Billion dollars of wage theft: Hong Kong investors might act as accomplices

 

As a global financial centre, Hong Kong has been long a popular base for Chinese enterprises to raise fund and get listed. Funds, grouping various Chinese shares together, have been popular among the investors. As an ordinary investor, s/he gets very little or almost no information about the labour conditions in the listed company s/he invests in. It is not unlikely that your investment in the Mandatory Provident Fund has been supporting Chinese enterprises which are the usual suspects in terms of labour rights violations.

 

Since 2013, the HKCTU has released an Investigative Report on Labour Rights in Hong Kong Enterprises in China annually (hereafter: The Report), to disclose the labour violations occurred in Hong Kong-invested Chinese enterprises. From 2018 on, it has put Chinese state-owned enterprises (hereafter: SOEs) listed in Hong Kong on its radar, in order to provide Hong Kong investors and other stakeholders the full picture, regarding how these Hong Kong-listed Chinese SOEs operate in China. It is particularly important for the stakeholders to know about the collective labour actions, occurred due to mismanagement and operational failure. 

 

The HKCTU has noticed that although collective labour actions took place often and the scale of labour violations was severe, enterprises rarely mentioned them in their corporate social responsibility report. It is a sign that the current listing system placed very loose requirement in information disclosure. From the 107 cases of collective labour actions shown in this years' Report, over 98% took place in SOEs, mostly related to wage theft in the construction industry. According to China Labour Bulletin's research on construction workers in 2019, illegal acts such as the subcontractors are required to pay for the government project in advance are common in the sector. Subcontractors  would only receive the reimbursement at the end of the year or when the construction project is completed. Most of the grassroots workers could only receive a meager living allowance from the subcontractors over months. For a large-scale project, it is common to have several layers of subcontractors. When a subcontractor, especially at the upper level, starts to have cash flow problem and fails to pay his subcontractors, grassroots workers lose the wages they have worked hard for for months. Knowing the system well and being “knowledgeable” enough to avoid responsibility, most of the labour agencies would not sign labour contracts with the workers, leaving the workers completely helpless and groundless in claiming their wages back. The Report points out that the Chinese government has failed to supervise the operation of SOEs in the construction sector.

 

The statistics released by the China Labour Bulletin also show that among the labour disputes in the construction sector, nearly 40% are involved with SOEs (41 cases, 38.3%). China State Construction Engineering Corporation, as the flagship enterprise in the field, holds 5 listed companies in Hong Kong, namely China Overseas Land and Investment Limited (0688.HK), China State Construction International Holdings Limited (03311.HK), China Overseas Grand Ocean Group (00081.HK), Fast East Global Group (00830.HK) and China Overseas Property Management Co. (02669.HK) , with a total market value of USD 270 billion. However, even the biggest construction enterprise in the world cannot guarantee to fulfill the basic labour protection, namely: to pay its workers punctually. It is not only about failing to comply corporate social responsibility, it is a violation of law, as well as setting bad examples and promoting unlawful practices. 

 

As Chinese SOEs would continue to use Hong Kong as a seat to raise fund, investors should be entitled to learn about how they spend the funds and if their operations comply with CSR. Yet, the Hong Kong Stock Exchange's Guideline on Environmental, Social and Governance Report (hereafter: ESG Report) has limited coverage on the public's right to know. None of the CSR reports of the subsidiaries of China State Construction Engineering Corporation mentioned the labour disputes.  

 

Therefore, HKCTU has been lobbying the Hong Kong Stock Exchange to revise its Guideline on ESG Report, to include details such as labour conditions, employment models, noncompliance of multinational corporate' code of conducts. More pressure must be put on the listed companies, they must explain why they have decided to withhold certain information. Investors have the right to know the labour conditions in companies they are putting their money in, as many of us do not want to support exploitative enterprises  and make money through hurting workers' rights.