Retailer Wal-Mart Stores has today succumbed to Chinese pressure and said it would allow its workers to set up a trade union.
The decision by the US-based company, under intense scrutiny worldwide for its labour practices, highlighted the importance of a market where it bought $15 billion worth of goods last year and is aggressively adding stores.
"Should associates request formation of a union, Wal-Mart China would respect their wishes and honor its obligations under China's Trade Union Law," the firm said in a statement. Wal-Mart calls its employees associates.
China threatened last month to blacklist Wal-Mart and a handful of other foreign firms if they did not set up trade unions at their China units.
Analysts have said the union battle may be more about influence of the state than employee rights.
China's trade federation, which claims 123 million members, is a state organ that controls virtually every union in the country. Independent trade unions are illegal.
But the federation's influence has been waning, with increasing numbers of workers heading to multinational firms or being laid off as China reforms its state-owned giants.
Foreign retailers such as Wal-Mart, Germany's Metro, France's Carrefour and Britain's Tesco are all developing a presence in China as Beijing relaxes rules governing foreign retail investment.