The Labor Contract Law can better protect the rights of workers and offers an opportunity for enterprises and local governments to change their growth models, says an article in the overseas edition of People's Daily. The following is an excerpt:

The Labor Contract Law contains a few new rules such as overtime work must be paid and internship should not last more than six months. The new law strengthens the protection of workers and hopefully will become an efficient legal tool for workers to protect their rights.

But different views have cropped up following the promulgation of the law. Some enterprises fear that an increase in labor costs will weaken the competitiveness of their products. Some local governments said it would affect their efforts in attracting overseas investment and thus lose their low-cost advantage. Others believe the law sets standards too high. Some said that rising labor costs may reduce employment and therefore is harmful to workers since China's labor supply hugely exceeds demand.

We say labor costs will increase in the short term if the law can be fully implemented. The increase, however, will be very small and will not harm enterprises because the new law is simply a refinement of the Labor Law.

From another aspect, the cost increase could become an opportunity for enterprises. If they realize that competitiveness cannot be built only on low labor costs, they may spare no efforts on technological innovation to raise productivity. The new law may exert pressure on those enterprises and local governments who rely on fast growth through low wages. It may prompt them to change their growth models.

Those who believe that only low costs can attract overseas investment have a lopsided view. Low costs can attract investors, but this attraction is usually not always reliable.

(China Daily July 30, 2007)