China’s enactment of a new Labor Contract Law two years ago was widely hailed as a great leap forward for workers. The country has long been synonymous with cheap and sometimes exploited labor. But the statute gave employees a range of benefits and protections that, while common in Western countries, were new for China.

Few could have foreseen how quickly the law would be tested. The global economic crisis has led to lower demand for Chinese exports, and that in turn has resulted in the closure of thousands of factories and the elimination of perhaps 20 million jobs. Government officials are deeply worried about the spillover effects of mass unemployment.

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