CCP reshapes society + New smart SUV + Overtime ban
CCP as the new (old) shaper of society
Smart becomes city SUV under China’s influence
Beijing: “Too many EV companies on the market”
Is Alipay facing break up?
Investors protest Evergrande
Bachelet denounces lack of access to Xinjiang
Tools: 996 declared illegal – China’s labor law is changing
Dear reader,
Beijing’s regulatory frenzy is hitting more and more sectors and areas of life. At first, it looked as if Beijing was merely expanding its control over the economy. But now regulators are also exerting more and more control over the lives of citizens. The CCP is now even restricting private tutoring and online gaming. Ning Wang analyzes: The authorities’ crackdown is meant to strengthen cohesion in society, to make people subordinate to the CCP. Re-education and thought control are back on the agenda.
For many years, the Smart was a rather unusual part of the cityscape: Hardly any other car could be parked crosswise on parking spots. A model for the future in times when ever-larger cars are clogging up cities and parking spaces are becoming scarce? Unfortunately no. The car flopped, its design often mocked as “elephant shoe” or “shopping cart”. Now the brand’s owners – Daimler and Geely – are planning its relaunch. And they’re doing so with a four-meter-long compact SUV, according to Frank Sieren. From a technical aspect, the concept unveiled at the IAA seems convincing. However, instead of taking an example from the success of the world’s best-selling mini e-car, the Wuling Hong Guang Mini EV, Smart is pushing into the highly contested city SUV segment with a new model. The production of affordable electric cars for the masses, on the other hand, is left to the Chinese competitors.
China’s economic rise is based on cheap labor. An army of hundreds of millions of migrant workers has catapulted the People’s Republic into the ranks of the richest countries at a rapid pace in recent decades. In the IT industry, overtime has been the order of the day in recent years, to the point where deaths have been caused by exhaustion. But the state is now cracking down harder on the 996 culture. And wage laborers are also to be better protected from exploitation. Both the judiciary and the government are pushing ahead with the advancement of labor laws. This is what Dezan Shira’s experts talk about in our Tools section today.
China’s authorities have targeted one economic sector after another with tough regulations in recent months (China.Table reported). But this is only taking place on the surface. The party is also expanding its influence over personal life – the way people live, how they behave, how they spend their free time. This is by no means new. In the first communist era under Mao Zedong, the leadership also wanted to re-educate its citizens and turn them into different people. Since Deng Xiaoping’s reforms, this has since come to an end, and private life has become a private matter once more. Under Xi Jinping, re-education and thought control are back on the political agenda.
Regulations, bans and rules are an indication of the path the People’s Republic wants to take under state and party leader Xi. With regulations, he aims to correct the market order, promote fair competition, and protect both consumer rights and the socialist market economy system. This is how the state-run People’s Daily called the government’s approach.
Loyal to the party
Recently, Xi spoke of achieving “common prosperity”. The goal: to reduce inequality in the formally socialist People’s Republic. He called on China’s billionaires to contribute to the “welfare of the motherland” (China.Table reported). The chairmen of the big corporations then tried to outshine each other. They set up charitable foundations and pledged billions in donations. The signal to Xi: We have understood the message and are bowing to the CCP’s pressure.
Western media assumed that Xi has unleashed a wave of so-called “purge” campaigns in all directions to bring the party back more to the center of people’s daily lives and private businesses. “It’s striking and significant. This is clearly not a sector-by-sector rectification; this is an entire economic, industry and structural rectification,” the Washington Post quotes Jude Blanchette, a China expert at the Center for Strategic and International Studies (CSIS) in the US.
Social stability through equal access to education
How far-reaching Beijing’s current actions are is particularly evident in regulations in the education sector. The sector has been “eaten away by capital“, Beijing argues (China.Table reported). It was only in July that authorities announced a major overhaul of the private education sector, which they implemented within weeks. Companies offering curriculum-related courses were banned from making profits or raising external capital. They now must register as non-profit organizations by the end of the year. Prices for tutoring are to be regulated by the state in the future. But many parents are not pleased with this move. Instead of being happy over tutoring prices being calculated according to parents’ income in the future, they are concerned that their children will then only be exposed to more competition. After all, with lower prices, more parents will be able to afford access to tutoring for their offspring.
The state not only interferes in school education but also when it comes to children’s education. Recently, Beijing’s new regulatory fury hit gamers. Children are now only allowed to play online games for up to three hours a week. Some parents see this as an invasion, by which the state plans to become the focal point of families and take over child-rearing. In Beijing’s crackdown on the entertainment industry, Beijing directly dictates what is allowed and what is not (China.Table reported).
Beijing’s regulations boil down to a systemic competition between China and the West. Xi Jinping wants to portray China as strong and superior to the West and is relying internally on a discussion of values that seeks above all to enforce communist virtues. This is a response to a trend that has long worried observers. When the Cultural Revolution of the mid-1960s destroyed traditional values, no salutary new beliefs took their place as the country opened up and experienced turbo growth. It was all about success, advancement, and consumption.
Even state media wondered at times why there were so many egoists in China. The party has recognized this, and at the beginning of his term, Xi gradually reintroduced Confucian rituals to boost morale. Confucius calls for cohesion in society. These ancient values suit the party well, because, in the spirit of proper order, citizens should submit to its authorities. At least that was the interpretation of state philosophers of the imperial era. A focus on education and learning, the preservation of morals, fidelity in marriage, the heeding of rituals, and general moderation are also part of this thought construct. Everything seems to suggest that Xi wants to pick up here.
Preemptive obedience on the rise again
Xi continues these thoughts, but takes a less than subtle approach. Flashy appearances on TV shows or fan worship for young female singers are now once again considered a threat to public mores, as are LGBTQ topics or exciting video games. Banned!
What is dangerous about the current strategy is that Beijing is extending its control further and further, and no one can escape the regulators: Neither the rich nor the companies. Whether this authoritarian strategy will pay off, in the long run, is questionable. By setting values and morals (according to Chinese understanding), it might be possible to better and, above all, much more effectively involve and even convince its own citizens and the West to have a discussion about values. But in China, there is no separation of powers and no neutral weighing of interests.
Xi is expected to be confirmed in office for a third time at the People’s Congress next autumn. He himself laid the groundwork by a constitutional amendment a few years back. This means that the president’s term of office is no longer limited to a maximum of ten years. Xi is able to remain in office for life. Xi’s unlimited power is currently being reinforced even more by the preemptive obedience of the authorities in the country. They continue to act according to the motto: Trust is good, but control is better.
Daimler and its Chinese partner Geely have presented a study for a new electric SUV of the joint Smart brand at the IAA in Munich. The Golf-sized city SUV goes by the name of Concept #1 and is set to go into series production next yearas a five-seater.
“The new Smart will be cool, sexy and grown-up, instead of cute and playful,” Daimler design chief Gorden Wagener said of the enlarged Smart at the presentation. “We have taken the opportunity to reinvent the brand.” At 4.29 meters long, the SUV is more than one and a half times the length of the Smart ForTwo and nearly as long as Mercedes-Benz’s compact electric crossover EQA.
For the interior, the designers were inspired by Tesla’s Model 3: There is no driver display behind the steering wheel. The center of the cockpit is a 12.8-inch (approx. 33 cm) touchscreen on which an animated, adaptive avatar serves the needs and habits of the user.
“Through the cooperation with Geely, we have connectivity that we could never have achieved on our own or with European partners,” says Smart’s European head Dirk Adelmann. Prices are expected to be in the range of the VW ID.3. That starts at around31,000 euros.
Design from Germany, technology from China
Mercedes designed the car. Geely is responsible for technology, development and production. The Smart car will be manufactured exclusively in China from 2022, primarily at a new factory in Xi’an that opened this year. The plant will have an annual capacity of around 150,000 vehicles, the companies announced in January 2020.
The “Smart” joint venture, which was established in 2019 and is based in Hangzhou Bay in the eastern Chinese province of Zhejiang, is owned equally by the two groups.Daimler and Geely have each invested 2.7 billion yuan (355 million euros) in the joint venture. The Smart parent plant in Hambach, France, has already been sold toIneos Automotive, a British manufacturer that emerged from the chemical group of the same name.
The idea of the“Smart” brand goes back toNicolas Hayek, the inventor of the Swatch watch, who died in 2010. After the Swiss entrepreneur had been rebuffed by VW, Hayek had been able to persuade Daimler in the mid-1990s to go along with his idea of a car that would be like a Swatch watch on wheels: an electric car with few parts, cheap, reliable and easy to implement. This put him ahead of his time. Daimler, however, brought him to his knees. The Smart became an expensive two-seater with a petrol engine and a jerky automatic. Daimler believed that the time for electric or hybrid drives had not yet come, and theStuttgart company missed the opportunity to become a trendsetter.
When the Smart was introduced in 1997, Hayek distanced himself, and he was right. And he was right. In Germany, the smallest car, often derided as a “shopping cart”, never made it out of its niche.Bankhaus Metzler estimates that Daimler made a loss of around four billion euros with the Smart. The Smart did not become an environmentally friendly car with an electric drive until 2018, more than 20 years later. But by then the Chinese had long since taken over the segment.
The brand was never strong in China
China is now building the “Swatch cars” Hayek had in mind: minimalist, low-cost e-cars. The Wuling Hong Guang Mini EV(China.Table reported) has overtaken Tesla’s Model 3 in China in absolute e-car sales and is by far the best-selling e-car in the world’s largest market. The brand sold30,706 e-vehicles in July alone, with prices hovering between the equivalent of €3,500 to €4,800 depending on features. It was developed jointly with US manufacturer General Motors. GM also rose to third place among carmakers with the highest sales of e-cars in the first half of 2021, after Tesla and VW, thanks to the success of the Wuling.
However, the Wuling vehicles achieve nowhere near the margins that larger vehicles do. “We very much respect the value of the Smart brand,”says Geely founder Li.“The brand has a unique appeal and great commercial value.” Whether that’s actually the case remains to be seen.The Concept #1 is undoubtedly a handsome car. Thelack of a B-pillar is particularly convincing.
The technical data also sounds promising: thesmart concept is to be fitted with a lithium-ion battery with a capacity of slightly less than 70 kWh. The battery is supposed to create a range of a good 440 kilometers. Fast charging and cloud-based over-the-air software updates are also planned – so a visit to the workshop is no longer necessary. This means additional features can be installed at a later date, such as a heated steering wheel. That’s all good, but it still doesn’t set the new Smart apart from the Chinese competition, which already offers similar features in production vehicles.
“We’ve kept the typical Smart look, but made it much cooler,” says Gorden Wagener, Chief Design Officer of the Daimler Group. Whether customers will actuallyrecognize the vehicleas a Smart, however, is open todoubt. In addition, the brand has never been strong in China. Time and again, you could see traditional 2-seater Smarts on the road, on which the owners unceremoniously stuck a Mercedes star. However, the Smart Concept #1 will also be offered in Europe from next year.
Car Industry
Geely
News
Beijing wants ‘bigger and stronger’ e-car firms
China wants to consolidate its own e-car industry and bring out “bigger and stronger” companies in the field. “We currently have too many EV companies in the market,” Minister of Industry and IT Xiao Yaqing said at a press conference yesterday. The companies are mostly small at present, and the government supports mergers and restructuring in the EV sector, Xiao said, according to Bloomberg. There are currently about 300 EV companies in China. The government is working on measures to reduce overcapacity in the EV sector and concentrate resources on key production centers, he said.
The growth of the EV sector is also based on generous government subsidies. Between 2016 and 2020, the sector received the equivalent of €4.3 billion in subsidies from the central government. The largest single recipient of subsidies was BYD with the equivalent of 525 million euros. Tesla received just under 280 million euros. The sharp rise in sales meant that ten times more subsid ies were paid in 2020 than in 2016, despite the fact that subsidies per e-car fell by 80 percent, according to business portal Caixin. Provincial governments have given additional tax breaks and other incentives in recent years to get e-car companies to set up shop. The current goal is to phase out all subsidies and incentives by the end of 2023.
In August, the NEV sector in China reached a new sales record. In the previous month, 320,000 electric, hydrogen or hybrid-powered cars were sold, the China Association of Automobile Manufacturers announced. NEVs accounted for 18 percent of all car sales in August, according to association data. The government is aiming for a 20 percent share by 2025. The target will most likely be reached ahead of schedule. At the same time, the total number of cars sold in China fell 18 percent year-on-year. The reasons cited are the chip shortage and new emission standards. nib
Car Industry
Electromobility
Industry
Subsidies
Should Alipay be broken up?
According to a report by Financial Times, authorities want to break up fintech group Ant Group’s payment service Alipay and create a separate platform for the company’s credit business. Ant is also expected to hand over all collected user data for customer credit assessments to a new joint venture that also involves two state-owned companies, FT reported, citing two people familiar with the matter. Ant itself has not yet commented on the issue.
It was only in autumn of last year that Beijing briefly banned Ant’s IPO. The reason given at the time was that Alibaba founder Jack Ma had allegedly not fulfilled the disclosure requirements. Ant is the financial arm of e-commerce platform Alibaba and has become one of the most successful providers of consumer loans in China in recent years. Already, one in five loans in the sector is issued by Ant (China.Table reported). niw
Alibaba
Alipay
Ant Group
Finance
Loans
Protests against Evergrande
The Chinese real estate group Evergrande is facing increasing protests. On Monday, about 100 investorsstormedthe struggling group’s headquarters, demanding repayment of their investments in overdue securities. In Guangzhou, angry homebuyers surrounded a local housing office, calling on Evergrande to resume construction of the homes. More protests against the real estate developer in other parts of the country were shared on social media platform Weibo, Bloomberg reports.
Evergrande has accumulated a mountain of debt equivalent to over US$300 billion (China.Table reported). Nearly half of the debt is owed to suppliers and trading partners, Bloomberg reported. The group has also received down payments from 1.5 million homebuyers who are worried about their savings (latest as of December 2020). Accordingly, Evergrande’s decline carries a high potential for economic and social conflict. nib
Economy
Evergrande
Finance
Real Estate
Bachelet deplores lack of access to Xinjiang
The UN High Commissioner for Human Rights, Michelle Bachelet, has denounced the lack of access to Xinjiang province. “I regret that I am not able to report progress on my efforts to seek meaningful access to the Xinjiang Uyghur Autonomous Region.,” Bachelet said during the opening of the UN Human Rights Council sessions on Monday, according to Reuters. The UN human rights envoy is trying to investigate reports of serious human rights abuses against Muslim Uighurs. Her office has been negotiating access to Xinjiang since as early as 2018 (China.Table reported). Bachelet’s effort is actively supported by more than 40 countries (China.Table reported). Bachelet plans to soon release a report on the “available information on allegations of serious human rights violations” in Xinjiang. nib
Human Rights
Michelle Bachelet
United Nations
Xinjiang
Tools
“996” declared illegal – China’s labour law in flux
By Zoey Zhang (Dezan Shira Associates)
Chinas oberstes Gericht hat entschieden, dass die umstrittene “996”-Überstundenregelung (Arbeit von 9 bis 21 Uhr an sechs Tagen in der Woche) illegal ist und richtet sich damit gegen die übermäßigen Arbeitszeiten, die in chinesischen Internetunternehmen üblich sind.
Am 26. August 2021 haben der Oberste Volksgerichtshof (SPC) und das Arbeitsministerium (MOHRSS) gemeinsam einen Leitfaden veröffentlicht, der zehn typische Fälle von Überstunden illustriert, die alle von Arbeitnehmern erstritten wurden. Die Behörden erläuterten die Rechtsgrundlage für das Urteil in jedem Fall.
In one case, a worker at a parcel delivery service was dismissed after refusing to work overtime under the “996” policy. The worker requested arbitration and the arbitration court ordered the company to compensate the worker with 8,000 RMB (1,050 euros). The court found that the parcel delivery company’s “996” labour policy was a serious violation of Chinese labour law.
In anderen Fällen geht es um Überstunden und die entsprechende Bezahlung, einschließlich Entschädigungen für Verletzungen, die während Überstundenarbeit auftreten.
In einem anderen Fall wurde ein Arbeitnehmer namens Li von einer Zeitarbeitsfirma zu einem nicht näher bezeichneten Medienunternehmen entsandt. Li arbeitete regelmäßig mehr als 300 Stunden pro Monat und nahm sich in einem normalen Monat nicht mehr als drei Tage frei. Am 1. Dezember 2020 fiel Li in einer Toilette am Arbeitsplatz in Ohnmacht und starb nach einer fast 12-stündigen Nachtschicht an einem Herzinfarkt. Lis Arbeitgeber hatte keine Unfallversicherung für ihn abgeschlossen. In seinem Urteil bestätigte das Gericht, dass sowohl der Zeitarbeitsdienstleister als auch das Medienunternehmen für den Tod von Herrn Li verantwortlich seien, und wies die beiden Unternehmen an, seine Familie mit 766.911 RMB (100.700 Euro) zu entschädigen.
The landmark Supreme Court ruling and labor dispute cases are a sign that China is cracking down on the grueling overtime culture in the tech industry. This comes amid the widespread crackdown on the sprawling private tech sector, and the campaign to promote “shared prosperity” to reduce inequality(China.Table reported). All of this is intended to dampen public discontent with immense social and economic constraints.
Cracking down on brutal overtime culture
Since Alibaba’s Jack Ma first called the “996” culture a “blessing” in 2018, the public backlash against the extreme overtime culture in Chinese society seems never-ending. Earlier this year, two employees of Pingduoduo (PDD), a fast-growing e-commerce platform, died unexpectedly, reviving debates about “996.” The death of a young PDD employee once again caused public outrage. She had died after working a series of excessively long shifts.
No wonder, then, that the leadership is raising its voice on labour rights issues. Recent developments may well lead to greater control of the labour market. For example, on June 23, Siemens Numerical Control was fined by the local government in Nanjing for violating working time regulations. Some administrative regions, such as Beijing, have also reportedly begun to review the implementation of labor laws and regulations in local companies.
In the face of this increased external regulatory pressure, China’s leading tech companies have finally begun to relax harsh working conditions. Since June, popular short-video apps Douyin (the Chinese Tiktok) and Kuaishou have abolished the “big week/small week” policy – a practice that mixes five-day weeks and six-day weeks.
Tencent-backed game studio Lightspeed & Quantum Studios, which has developed popular games such as Game for Peace (the Chinese version of PUBG), has decided to allow its employees to leave the office at 6pm on Wednesdays and no later than 9pm on other days of the week.
Still, not all workers agree with the change in overtime rules, especially those who need to meet key performance indicators (KPIs) or want more overtime pay. According to a Caixin report, employees at Bytedance, which owns Tiktok and Douyin, found that their wages shrank by 10 to 20 percent compared to previous months as overtime pay withered under the less demanding labor policy.
Safeguarding the rights and interests of day labourers
Compared to permanent employees who can rely on arbitration tribunals and local regulators to protect their labor rights, millions of casual workers such as couriers, food delivery drivers, and app drivers have more difficulty protecting their rights.
In January, a food delivery driver for Alibaba-operated takeout platform Ele.me set himself on fire outside a store in the eastern Chinese city of Taizhou over a pay dispute. In September last year, an investigative report titled “Delivery Man Trapped in System” went viral on popular Chinese social media platforms, sparking a heated discussion. The tech company’s algorithm was said to have shortened delivery times for delivery drivers and driven them to race against time on the road. In April, Beijing Satellite TV aired a segment about a high-ranking city official who disguised himself as a food delivery driver. In that role, he had earned only five euros within a day. All this news has caused public unrest.
In response, Chinese regulators have forced tech companies to pay more attention to the rights of casual workers, known as gig workers, through a series of measures.
On 22 June , eight authorities published guidance on protecting the rights and interests of workers in “new forms of employment”, such as couriers, food delivery and ride-sharing drivers.
On 23 June, seven authorities, including the Ministry of Transport, issued a statement on the rights and interests of couriers. The statement calls on courier companies to hire workers directly and to pay accident insurance for courier employees in proportion to the average local salary or turnover.
On 27 July , seven authorities, including the State Agency for Market Regulation (SAMR), published guidance urging online food delivery providers to improve their remuneration. They should also introduce a proper mechanism for recording the working hours of their delivery staff.
The reaction of the capital market forces adjustments
Shares of delivery services fell dramatically in the two days following the release of the Ministry of Transport’s directive to strengthen protections for courier drivers. In contrast, shares of short-video app Kuaishou rose nearly five percent on June 25, the day after the announcement of the repeal of the “big/small weeks” policy, according to Caixin.
From the investors’ point of view, the tightened labour protection threatens to drive up the costs of listed companies. This could reduce the return on investment. In order to survive in the market, the companies concerned may have to rethink their competitive pricing strategies.
What Chinese labor law says about overtime
Under Chinese law, employees may not work more than eight hours per day or 40 hours per week. Companies must limit overtime to 36 hours per month. Despite the current law, workers are often discouraged from recording overtime correctly.
For beginners to the world of Chinese labor law, we divide the laws into the following categories:
The standard working time system: According to this system, an employee’s working day should not exceed eight hours, and the average working week does not exceed 40 hours, which corresponds to a five-day week. Employees are entitled to at least one rest day per week, and the fixed overtime rates apply to longer working hours. Most employees fall into this category.
The holistic hours worked system: under this system, hours worked are accumulated over a period of time (weekly, monthly, quarterly or annually). The average number of hours is then calculated based on this period. On the whole, this system is best suited to work assignments with irregular shifts, such as seasonal or project work. Overtime is charged for hours worked in excess of the standard per cycle. These rates are the same as those in the standard work schedule system for overtime and work on holidays. However, this system does not include a day off. Before a company can implement this system, it must first submit its plan to the local labor office and obtain its approval.
The system of non-fixed (flexible) working hours: This system is suitable for workers whose working hours are difficult to measure. Workers with such a work schedule system are usually paid like salaried employees. This salary is a fixed amount paid per period, often monthly. Under the non-fixed work schedule system, there are no overtime costs. While the employer is required to maintain reasonable hours of work and rest, this is at the employer’s discretion. This system also requires the approval of the local labour office before implementation.
How companies should prepare
China’s changing labor system may have a direct impact on the hiring practices, employment policies, organizational restructuring, and specific business development regulations of many companies in the technology and related sectors.
To learn more about employment law compliance in China and avoid employment litigation, please read our guide to human resources and payroll in China or contact our human resources experts and attorneys at china@dezshira.com.
This article first appeared in Asia Briefing, published by Dezan Shira Associates. The firm advises international investors in Asia and has offices in China, Hong Kong, Indonesia, Singapore, Russia and Vietnam.
Chinese Communist Party
Society
Tech Crackdown
Executive Moves
Jörg Brosemann takes over the position of actingprincipal of the German School Shanghai Yangpu (DSSY). He was previously Deputy Headmaster. Susanne Hess, previously principal at the German School Shanghai Hongqiao (DSSH), is working in school management across both locations this school year. Heiko Baum, who has been principal at DSSH since the 2020/21 school year, will also take over administration at Yangpu.
Dessert
Breakdowns and mishaps are no problem for the operator of this repair shop in Beijing on three wheels. He has new inner tubes ready for cyclists, and scooter motorists are also served when they have run over a nail again, causing a flat tire. Unlike in Germany, however, a fee is charged for pumping up the tire – even if you have to do it yourself.
Tools: 996 declared illegal – China’s labor law is changing
Dear reader,
Beijing’s regulatory frenzy is hitting more and more sectors and areas of life. At first, it looked as if Beijing was merely expanding its control over the economy. But now regulators are also exerting more and more control over the lives of citizens. The CCP is now even restricting private tutoring and online gaming. Ning Wang analyzes: The authorities’ crackdown is meant to strengthen cohesion in society, to make people subordinate to the CCP. Re-education and thought control are back on the agenda.
For many years, the Smart was a rather unusual part of the cityscape: Hardly any other car could be parked crosswise on parking spots. A model for the future in times when ever-larger cars are clogging up cities and parking spaces are becoming scarce? Unfortunately no. The car flopped, its design often mocked as “elephant shoe” or “shopping cart”. Now the brand’s owners – Daimler and Geely – are planning its relaunch. And they’re doing so with a four-meter-long compact SUV, according to Frank Sieren. From a technical aspect, the concept unveiled at the IAA seems convincing. However, instead of taking an example from the success of the world’s best-selling mini e-car, the Wuling Hong Guang Mini EV, Smart is pushing into the highly contested city SUV segment with a new model. The production of affordable electric cars for the masses, on the other hand, is left to the Chinese competitors.
China’s economic rise is based on cheap labor. An army of hundreds of millions of migrant workers has catapulted the People’s Republic into the ranks of the richest countries at a rapid pace in recent decades. In the IT industry, overtime has been the order of the day in recent years, to the point where deaths have been caused by exhaustion. But the state is now cracking down harder on the 996 culture. And wage laborers are also to be better protected from exploitation. Both the judiciary and the government are pushing ahead with the advancement of labor laws. This is what Dezan Shira’s experts talk about in our Tools section today.
China’s authorities have targeted one economic sector after another with tough regulations in recent months (China.Table reported). But this is only taking place on the surface. The party is also expanding its influence over personal life – the way people live, how they behave, how they spend their free time. This is by no means new. In the first communist era under Mao Zedong, the leadership also wanted to re-educate its citizens and turn them into different people. Since Deng Xiaoping’s reforms, this has since come to an end, and private life has become a private matter once more. Under Xi Jinping, re-education and thought control are back on the political agenda.
Regulations, bans and rules are an indication of the path the People’s Republic wants to take under state and party leader Xi. With regulations, he aims to correct the market order, promote fair competition, and protect both consumer rights and the socialist market economy system. This is how the state-run People’s Daily called the government’s approach.
Loyal to the party
Recently, Xi spoke of achieving “common prosperity”. The goal: to reduce inequality in the formally socialist People’s Republic. He called on China’s billionaires to contribute to the “welfare of the motherland” (China.Table reported). The chairmen of the big corporations then tried to outshine each other. They set up charitable foundations and pledged billions in donations. The signal to Xi: We have understood the message and are bowing to the CCP’s pressure.
Western media assumed that Xi has unleashed a wave of so-called “purge” campaigns in all directions to bring the party back more to the center of people’s daily lives and private businesses. “It’s striking and significant. This is clearly not a sector-by-sector rectification; this is an entire economic, industry and structural rectification,” the Washington Post quotes Jude Blanchette, a China expert at the Center for Strategic and International Studies (CSIS) in the US.
Social stability through equal access to education
How far-reaching Beijing’s current actions are is particularly evident in regulations in the education sector. The sector has been “eaten away by capital“, Beijing argues (China.Table reported). It was only in July that authorities announced a major overhaul of the private education sector, which they implemented within weeks. Companies offering curriculum-related courses were banned from making profits or raising external capital. They now must register as non-profit organizations by the end of the year. Prices for tutoring are to be regulated by the state in the future. But many parents are not pleased with this move. Instead of being happy over tutoring prices being calculated according to parents’ income in the future, they are concerned that their children will then only be exposed to more competition. After all, with lower prices, more parents will be able to afford access to tutoring for their offspring.
The state not only interferes in school education but also when it comes to children’s education. Recently, Beijing’s new regulatory fury hit gamers. Children are now only allowed to play online games for up to three hours a week. Some parents see this as an invasion, by which the state plans to become the focal point of families and take over child-rearing. In Beijing’s crackdown on the entertainment industry, Beijing directly dictates what is allowed and what is not (China.Table reported).
Beijing’s regulations boil down to a systemic competition between China and the West. Xi Jinping wants to portray China as strong and superior to the West and is relying internally on a discussion of values that seeks above all to enforce communist virtues. This is a response to a trend that has long worried observers. When the Cultural Revolution of the mid-1960s destroyed traditional values, no salutary new beliefs took their place as the country opened up and experienced turbo growth. It was all about success, advancement, and consumption.
Even state media wondered at times why there were so many egoists in China. The party has recognized this, and at the beginning of his term, Xi gradually reintroduced Confucian rituals to boost morale. Confucius calls for cohesion in society. These ancient values suit the party well, because, in the spirit of proper order, citizens should submit to its authorities. At least that was the interpretation of state philosophers of the imperial era. A focus on education and learning, the preservation of morals, fidelity in marriage, the heeding of rituals, and general moderation are also part of this thought construct. Everything seems to suggest that Xi wants to pick up here.
Preemptive obedience on the rise again
Xi continues these thoughts, but takes a less than subtle approach. Flashy appearances on TV shows or fan worship for young female singers are now once again considered a threat to public mores, as are LGBTQ topics or exciting video games. Banned!
What is dangerous about the current strategy is that Beijing is extending its control further and further, and no one can escape the regulators: Neither the rich nor the companies. Whether this authoritarian strategy will pay off, in the long run, is questionable. By setting values and morals (according to Chinese understanding), it might be possible to better and, above all, much more effectively involve and even convince its own citizens and the West to have a discussion about values. But in China, there is no separation of powers and no neutral weighing of interests.
Xi is expected to be confirmed in office for a third time at the People’s Congress next autumn. He himself laid the groundwork by a constitutional amendment a few years back. This means that the president’s term of office is no longer limited to a maximum of ten years. Xi is able to remain in office for life. Xi’s unlimited power is currently being reinforced even more by the preemptive obedience of the authorities in the country. They continue to act according to the motto: Trust is good, but control is better.
Daimler and its Chinese partner Geely have presented a study for a new electric SUV of the joint Smart brand at the IAA in Munich. The Golf-sized city SUV goes by the name of Concept #1 and is set to go into series production next yearas a five-seater.
“The new Smart will be cool, sexy and grown-up, instead of cute and playful,” Daimler design chief Gorden Wagener said of the enlarged Smart at the presentation. “We have taken the opportunity to reinvent the brand.” At 4.29 meters long, the SUV is more than one and a half times the length of the Smart ForTwo and nearly as long as Mercedes-Benz’s compact electric crossover EQA.
For the interior, the designers were inspired by Tesla’s Model 3: There is no driver display behind the steering wheel. The center of the cockpit is a 12.8-inch (approx. 33 cm) touchscreen on which an animated, adaptive avatar serves the needs and habits of the user.
“Through the cooperation with Geely, we have connectivity that we could never have achieved on our own or with European partners,” says Smart’s European head Dirk Adelmann. Prices are expected to be in the range of the VW ID.3. That starts at around31,000 euros.
Design from Germany, technology from China
Mercedes designed the car. Geely is responsible for technology, development and production. The Smart car will be manufactured exclusively in China from 2022, primarily at a new factory in Xi’an that opened this year. The plant will have an annual capacity of around 150,000 vehicles, the companies announced in January 2020.
The “Smart” joint venture, which was established in 2019 and is based in Hangzhou Bay in the eastern Chinese province of Zhejiang, is owned equally by the two groups.Daimler and Geely have each invested 2.7 billion yuan (355 million euros) in the joint venture. The Smart parent plant in Hambach, France, has already been sold toIneos Automotive, a British manufacturer that emerged from the chemical group of the same name.
The idea of the“Smart” brand goes back toNicolas Hayek, the inventor of the Swatch watch, who died in 2010. After the Swiss entrepreneur had been rebuffed by VW, Hayek had been able to persuade Daimler in the mid-1990s to go along with his idea of a car that would be like a Swatch watch on wheels: an electric car with few parts, cheap, reliable and easy to implement. This put him ahead of his time. Daimler, however, brought him to his knees. The Smart became an expensive two-seater with a petrol engine and a jerky automatic. Daimler believed that the time for electric or hybrid drives had not yet come, and theStuttgart company missed the opportunity to become a trendsetter.
When the Smart was introduced in 1997, Hayek distanced himself, and he was right. And he was right. In Germany, the smallest car, often derided as a “shopping cart”, never made it out of its niche.Bankhaus Metzler estimates that Daimler made a loss of around four billion euros with the Smart. The Smart did not become an environmentally friendly car with an electric drive until 2018, more than 20 years later. But by then the Chinese had long since taken over the segment.
The brand was never strong in China
China is now building the “Swatch cars” Hayek had in mind: minimalist, low-cost e-cars. The Wuling Hong Guang Mini EV(China.Table reported) has overtaken Tesla’s Model 3 in China in absolute e-car sales and is by far the best-selling e-car in the world’s largest market. The brand sold30,706 e-vehicles in July alone, with prices hovering between the equivalent of €3,500 to €4,800 depending on features. It was developed jointly with US manufacturer General Motors. GM also rose to third place among carmakers with the highest sales of e-cars in the first half of 2021, after Tesla and VW, thanks to the success of the Wuling.
However, the Wuling vehicles achieve nowhere near the margins that larger vehicles do. “We very much respect the value of the Smart brand,”says Geely founder Li.“The brand has a unique appeal and great commercial value.” Whether that’s actually the case remains to be seen.The Concept #1 is undoubtedly a handsome car. Thelack of a B-pillar is particularly convincing.
The technical data also sounds promising: thesmart concept is to be fitted with a lithium-ion battery with a capacity of slightly less than 70 kWh. The battery is supposed to create a range of a good 440 kilometers. Fast charging and cloud-based over-the-air software updates are also planned – so a visit to the workshop is no longer necessary. This means additional features can be installed at a later date, such as a heated steering wheel. That’s all good, but it still doesn’t set the new Smart apart from the Chinese competition, which already offers similar features in production vehicles.
“We’ve kept the typical Smart look, but made it much cooler,” says Gorden Wagener, Chief Design Officer of the Daimler Group. Whether customers will actuallyrecognize the vehicleas a Smart, however, is open todoubt. In addition, the brand has never been strong in China. Time and again, you could see traditional 2-seater Smarts on the road, on which the owners unceremoniously stuck a Mercedes star. However, the Smart Concept #1 will also be offered in Europe from next year.
Car Industry
Geely
News
Beijing wants ‘bigger and stronger’ e-car firms
China wants to consolidate its own e-car industry and bring out “bigger and stronger” companies in the field. “We currently have too many EV companies in the market,” Minister of Industry and IT Xiao Yaqing said at a press conference yesterday. The companies are mostly small at present, and the government supports mergers and restructuring in the EV sector, Xiao said, according to Bloomberg. There are currently about 300 EV companies in China. The government is working on measures to reduce overcapacity in the EV sector and concentrate resources on key production centers, he said.
The growth of the EV sector is also based on generous government subsidies. Between 2016 and 2020, the sector received the equivalent of €4.3 billion in subsidies from the central government. The largest single recipient of subsidies was BYD with the equivalent of 525 million euros. Tesla received just under 280 million euros. The sharp rise in sales meant that ten times more subsid ies were paid in 2020 than in 2016, despite the fact that subsidies per e-car fell by 80 percent, according to business portal Caixin. Provincial governments have given additional tax breaks and other incentives in recent years to get e-car companies to set up shop. The current goal is to phase out all subsidies and incentives by the end of 2023.
In August, the NEV sector in China reached a new sales record. In the previous month, 320,000 electric, hydrogen or hybrid-powered cars were sold, the China Association of Automobile Manufacturers announced. NEVs accounted for 18 percent of all car sales in August, according to association data. The government is aiming for a 20 percent share by 2025. The target will most likely be reached ahead of schedule. At the same time, the total number of cars sold in China fell 18 percent year-on-year. The reasons cited are the chip shortage and new emission standards. nib
Car Industry
Electromobility
Industry
Subsidies
Should Alipay be broken up?
According to a report by Financial Times, authorities want to break up fintech group Ant Group’s payment service Alipay and create a separate platform for the company’s credit business. Ant is also expected to hand over all collected user data for customer credit assessments to a new joint venture that also involves two state-owned companies, FT reported, citing two people familiar with the matter. Ant itself has not yet commented on the issue.
It was only in autumn of last year that Beijing briefly banned Ant’s IPO. The reason given at the time was that Alibaba founder Jack Ma had allegedly not fulfilled the disclosure requirements. Ant is the financial arm of e-commerce platform Alibaba and has become one of the most successful providers of consumer loans in China in recent years. Already, one in five loans in the sector is issued by Ant (China.Table reported). niw
Alibaba
Alipay
Ant Group
Finance
Loans
Protests against Evergrande
The Chinese real estate group Evergrande is facing increasing protests. On Monday, about 100 investorsstormedthe struggling group’s headquarters, demanding repayment of their investments in overdue securities. In Guangzhou, angry homebuyers surrounded a local housing office, calling on Evergrande to resume construction of the homes. More protests against the real estate developer in other parts of the country were shared on social media platform Weibo, Bloomberg reports.
Evergrande has accumulated a mountain of debt equivalent to over US$300 billion (China.Table reported). Nearly half of the debt is owed to suppliers and trading partners, Bloomberg reported. The group has also received down payments from 1.5 million homebuyers who are worried about their savings (latest as of December 2020). Accordingly, Evergrande’s decline carries a high potential for economic and social conflict. nib
Economy
Evergrande
Finance
Real Estate
Bachelet deplores lack of access to Xinjiang
The UN High Commissioner for Human Rights, Michelle Bachelet, has denounced the lack of access to Xinjiang province. “I regret that I am not able to report progress on my efforts to seek meaningful access to the Xinjiang Uyghur Autonomous Region.,” Bachelet said during the opening of the UN Human Rights Council sessions on Monday, according to Reuters. The UN human rights envoy is trying to investigate reports of serious human rights abuses against Muslim Uighurs. Her office has been negotiating access to Xinjiang since as early as 2018 (China.Table reported). Bachelet’s effort is actively supported by more than 40 countries (China.Table reported). Bachelet plans to soon release a report on the “available information on allegations of serious human rights violations” in Xinjiang. nib
Human Rights
Michelle Bachelet
United Nations
Xinjiang
Tools
“996” declared illegal – China’s labour law in flux
By Zoey Zhang (Dezan Shira Associates)
Chinas oberstes Gericht hat entschieden, dass die umstrittene “996”-Überstundenregelung (Arbeit von 9 bis 21 Uhr an sechs Tagen in der Woche) illegal ist und richtet sich damit gegen die übermäßigen Arbeitszeiten, die in chinesischen Internetunternehmen üblich sind.
Am 26. August 2021 haben der Oberste Volksgerichtshof (SPC) und das Arbeitsministerium (MOHRSS) gemeinsam einen Leitfaden veröffentlicht, der zehn typische Fälle von Überstunden illustriert, die alle von Arbeitnehmern erstritten wurden. Die Behörden erläuterten die Rechtsgrundlage für das Urteil in jedem Fall.
In one case, a worker at a parcel delivery service was dismissed after refusing to work overtime under the “996” policy. The worker requested arbitration and the arbitration court ordered the company to compensate the worker with 8,000 RMB (1,050 euros). The court found that the parcel delivery company’s “996” labour policy was a serious violation of Chinese labour law.
In anderen Fällen geht es um Überstunden und die entsprechende Bezahlung, einschließlich Entschädigungen für Verletzungen, die während Überstundenarbeit auftreten.
In einem anderen Fall wurde ein Arbeitnehmer namens Li von einer Zeitarbeitsfirma zu einem nicht näher bezeichneten Medienunternehmen entsandt. Li arbeitete regelmäßig mehr als 300 Stunden pro Monat und nahm sich in einem normalen Monat nicht mehr als drei Tage frei. Am 1. Dezember 2020 fiel Li in einer Toilette am Arbeitsplatz in Ohnmacht und starb nach einer fast 12-stündigen Nachtschicht an einem Herzinfarkt. Lis Arbeitgeber hatte keine Unfallversicherung für ihn abgeschlossen. In seinem Urteil bestätigte das Gericht, dass sowohl der Zeitarbeitsdienstleister als auch das Medienunternehmen für den Tod von Herrn Li verantwortlich seien, und wies die beiden Unternehmen an, seine Familie mit 766.911 RMB (100.700 Euro) zu entschädigen.
The landmark Supreme Court ruling and labor dispute cases are a sign that China is cracking down on the grueling overtime culture in the tech industry. This comes amid the widespread crackdown on the sprawling private tech sector, and the campaign to promote “shared prosperity” to reduce inequality(China.Table reported). All of this is intended to dampen public discontent with immense social and economic constraints.
Cracking down on brutal overtime culture
Since Alibaba’s Jack Ma first called the “996” culture a “blessing” in 2018, the public backlash against the extreme overtime culture in Chinese society seems never-ending. Earlier this year, two employees of Pingduoduo (PDD), a fast-growing e-commerce platform, died unexpectedly, reviving debates about “996.” The death of a young PDD employee once again caused public outrage. She had died after working a series of excessively long shifts.
No wonder, then, that the leadership is raising its voice on labour rights issues. Recent developments may well lead to greater control of the labour market. For example, on June 23, Siemens Numerical Control was fined by the local government in Nanjing for violating working time regulations. Some administrative regions, such as Beijing, have also reportedly begun to review the implementation of labor laws and regulations in local companies.
In the face of this increased external regulatory pressure, China’s leading tech companies have finally begun to relax harsh working conditions. Since June, popular short-video apps Douyin (the Chinese Tiktok) and Kuaishou have abolished the “big week/small week” policy – a practice that mixes five-day weeks and six-day weeks.
Tencent-backed game studio Lightspeed & Quantum Studios, which has developed popular games such as Game for Peace (the Chinese version of PUBG), has decided to allow its employees to leave the office at 6pm on Wednesdays and no later than 9pm on other days of the week.
Still, not all workers agree with the change in overtime rules, especially those who need to meet key performance indicators (KPIs) or want more overtime pay. According to a Caixin report, employees at Bytedance, which owns Tiktok and Douyin, found that their wages shrank by 10 to 20 percent compared to previous months as overtime pay withered under the less demanding labor policy.
Safeguarding the rights and interests of day labourers
Compared to permanent employees who can rely on arbitration tribunals and local regulators to protect their labor rights, millions of casual workers such as couriers, food delivery drivers, and app drivers have more difficulty protecting their rights.
In January, a food delivery driver for Alibaba-operated takeout platform Ele.me set himself on fire outside a store in the eastern Chinese city of Taizhou over a pay dispute. In September last year, an investigative report titled “Delivery Man Trapped in System” went viral on popular Chinese social media platforms, sparking a heated discussion. The tech company’s algorithm was said to have shortened delivery times for delivery drivers and driven them to race against time on the road. In April, Beijing Satellite TV aired a segment about a high-ranking city official who disguised himself as a food delivery driver. In that role, he had earned only five euros within a day. All this news has caused public unrest.
In response, Chinese regulators have forced tech companies to pay more attention to the rights of casual workers, known as gig workers, through a series of measures.
On 22 June , eight authorities published guidance on protecting the rights and interests of workers in “new forms of employment”, such as couriers, food delivery and ride-sharing drivers.
On 23 June, seven authorities, including the Ministry of Transport, issued a statement on the rights and interests of couriers. The statement calls on courier companies to hire workers directly and to pay accident insurance for courier employees in proportion to the average local salary or turnover.
On 27 July , seven authorities, including the State Agency for Market Regulation (SAMR), published guidance urging online food delivery providers to improve their remuneration. They should also introduce a proper mechanism for recording the working hours of their delivery staff.
The reaction of the capital market forces adjustments
Shares of delivery services fell dramatically in the two days following the release of the Ministry of Transport’s directive to strengthen protections for courier drivers. In contrast, shares of short-video app Kuaishou rose nearly five percent on June 25, the day after the announcement of the repeal of the “big/small weeks” policy, according to Caixin.
From the investors’ point of view, the tightened labour protection threatens to drive up the costs of listed companies. This could reduce the return on investment. In order to survive in the market, the companies concerned may have to rethink their competitive pricing strategies.
What Chinese labor law says about overtime
Under Chinese law, employees may not work more than eight hours per day or 40 hours per week. Companies must limit overtime to 36 hours per month. Despite the current law, workers are often discouraged from recording overtime correctly.
For beginners to the world of Chinese labor law, we divide the laws into the following categories:
The standard working time system: According to this system, an employee’s working day should not exceed eight hours, and the average working week does not exceed 40 hours, which corresponds to a five-day week. Employees are entitled to at least one rest day per week, and the fixed overtime rates apply to longer working hours. Most employees fall into this category.
The holistic hours worked system: under this system, hours worked are accumulated over a period of time (weekly, monthly, quarterly or annually). The average number of hours is then calculated based on this period. On the whole, this system is best suited to work assignments with irregular shifts, such as seasonal or project work. Overtime is charged for hours worked in excess of the standard per cycle. These rates are the same as those in the standard work schedule system for overtime and work on holidays. However, this system does not include a day off. Before a company can implement this system, it must first submit its plan to the local labor office and obtain its approval.
The system of non-fixed (flexible) working hours: This system is suitable for workers whose working hours are difficult to measure. Workers with such a work schedule system are usually paid like salaried employees. This salary is a fixed amount paid per period, often monthly. Under the non-fixed work schedule system, there are no overtime costs. While the employer is required to maintain reasonable hours of work and rest, this is at the employer’s discretion. This system also requires the approval of the local labour office before implementation.
How companies should prepare
China’s changing labor system may have a direct impact on the hiring practices, employment policies, organizational restructuring, and specific business development regulations of many companies in the technology and related sectors.
To learn more about employment law compliance in China and avoid employment litigation, please read our guide to human resources and payroll in China or contact our human resources experts and attorneys at china@dezshira.com.
This article first appeared in Asia Briefing, published by Dezan Shira Associates. The firm advises international investors in Asia and has offices in China, Hong Kong, Indonesia, Singapore, Russia and Vietnam.
Chinese Communist Party
Society
Tech Crackdown
Executive Moves
Jörg Brosemann takes over the position of actingprincipal of the German School Shanghai Yangpu (DSSY). He was previously Deputy Headmaster. Susanne Hess, previously principal at the German School Shanghai Hongqiao (DSSH), is working in school management across both locations this school year. Heiko Baum, who has been principal at DSSH since the 2020/21 school year, will also take over administration at Yangpu.
Dessert
Breakdowns and mishaps are no problem for the operator of this repair shop in Beijing on three wheels. He has new inner tubes ready for cyclists, and scooter motorists are also served when they have run over a nail again, causing a flat tire. Unlike in Germany, however, a fee is charged for pumping up the tire – even if you have to do it yourself.
