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Pity U.S. companies in China, the union is moving in

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Doing business in China was supposed to be cheap. As the old saying goes "cheap gets expensive." The central government wants all of the foreign companies with local operations to have unions. All of those workers will be able to stage stop strikes if they like. They can ask for more cash. They can demand more benefits.

China does not say this, but getting U.S. companies to take on unions means that there is a good chance insurance and other services, which the government might pay for, can come out of the pockets of firms like Wal-Mart (NYSE: WMT) and McDonald's (NYSE: MCD).

According to The New York Times, "The union push is coming at a time when global corporations are already facing rising labor and commodity costs in China." Of course, the communist government probably forgot to mention the labor issue when corporations from the U.S. started moving into China to get cheap manufacturing and access to the rapidly increasing consumer base. A classic bait and switch move.

China is putting the screws to foreign companies and that may backfire. The temptation to move manufacturing to other countries like Vietnam and Mexico is likely to grow. China may see some of its best employers begin to leave.

The Chinese may want to see conditions improve for its workers who are employed by outside companies, but the push could put a lot of local workers out on the streets. Doing business in China isn't what it used to be.

Douglas A. McIntyre is an editor at 247wallst.com.

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Last updated: July 06, 2009: 05:03 AM

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