MNCs in China: Regulation and Reality

Abstract

In November 2004 Wal-Mart announced that its workers in China could set up unions. This is a change in position for the U.S.- based retail giant, which has resisted the organizing of its employees in every country that it has operations. In this paper we argue that Wal-Mart’s change in policy in China is related to both host-country and country-of-origin factors. The reality of industrial relations (IR) in China is that there are two tracks. One track is for stated-owned enterprises, and the other track is for private firms including MNCs. Local governments compete for foreign direct investment (FDI) and relax their enforcement of labor standards to attract or keep MNCs. This allows the Chinese government to appease foreign critics of its workplace practices while giving Wal-Mart a favorable public relations position in the United States.