AFL-CIO Examines China Unicom IPO

By DOUGLAS C. McGILL

(Virtual China News, May 30) The AFL-CIO, the American labor organization which has mounted two fierce lobbying campaigns this year to block U.S. investors' support of China, is weighing whether to mount a third attack aimed at the latest hot China IPO.

Last Friday, China Unicom, China's second largest phone company, officially declared its intention to sell as much as US$5.26 billion in shares to the public on the New York Stock Exchange and the Hong Kong Stock Exchange.

Struggling Economy

The share sale is part of the Chinese government's broader program to revive its struggling economy by selling off revamped parts of its enormous "state-owned enterprises" (SOE's) to Western investors.

"We are watching it very closely," said Ron Blackwell, director of corporate affairs for the AFL-CIO. He said researchers and lawyers were studying China Unicom's history, governance, and its recent SEC filings to determine whether the labor organization will launch a lobbying campaign against China Unicom similar to two others recently waged.

"We are considering whether it is an appropriate investment for the savings of working people," Blackwell said. American workers own $430 billion worth of foreign equities through pension funds like CALPERS and TIA-CREFF, according to the AFL-CIO.

Flagship Oil Company

In April, the AFL-CIO led a coalition of labor groups, environmentalists, religious groups, and human rights activists to stop the initial share offering of PetroChina Ltd., China's flagship oil company, which had hoped to raise more than $10 billion in the sale in Western equity markets. In the end, the sale went through but raised only about $3 billion.

Over the past month, the labor group mounted a campaign of unprecedented scope to stop Congressional passage of the bill to extend permanent normal trading status (PNTR) to China. Labor officials said the campaign was the most costly one ever to influence a vote, with more than $2 million spent on television ads opposing the bill, which nevertheless passed by a vote of 237 to 197.

Both of those campaigns are part of the AFL-CIO's larger battle in recent years to protect its own 13 million members in a low-wage global economy. After more than a decade of seeming increasing irrelevance, that larger battle has revived the fortunes and the public image of the AFL-CIO somewhat. It has also placed it in a strong leadership position among many pro-labor, environmental, and human rights groups worldwide who tend to see globalization as a conspiracy of elite corporations working to society's detriment.

Unethical and Risky

In the case of PetroChina, the AFL-CIO wrote an in-depth criticism of the IPO and mailed it to key institutional investors in the United States. The main argument against the company were that the Chinese Communist government would retain ownership and control of the company, and that this was both unethical because of China's poor labor rights record and risky because of Beijing's at best unproven record as a financial fiduciary.

Also, labor argued, as many as a million workers could be laid off as part of the government's attempt to prepare the company for sale to Western investors.

The six-year-old China Unicom hasn't announced any layoff plans as yet, and having only a tiny fraction of the employees of PetroChina, any layoffs would likely be minimal.

Question Under Study

As for whether human rights abuses and labor practices would be an issue for a "new economy" like China Unicom, Blackwell said that was precisely the question under study.

"Old companies, new companies, they all have workers," he said.

In a speech given to labor lawyers on May 8, Richard L. Trumka, the secretary-treasury of the AFL-CIO, said the labor group would scrutinize every planned Chinese company share sale to Western investors.

"When the AFL-CIO capital stewardship program was launched in 1997, President Sweeney said we were going to take on Wall Street's conventional wisdom and show there was another way," Trumka said. "And by God we have, and we are not going to stop with PetroChina."

To reach Douglas C. McGill by email: dmcgill@virtualchina.com