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ZNR UUUUU ZZH
P 160541Z NOV 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 2129
RUEHC/DEPT OF LABOR WASHDC PRIORITY
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHSH/AMCONSUL SHENYANG 7151
RUEHGH/AMCONSUL SHANGHAI 6429
RUEHCN/AMCONSUL CHENGDU 7503
RUEHGZ/AMCONSUL GUANGZHOU 1846
RUEHIN/AIT TAIPEI 6067
RUEHHK/AMCONSUL HONG KONG 8453
RUEHGV/USMISSION GENEVA 1429

UNCLAS SECTION 01 OF 07 BEIJING 023804 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
DEPT PASS USTR FOR KARESH, A. ROSENBERG, MCCARTIN 
LABOR FOR ILAB 
TREAS FOR OASIA/ISA-CUSHMAN 
USDOC FOR 4420/ITA/MAC/MCQUEEN 
GENEVA FOR CHAMBERLIN 
 
E.O. 12958: N/A 
TAGS: ELAB PGOV PHUM EMIN CH
SUBJECT: CHINESE AND U.S. EXPERTS DISCUSS COAL MINE 
SAFETY-RELATED LEGAL ISSUES IN CHINA 
 
(U) SENSITIVE BUT UNCLASSIFIED: NOT FOR INTERNET 
DISTRIBUTION. 
 
¶1.  (SBU)  Summary:  On October 21-22, the American 
Center for International Labor Solidarity (ACILS) co- 
hosted a conference on "Legal Means to Address the 
Problem of Mine Accidents" with Chinese experts in 
Beijing.  The Chinese experts were extremely candid 
about the seriousness of China's mine safety problem, 
and the reasons behind it.  They described a failing 
mine safety regime based on an incomplete legal 
framework with poor enforcement.  They described how 
mine owners collude with corrupt government officials 
to undermine this regime, and noted that mine workers 
have virtually no effective means of protecting their 
own rights.  Chinese experts were very interested in 
U.S. experiences, and how U.S. laws, regulations and 
enforcement mechanisms have led to a vastly superior 
safety record.  Most Chinese experts showed a deep- 
rooted suspicion of private ownership of mines, and 
even private sector involvement in providing work 
injury insurance.  U.S. presentations were well 
received, and Embassy believes Chinese experts and 
policy makers are interested in, and would be 
receptive to, more discussion of how the United States 
has achieved its superior record on occupational 
safety and health (OSH) within the context of a market 
economy.  End summary. 
 
¶2.  (U)  On October 21-22, ACILS and the China 
University of Political Science and Law co-hosted an 
academic conference on "Legal Means to Address the 
Problem of Mine Accidents."  The proceedings painted a 
picture of a fragmented and ineffective legal 
framework for OSH regulation, enforcement and accident 
compensation.  Participants included an influential 
cross-section of labor, OSH and work injury insurance 
officials and experts.  Several prominent Chinese 
academic institutions were represented, as were the 
Ministry of Labor and Social Security (MOLSS), the 
State Administration for Work Safety (SAWS), the All 
China Federation of Trade Unions (ACFTU), and other 
government and ACFTU-affiliated institutions.  ACILS 
Labor Law Counsel/China Program Director Earl Brown 
and U.S. mine safety consultant Joe Main also 
addressed the conference on the U.S. experience. 
Laboff and Labor Assistant participated as observers. 
 
A FRAGMENTED LEGAL FRAMEWORK 
---------------------------- 
 
¶3.  (U)  China's system for compensating victims of 
mine accidents has two main components according to a 
senior official from MOLSS: 1) a social insurance 
system, based on the Labor Law and Civil Service Law, 
which provides benefits to accident victims directly 
from the local government budget or government 
administered social pooling fund, and 2) civil 
compensation for victims which exempts employers from 
legal liability.  The social insurance system is the 
benefit provider of first resort. 
 
¶4.  (U)  The social insurance system currently covers 
95 million Chinese workers, according to MOLSS, 15 
percent of whom are in "high risk" industries. 
Employers in high risk industries pay higher social 
insurance contributions, but the system does not track 
the safety records of individual employers.  Compliant 
employers effectively subsidize non-compliant 
employers.  Benefits are based on lost wages, with 
death benefits set administratively at 48-60 months 
wages.  According to several participants, the social 
insurance is fairly reliable, as long as the employer 
participates in it, but can be slow in paying claims. 
 
 
BEIJING 00023804  002 OF 007 
 
 
¶5.  (U)  Under civil law, lump sum or sustained 
compensation payments are based on the victim's 
salary, the level of injury and duration of 
disability.  However, China has no specific 
regulations on what civil damages should be.  These 
appear to be up to the discretion of local judges.  In 
practice, according to conference participants, 
workers and their families rarely seek civil 
compensation, especially if they are covered by social 
insurance. 
 
¶6.  (U)  The Law on Production Safety requires 
employers to purchase work injury insurance for 
employees "in accordance with the law," and allows 
workers to pursue compensation claims against the 
employer "if, according to the civil laws, they have 
the right to do so apart from enjoying the employment 
injury insurances."  Conference participants noted 
that in practice this is a very difficult process and 
rarely used.  Courts can also reject such cases if the 
employee is covered by social insurance. 
 
¶7.  (SBU)  Commercially available liability insurance 
also plays a role in accident compensation, in some 
locations and some industries.  MOLSS noted that some 
government agencies, e.g., the Ministry of 
Construction, require employers to purchase liability 
insurance policies for workers.  Private insurance 
only comes into play for claims not covered by the 
social insurance program.  One presenter called for a 
greater role for private insurance companies, arguing 
that they could play an important role in bringing 
mines into compliance with health and safety 
standards, but presentations from MOLSS and other 
Chinese presenters revealed deep-rooted doubts about 
private sector involvement in a social welfare 
function. 
 
¶8.  (SBU)  There was considerable discussion at the 
conference of the use of administrative orders to set 
minimum compensation standards for injury or death. 
Shanxi Province, for example, enacted a regulation in 
2006 requiring coal mine owners to pay standard 
compensation of 200,000 yuan (about USD 25,000) in the 
case of mine-related deaths.  A participant from MOLSS 
criticized such administrative standards as having no 
basis in any overarching law, and running contrary to 
the principal of risk sharing.  He added that in some 
cases, mine owners stopped contributing (illegally, 
but without consequence) to social insurance programs 
after such administrative orders went into effect. 
These employers argued that there is no reason to pay 
into an insurance system that does not reduce their 
potential liability.  Other participants acknowledged 
that such orders are "extra-legal" but said they are 
effective -- mine deaths dropped 10 percent in Shanxi 
after the regulations when into effect.  Despite 
debate over the legality of administrative 
compensation standards, there is strong support among 
academics at the conference for higher standards of 
compensation to increase the cost to employers of 
accidents. 
 
¶9.  (SBU)  Conference participants showed strong 
interest in greater use of criminal penalties to 
prevent and punish mine accidents.  Several conference 
participants noted that articles of the criminal code 
on forced labor and major accidents could potentially 
serve as a basis for criminal penalties, but that the 
criminal code focuses on the results of negligence, 
not on negligence itself.  One participant said that 
under current law, a mine owner who orders production 
operations to proceed under conditions he knows to be 
dangerous cannot be held criminally accountable unless 
there is an accident.  One observer noted that the 
 
BEIJING 00023804  003 OF 007 
 
 
crime of "negligence" is too weak a charge, and that 
the criminal code should be amended to allow charges 
of premeditated murder in cases of mine accidents 
resulting from negligence. 
 
¶10.  (U)  The 1992 Law on Mine Safety gives county- 
and higher-level governments authority over mine 
supervision and inspection, but one presenter noted 
that the law has not been revised to reflect the 
economic transition that has taken place since its 
passage.  He pointed out that a strict reading of the 
law would make it non-applicable to illegal mines, for 
example, and that the State Council's creation of the 
State Administration for Work Safety (SAWS) and the 
State Administration for Coal Mine Safety (SACMS), the 
Chinese Government's flagship agencies for protecting 
mine workers, may not technically even be legal. 
Other presenters were critical of the 2002 Law on 
Production Safety, including for being biased in favor 
of production over workers interests. 
 
UNEVEN IMPLEMENTATION AND ENFORCEMENT 
------------------------------------- 
 
¶11.  (SBU)  Almost without exception, Chinese 
presenters described China's legal framework for 
addressing the mine accident problem as "incomplete," 
and enforcement as weak.  MOLSS noted that although 
participation in the workplace injury insurance system 
is mandatory, many mine owners simply ignore it. 
Penalties for not contributing are limited to a few 
thousand yuan (several hundred dollars), insufficient 
to force compliance.  When accidents occur in mines 
where employers have not paid their insurance 
contributions, some local governments simply bow out, 
advising victims and their families to seek civil 
compensation, rather than paying benefits to the 
victim and pursuing back contributions from the 
employer.  There is no guarantee fund to cover benefit 
payments in cases where the employer is uninsured or 
absconds.  The social insurance contribution 
collection and pooling system is ill-defined and 
varies widely by location. 
 
¶12.  (SBU)  Social insurance programs do not cover 
informal employees, and when employers hire labor 
through labor contractors or other middlemen, the law 
provides little guidance regarding how to determine 
who the "employer" is.  (A draft Labor Contract Law, 
currently under consideration in the National People's 
Congress, may help to clarify this point.)  One 
presenter noted that the majority of mine workers are 
migrant workers who do not enjoy full protection under 
the law in any case.  While the Labor Law makes no 
distinction between migrants and other workers with 
respect to rights and benefits, migrants often have 
difficulty participating in local-government 
administered social insurance programs, joining local 
union branches, or receiving legal protection from 
local law enforcement authorities or courts. 
 
¶13.  (SBU)  MOLSS reported that 26 million migrant 
workers are covered by work injury insurance in China 
in all industries, but that no one knows how many 
migrants are not covered.  (Estimates of the total 
number of migrant workers in China range from 120-200 
million.)  MOLSS hopes to achieve full workplace 
injury insurance coverage for migrant workers in the 
mining and construction industries by the end of 2008, 
and is currently exploring ways to do this without 
creating a new, duplicative system. 
 
¶14.  (SBU)  A participant from the State Council Legal 
Affairs Office criticized the system of accountability 
for mine accidents.  He said Central Government 
 
BEIJING 00023804  004 OF 007 
 
 
policies dating back to 2000, which hold local 
government officials accountable for mine accidents 
that occur within their jurisdictions, perversely 
encourage these officials to cover up accidents or 
pass off mine supervision responsibilities to younger, 
less powerful officials.   He added that regulations 
governing mine accident investigations are overly 
bureaucratic.  Even local governments interested in 
conducting investigations do not have the resources to 
do so, especially given the large number of government 
agencies required by law to be involved. 
 
¶15.  (SBU)  Corruption was a major topic of 
discussion.  Numerous presenters blamed the high 
frequency of mine accidents on collusion between mine 
owners and local government officials responsible for 
enforcing mine safety laws.  One professor noted that 
when compensation is paid to accident victims in 
China, there is generally no follow-up to determine 
whether the accident resulted from negligence by local 
officials.  Another professor, illustrating the point 
that too many local government officials own shares in 
small coal mines, described meeting a prison guard 
with a share in a local coal mine.  He added that 
local governments cannot be relied upon to investigate 
accidents.  Local governments perform administrative 
investigations before criminal investigations take 
place, giving guilty parties an opportunity to 
manipulate the accident site.  One presenter noted 
that many mine accidents, including accidents with 
large numbers of fatalities, go unreported, and that 
the actual number of mine fatalities and injuries is 
unknown.   If not for media attention, one participant 
said, there would be even more violations. 
 
¶16.  (SBU)  A vocal group of participants argued that 
China should amend the criminal code to create 
meaningful criminal sanctions against mine owners or 
government officials whose negligence leads to mine 
accidents.  One presenter argued that mine owners who 
knowingly allow production to continue under dangerous 
conditions should be charged with premeditated murder. 
Alternatively, he said, China could amend the criminal 
code to create a new crime of "compromising production 
safety," as long as this crime carried heavy sentences 
sufficient to deter illegal behavior.  Another 
presenter suggested that China should add a new crime 
to the criminal code for "dereliction of duty" in 
order to make government officials legally liable when 
they fail to enforce mine safety rules. 
 
¶17.  (U)  The definition of what constitutes a 
workplace injury is also an issue.  For example, one 
law school professor said that there is no legal 
framework for dealing with injuries arising from 
prolonged exposure to hazardous conditions, e.g., lung 
disease.  Without a specific accident in the 
workplace, there is no way to compensate workers for 
their injuries. 
 
¶18.  (SBU)  Many presenters said China basically has 
an adequate legal and administrative framework for 
mine safety enforcement, but that the problem lies in 
coordination and enforcement.  One presenter argued 
that legal responsibility for different aspects of 
mine safety supervision and enforcement is unclear, 
and that key functions fall through the cracks.  He 
described supervision and inspection activities by 
local mine safety authorities as "perfunctory."  Many 
presenters pointed out that penalties for violations, 
including serious violations, are too weak to deter 
negligence or encourage investment in better safety 
equipment, training and practices.  SAWS reported that 
cooperation between its local mine safety inspectors 
who report to Beijing and those who still report to 
 
BEIJING 00023804  005 OF 007 
 
 
local governments remains problematic. 
 
THE ROLE OF TRADE UNIONS 
------------------------- 
 
¶19.  (SBU)  By most accounts, the ACFTU plays no 
significant role in preventing mine accidents or 
protecting the interests of victims.  The ACFTU has a 
statutory right to supervise enterprise compliance 
with OSH regulations and to participate in mine 
accident investigations.  However, academics at the 
conference sharply attacked the union for its weakness 
and its failure to represent its members in court. 
One academic described the ACFTU to Laboff during a 
coffee break as a "fake union."  One presenter told 
the conference that ACFTU unions are sometimes under 
the control of the enterprise or its managers, and 
that these unions side with management in pursuit of 
their own personal interests.  The presenter added 
that despite the large number of mine accidents that 
have occurred, he knows of no instance in which a 
union branch has ever stood up to confront management 
on behalf of workers' interests.  Several presenters 
noted that despite the special status afforded to 
ACFTU by law, mine workers, especially migrant 
workers, have no bargaining power, and that the union 
does not protect the workers' right to call attention 
to OSH violations in their workplaces. 
 
¶20.  (SBU)  ACFTU representatives agreed that the 
union needs to increase its efforts and offered no 
examples of cases in which ACFTU union did stand up 
against employers.  One ACFTU presenter even said that 
the union's level of activity in OSH work at the 
enterprise level is in "obvious decline."  She 
attributed the union's weakness to the lack of a 
formal, legally-established tripartite OSH 
consultative mechanism.  She described ACFTU's legal 
role as participating in the "democratic management" 
and "democratic supervision" of the enterprise, 
meaning that it should encourage and assist the 
government in supervising OSH compliance, point out 
problems and raise "constructive suggestions" that 
benefit both workers and the enterprise.  There was no 
discussion of strikes, halting production at non- 
compliant mines, or defending workers who wish to 
exercise their legal right to remove themselves from 
dangerous working conditions.  ACFTU experts said the 
union is working with the Ministry of Justice to 
establish new legal aid mechanisms for workers, and 
trumpeted a program it is running to train 100,000 
experienced coal miners as mine safety officers.  Even 
in the context of these limited programs, however, the 
ACFTU expert warned against over-inflated 
expectations, given the ownership structure of coal 
mines and the legal framework for protecting workers' 
interests. 
 
INTERESTED IN U.S. EXPERIENCE 
----------------------------- 
 
¶21.  (SBU)  Several Chinese participants cited the far 
superior mine safety record in the United States, and 
showed interest in learning from the U.S. experience. 
Brown's and Main's presentations on U.S. law, accident 
prevention and compensation practices were very well 
received.  Chinese participants were particularly 
interested in how the U.S. keeps track of who holds 
financial interests in coal mines, and whether such 
information is considered trade secrets.  Explanation 
of U.S. public disclosure rules led several Chinese 
participants to conclude glumly that even if similar 
regulations were enacted in China, owners would 
circumvent them by buying and holding shares in 
another person's name, or simply eliminating the paper 
 
BEIJING 00023804  006 OF 007 
 
 
trail that documents their ownership. 
 
¶22.  (SBU)  Chinese participants showed strong 
interest in U.S. laws under which employers, equipment 
manufacturers, or other parties could face criminal 
charges for intentional negligence, even in cases 
where no accidents or injuries occur.  Discussion of 
U.S. law sparked debate among Chinese participants 
about how to use criminal law to punish and deter 
illegal or unsafe mining practices.  Some Chinese 
participants were intrigued by the idea that 
misrepresentation or fraud could itself lead to 
criminal sanctions.  Several Chinese participants 
lamented that existing Chinese criminal law focuses on 
the consequences of criminal negligence, rather than 
the criminal negligence itself. 
 
¶23.  (SBU)  Chinese participants were interested in 
U.S. rules which allow union members to demand safety 
inspections at any time, at the employer's expense. 
They also showed strong interest in U.S. and third 
country models for Labor-Management Safety Committees. 
 
LOOKING TO THE STATE FOR SOLUTIONS 
---------------------------------- 
 
¶24.  (SBU)  The Chinese participants at the conference 
presented a variety of viewpoints, but were generally 
biased against the private sector, and skeptical that 
market and civil mechanisms could effectively protect 
workers' interests.  Several participants suggested 
that private ownership of mines leads inevitably to 
non-compliance with OSH laws and regulations, that the 
private sector is not "moral" enough to play a 
significant role in providing workplace injury 
insurance, or that the profit motive undermines any 
possibility of achieving a balance between sustained 
production levels and respect for workers' rights. 
Participants were not blind to the Chinese 
Government's failure to adequately resolve mine safety 
problems, but still called for an even greater state 
role -- tougher laws to deter corruption, stronger 
administrative and criminal penalties, and increased 
inspection and oversight to prevent mine accidents and 
improve working conditions. 
 
A CHANCE TO MAKE AN IMPACT 
-------------------------- 
 
¶25.  (SBU)  Comment:  The Chinese Government claims to 
be serious about improving mine safety, and worker 
safety in general, but has no clear strategy.  Chinese 
OSH experts at the conference were well aware of the 
problems China faces, and see the United States as one 
country which has valuable experience to offer. 
Events like the conference on "Legal Means to Address 
the Problem of Mine Accidents" provide an opportunity 
for American presenters to introduce ideas that might 
not come naturally to China's bureaucracy or 
influential academics.  At the same time, the candid 
presentations of Chinese experts provided valuable 
insight into China's management of labor-related 
issues that could potentially affect China's social 
stability.  Embassy believes the conference was 
beneficial for both sides, and thoroughly in line with 
the goals of our Letters of Understanding with the 
Chinese Government on labor issues.  The conference 
also brought to light key themes which the USG 
agencies may wish to revisit when discussing OSH 
issues with China.  These include: 
 
--  OSH is about rule-of-law, not property rights. 
Private ownership of mines and other enterprises is 
not inconsistent with high OSH standards.  For 
example, the U.S. coal industry, with 100 percent of 
 
BEIJING 00023804  007 OF 007 
 
 
mines in private hands, has an OSH record far superior 
to China's. 
 
--  The key to safe and healthy workplaces is a 
functioning regulatory framework, combined with a 
well-defined system for legal liability and effective 
enforcement. 
 
--  Civil law can provide just compensation for 
accident victims and their families, and effectively 
deter OSH violations, provided that damages are well- 
defined and significant. 
 
--  Private insurance can play a very useful function, 
not only in sharing risk, but also by providing an 
additional layer of scrutiny over the enterprises 
covered by their policies.  Private insurance 
companies can base insurance premiums on an employer's 
safety record, effectively forcing the non-compliant 
employers to subsidize the compliant. 
 
--  Worker involvement in monitoring OSH conditions 
and reporting violations to management and/or relevant 
government agencies can be extremely effective, but 
only when workers are free to perform this function 
without interference or fear of reprisal. 
 
End comment. 
 
RANDT