The following is a guest post by Jennifer Hillman, senior fellow for trade and international political economy, and Alex Tippett, research associate for international economics, at the Council on Foreign Relations.
Jennifer Hillman and David Sacks are codirectors of the CFR-sponsored Independent Task Force on a U.S. Response to China’s Belt and Road Initiative, which is co-chaired by Jacob J. Lew and Gary Roughead.
China’s Belt and Road Initiative (BRI) is a globe-spanning infrastructure project tying China closer together with its trading partners and expanding its political influence. BRI’s construction of hundreds of bridges, roads, railroads, ports, and power plants across Africa, Asia, and Europe has required substantial amounts of labor. Where this labor comes from, and the rights that are afforded to laborers, has been the subject of intense debate.
As a new bipartisan CFR-sponsored Independent Task Force report argues, the United States must articulate and implement a more forceful response to China’s Belt and Road. One component of that response should be an effort to improve labor protections for workers on BRI projects, as well as to ensure that such projects promote the employment of and transfer of valuable skills to host country workers.
The use of Chinese labor on BRI projects has been a contentious issue. The governments and populations of host countries usually seek to increase the proportion of local hires on such projects, to increase local income and skills transfer. Chinese firms, however, seek to keep labor costs down while accommodating Beijing’s political preferences. This often results in their importing Chinese labor for BRI projects rather than relying on local workers. Railroads in Laos and pipelines in Myanmar, for instance, have been reportedly constructed with a predominantly Chinese labor force. As of 2019, there were officially about one million Chinese workers employed overseas, with many additional Chinese citizens working overseas on tourist visas or in other unofficial capacities.
The actual scale of BRI’s reliance on Chinese labor is unclear, however. As with most things related to BRI, China’s lack of transparency makes comprehensive data hard to come by. The attractiveness of importing Chinese labor likely depends on the specific project being carried out.
There are a variety of reasons why a BRI project may be constructed with Chinese labor. For high-skill positions, Chinese firms may believe that local labor markets are unable to meet their needs or may see transferring pre-existing employees as easier than hiring locals. Importing labor from China, for instance, allows firms to bypass complicated legal regimes that may favor locals over foreign multinationals during labor disputes. There are also claims that Chinese laborers are more productive than locals. The president of Sri Lanka’s Chamber of Construction Industry, for instance, suggested that Chinese workers are four times as productive as Sri Lankans. Politically sensitive investments may also involve more Chinese laborers, particularly near the end of projects, as Beijing puts pressure on companies to meet deadlines.
For low-skill positions, the value proposition for importing Chinese laborers stems in part from their relative vulnerability; practices like the seizure of passports, withholding wages, and seclusion in company-owned housing minimize the downside risk posed by labor unrest. Predatory agencies in China frequently recruit such workers, misleading them about working conditions and pay. Upon arriving in the host country, they are often unable to return home. A survey of Chinese construction workers in Cambodia, for instance, found that fifty-seven percent of respondents had their passports held by their employers. While labor practices differ from sector to sector and from firm to firm, overseas Chinese laborers are at times subjected to inhumane working conditions, often in violation of Chinese regulations intended to govern overseas labor.
Chinese workers also lack some of the political tools available to other workers. The State Department has reported that Chinese embassies are frequently unresponsive to complaints filed by overseas Chinese nationals who are victims of forced labor. In one case in Laos, Chinese firms facing capital constraints while working on BRI projects brought in Chinese workers to replace Laotians who had protested delayed wage payments. When the Chinese workers attempted to highlight their own concerns over pay delays to Chinese-language media in Laos, the local Chinese embassy clamped down on reports seen as potentially embarrassing to Beijing. When protests eventually occurred, the protesting workers were simply deported.
The reliance on predominantly Chinese labor—or simply the perception of such a reliance—has frustrated local populations and leaders, occasionally leading to anti-Chinese protests. Local elites have mobilized these complaints in internecine conflicts, playing on xenophobia and economic anxiety to criticize arrangements between their political rivals and China. The tensions around this issue have led to legislative action in places like Indonesia—as well as attacks on Chinese workers. An analysis by the United States Institute of Peace suggests that between 2006 and 2016 at least 619 overseas Chinese workers were killed in violent attacks.
The use of Chinese workers is just one strategy firms use to minimize labor costs. In the Greek port of Piraeus, a flagship BRI project, Chinese investors began importing Chinese labor to avoid dealing with the Greek union that represented local workers. Protests and strikes, however, eventually prompted a change in approach. Instead of Chinese workers, they brought in Eastern European laborers and other subcontractors as replacements, with few of the protections offered to unionized Greek workers.
In other cases, Chinese firms have been happy to rely on local labor. In Cambodia, for example, BRI projects have created an estimated twenty thousand jobs. Generally speaking, however, Chinese firms primarily hire local laborers for low-skill positions, limiting the possibility of skills transfer. A 2019 survey of Chinese firms in Angola and Ethiopia found that nearly all low-skilled jobs were occupied by local workers, while many high-skill positions or management roles were reserved for Chinese workers. Different sectors lend themselves to different kinds of localization. A 2015 survey of Chinese firms in Africa found that telecommunications firms like Huawei and ZTE had the lowest levels of local employment, while 99 percent of the labor employed by several mining, textile, and agricultural interests was local. Similarly, in Kyrgyzstan, TBEA Co. Ltd., a Chinese power company, uses almost exclusively Chinese labor, while firms involved in other infrastructure projects like rail and roadbuilding have roughly even numbers of Kyrgyz and Chinese employees.
As the United States formulates a response to BRI, it should call attention to these problematic labor practices. Excessive use of foreign labor and limited skill transfer threaten to undermine the positive effects of BRI on host countries. They can also reduce the ability of U.S. firms, which lack the ability to import cheap labor, to compete in these markets. Encouraging host countries to insist on high levels of local labor and skills transfer is a good step. Simultaneously, the United States should advocate for greater protections for migrant laborers writ large.
The United States should also press China to live up to its own espoused labor standards. Beijing is well aware that the abuse of Chinese laborers overseas can have reputational costs. It has issued a number of policies and guidelines intended to encourage sustainable development, including codes of conduct that require firms operating abroad to educate Chinese laborers on their rights and ensure laborers enjoy safe working conditions. Highlighting the abuses that still take place, and pressing China to tighten regulations further, would be an important step toward improving the human outcomes associated with BRI.