The announcement in the Workers’ Daily on 31 July came just two weeks after Wal-Mart signed its first collective wage agreement in Shenyang, which mandated an eight percent pay increase for all workers this year, with another eight percent next year.

This was soon followed by the signing of similar collective contracts in the Quanzhou store, which formed the first Wal-Mart union in China in August 2006, and close to 20 other outlets, including those in Shenzhen.

All the agreements reportedly covered remuneration, working hours and paid vacations, labour insurance and welfare benefits, and stipulated that workers should be paid more than the local minimum wage.

The contracts are the result of high level campaign by the All China Federation of Trade Unions (ACFTU) to establish a mechanism for store-wide collective consultations between labour and management and to sign collective labour contracts at Wal-Mart outlets across China. Indeed, ACFTU Chairman Wang Zhaoguo paid a high profile visit to Shenyang a few days before the first contract was signed, presumably to ensure that the whole process went smoothly.

The ACFTU claimed on its website that Wal-Mart was singled out for the collective contract campaign because, as a major Fortune 500 company, its initiative would spur other foreign invested enterprises to sign collective labour contracts too. However, the high-profile unionization of Wal-Mart two years ago did not lead to surge in the voluntary unionization of other foreign companies and it is doubtful if this trickle-down approach to collective contracts will be any more successful.

The Chinese government and the ACFTU clearly see collective contracts as an effective means of safeguarding workers’ rights and regulating relations between management and labour. However, for the process to be truly effective, unions at the grassroots level will have to vigorously represent the interests of employees and fight for the best deal possible rather than simply go through the motions of collective bargaining at the behest of their ACFTU superiors.