social security system will result in long-term poverty reduction, a greater middle class, and increased private consumption as an economic driver.
Impact of China’s business policies on human rights issues
In recent years, China’s government has increased its participation in a variety of UN and other international organisations, including the global human rights system. It has ratified a number of key United Nations human rights treaties, served on the UN Human Rights Council (HRC) and sent Chinese diplomats to work in the UN human rights system. China has taken a variety of steps that could have an impact on human rights: Under the guise of encouraging economic development, it established the Belt and Road Initiative (BRI) and the Asian Infrastructure Investment Bank (AIIB), and it has emerged as a major worldwide player on social media platforms.
China’s government has strengthened its involvement in a number of UN and other international organisations, including the global human rights system, in recent years. It has ratified several key UN human rights treaties, served on the UN Human Rights Council (HRC), and dispatched Chinese diplomats to work in the UN human rights system. China has done a number of actions that potentially affect human rights: It launched the Belt and Road Initiative (BRI) and the Asian Infrastructure Investment Bank (AIIB) under the pretext of promoting economic development, and it has become a major global participant on social media platforms.
It’s critical to remember why the international human rights system exists, especially for individuals who live in democracies and have access to political participation, an independent court, a free press, and other functional institutions. Simply put, it is because many states fail to defend and abuse human rights, particularly in countries where redress and accountability institutions are lacking. People must turn to institutions that are not under the direct control of their government.
Chinese corporates and human rights
With China’s expanding economic prominence, increased overseas foreign direct investment, and very significant human rights implications, Chinese and international businesses face greater pressures at home and abroad to address human rights issues. The UN Guiding Principles on Business and Human Rights clearly establish the baseline international normative norms on business and human rights (UNGPs). At the UN Human Rights Council in 2011, the Chinese government reaffirmed its gratitude and support for the UNGPs.
Companies must “observe the UN Guiding Principles on Business and Human Rights throughout the entire life-cycle of the mining project,” according to the China Chamber of Commerce of Metals Minerals and Chemicals Importers & Exporters (CCCMC) Guidelines for Social Responsibility in Outbound Mining Investment. There is an increasing urgency for enterprises – including Chinese-headquartered private and state-owned firms, international firms operating and investing in China, and firms with global business ties to Chinese firms – to develop knowledge, tools, and expertise to put human rights into reality. There are several complementary approaches that should be pursued. The development of learning forums on human rights, tailored to Chinese corporate requirements and implications, is one path that has obvious potential.Another option is to engage multiple stakeholders, such as businesses and trade groups, civic society, and international organisations, in constructive and innovative ways.
Merging business and human rights in China
Respect for human rights by Chinese businesses is a novel notion that must be adopted into Chinese corporate culture in order for China’s industries to continue to grow at a rapid pace. Ironically, the image of Chinese corporate irresponsibility may become the primary motivator for Chinese companies to align their operations with human rights.
The People’s Republic of China’s Constitution was amended in 2004 to add provisions protecting private property and human rights. “The state respects and guarantees human rights,” says Article 33 of the Constitution’s chapter on fundamental rights and obligations.
These new constitutional provisions are seen by the Chinese government as a step toward Chinese democracy and a statement that the Communist Party of China (CPC) recognises the need for change in light of the development of the upper and middle classes, who desire property protection.
However, because there is no constitutional court or judicial review process in China, constitutional rights cannot be used as a basis for legal action. This is regarded as the most serious flaw in the Chinese legal system, demonstrating a disconnect between legal discourse and judicial practices. Nonetheless, the Chinese constitution’s articles on private property and human rights provide that the government must strive to respect and promote individual property and human rights. They provide a solid constitutional foundation for the growth of the relationship between business and human rights. The Chinese government adopted the “Socialist Harmonious Society” concept during the 2005 National People’s Congress, officially shifting China’s focus away from economic growth and toward total societal balance and harmony. The concept is prominently displayed in Chinese banners. As a result, businesses have been under pressure to think about corporate social responsibility in order to comply with the new government policy.
China’s government issued its second National Human Rights Action Plan (2012-2015) in 2012, stating that
“The Chinese government’s establishment of a National Human Rights Action Plan is a significant step toward ensuring the constitutional principle of protecting and safeguarding human rights is implemented. It is critical to advancing scientific progress and social harmony, as well as to accomplishing the lofty goal of creating a moderately prosperous society on a global scale.”
The National Human Rights Action Plan has served as a benchmark for evaluating China’s human rights.
Corporate Social Responsibility
The Guide Opinion on Social Responsibility Implementation for State-owned Enterprises Controlled by the Central Government was published by the State Council’s State Owned Assets Supervision and Administration Commission (SASAC) in January 2008. (Guide Opinion). The Guide Opinion is regarded as a significant legal document because it expresses the goal of fully implementing the “spirit of the 17th CPC National Congress and the Scientific Outlook on Development, and [giving] impetus to state-owned enterprises (SOEs) directly under the central government (CSOEs) to earnestly fulfil corporate social responsibilities, in order to achieve coordinated and sustainable development.”
SASAC’s explanation of the Guide Opinion’s background clearly demonstrates that the Guide Opinion is intended to address a new global trend, namely the proliferation of corporate social responsibility (CSR) initiatives such as the United Nations Global Compact, ISO 26000, and multinational companies’ codes of conduct and sustainability reports. However, according to an SASAC representative, CSR guidelines for CSOEs should not only be in accordance with international trends, but also with China’s national and organisational realities.
China has judicial grievance processes enacted into law. The purpose of the Criminal Procedure Law is to “…defend citizens’ personal rights, property rights, democratic rights, and other rights…”
However, China’s judicial system has a number of flaws that make it difficult for regular citizens to obtain justice. The financial and personnel resources needed to run the courts are not distributed equitably across urban and rural areas, with metropolitan areas receiving more resources. The judicial system is also plagued by a number of issues, prompting the CPC Central Committee to issue a communiqué calling for reforms to “uphold the constitution and laws, deepen reforms in administrative law enforcement, ensure independence and fairness in prosecuting bodies and courts, as well as improve judicial practise and human rights protection.”
People with grievances may seek justice through other means, including submitting petitions with government authorities (Xinfang) in Beijing, because the judicial system has failed to resolve the growing number of conflicts and meet public expectations. In practise, petitions that bypass local governments have been regarded as a cause of discontent. Regulations enacted in 2005 aimed to compel local officials to strengthen their system for aiding petitioners, reducing the number of petitioners seeking assistance in the capital.
While the Labor Law, the Law on Employment Contracts, the State Council’s administrative regulations, the ministerial guidelines, and the Supreme People’s Court’s judicial explanations have all contributed to the preservation of labour rights, the practical situation in the factories remains dire. Workers are frequently misinformed about the provisions of a labour contract before signing it, which can result in the contract being voided. Workers have labour contracts with labour dispatch companies in several circumstances. As a result, factories may refuse to accept the workers on an arbitrary basis, resulting in employment insecurity. Many workers confront major barriers in resolving their problems since the ‘All China Federation of Trade Unions’ (ACFTU) does not act as the legitimate agency representing all workers, particularly rural migrant workers.
Issues involving companies
Chinese corporations have been involved in a number of concerns affecting the environment, community health, workers, and customers. Industrial pollution pushed the daily pollution index in large cities to dangerously high levels, resulting in the emergence of “cancer towns” with disproportionately high cancer rates. The lack of an autonomous labour union is a prominent concern among labour issues. For consumers, a recent rash of food safety issues (tainted milk, for example) involving large corporations has created concerns about the safety of Chinese products in general.
In order to uphold the objectives stated by both the Chinese government and the international community on the correct role of business in serving justice, enterprises must develop their own internal mechanisms based on human rights-based access to justice principles.
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