PRESS RELEASE: AUGUST 01, 2006

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Wal-Mart first China union could mean more to come
Mon Jul 31, 2006

By Lindsay Beck and Jerker Hellstrom

BEIJING/SHANGHAI, July 31 (Reuters) - Employees of retail giant Wal-Mart have set up their first trade union in China, a move analysts said on Monday could lead to more unionisation in the sector.

Twenty-five employees of a Wal-Mart store in Quanzhou, in the southeastern province of Fujian, established the union, a branch of the state-controlled All-China Federation of Trade Unions, on Saturday, Xinhua news agency reported.

"One of the major tasks of the ACFTU in 2006 is to push foreign-funded or transnational companies to unionise," Xinhua cited Xu Deming, the union's vice-president, as saying.

Wal-Mart Stores Inc., which set up shop in China in 1996 and employs more than 30,000 at stores across the country, has long resisted pressure in the United States to unionise its workers there to win better pay and benefits.

But analysts said that in China, where independent trade unions are illegal, the move at the Wal-Mart store in Quanzhou may signal a push toward unionisation in the retail sector.

"Foreign companies are often a barometer of where the government is shifting its policies," said John Gruetzner, executive vice-president of Intercedent Ltd, an investment advisory firm.

China has in past threatened foreign firms with blacklists and legal action if they did not set up trade unions at their China units, but Gruetzner said he thought the Wal-Mart case was more about developing the services sector.

"I think it's a shift in sector focus. There's an interest in making sure the service economy moves forward," he said.

Wal-Mart's main competitor, French retailer Carrefour, said it already has unions at its China branches.

"We established labour unions at a very early stage," said a company spokesman in Shanghai. "Last year we launched a plan to set up unions in places where we have none now," he said.

Analysts have said the government's concern with establishing a presence for the state-run union in foreign firms was also about a battle for influence.

With increasing numbers of Chinese workers leaving the state sector and working in private and foreign companies, the drive could be aimed at trying to bring more employees under state control.

A spokeswoman for Wal-Mart in China said she did not know anything about the Quanzhou union and it was not clear that there were any similar moves at other Wal-Mart branches.

But once the precedent in Quanzhou was set it could be hard for the company, which has long said it opposed third-party representation, to resist more unionisation in China, analysts said.

"If they do it once, they may be pressured to repeat the same thing in other areas," said one analyst.

Belonging to the trade federation does not necessarily mean higher labour standards in China, which was long been criticised for producing cheap goods at the expense of fair wages and working conditions.

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