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UNCLAS SECTION 01 OF 02 GUANGZHOU 032263 
 
SIPDIS 
 
PACOM FOR FPA 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ELAB SOCI CH
SUBJECT:  Labor Law Implementation and CSR Cynicism are Key 
Problems, Say Labor Experts 
 
REF: 04 Guangzhou 27525 
 
¶1. (U) Summary:  Despite China's many international labor 
commitments, migrant workers remain poorly trained, overworked and 
underpaid, according to experts at a recent conference on Corporate 
Social Responsibility (CSR) in Shenzhen.  Many legal experts said 
that China's labor laws are theoretically sound but in need of 
proper implementation through better monitoring and incentive 
programs.  On the factory floor itself, many migrant workers are 
eager for education, but the government provides little support for 
such programs.  An official at a large Nike factory explained how 
offering educational and recreational opportunities can greatly 
lower turnover rates that have plagued other factories.  End 
Summary. 
 
¶2. (U) On October 26-27, poloff attended a Corporate Social 
Responsibility (CSR) Conference hosted by Shenzhen's Institute of 
Contemporary Observation (ICO) entitled "Toward the Olympics: 
China's Opportunities and Challenges."  Since its founding in 2001, 
the ICO has audited over 1,000 factories in Guangdong Province's 
manufacturing-intensive Pearl River Delta (PRD) and provided worker 
training sessions in hundreds of others.  In March 2004 the ICO 
started a Migrant Worker Community College, which teaches basic 
computer skills, English, health care and labor rights. The ICO 
conference included academics from China and abroad, private sector 
CSR leaders and representatives from foreign governments, as well as 
representatives from the United Nations International Labor 
Organization (ILO). 
 
Workers: Inexperienced, Overworked and Underpaid 
--------------------------------------------- --- 
 
¶3.  (U) ICO founder Liu Kaiming began the conference by presenting 
troubling statistics on general migrant worker patterns and working 
conditions.  Liu estimated that 200 million farmers have migrated to 
urban areas.  Fifty-eight percent of migrant workers are in 
manufacturing or construction and 82 percent of them work in the 
eastern cities of Beijing, Tianjin, Shanghai or the provinces of 
Zhejiang, Jiangsu, Fujian and Guangdong.  Guangdong alone has 40 
million migrant workers (27 percent of the total).  On average, 
migrant workers are 29 years old, 77 percent have never gone to high 
school and 72 percent have no vocational training.  As labor rights 
awareness increases in China, labor disputes have risen from 19,098 
in 1994 to 226,000 in 2003.  Liu said China has 560,000 foreign 
companies, which employ 80 million Chinese workers in the global 
supply chain. 
 
¶4.  (U) China's current "Gini" index is 0.49, which Liu said is 
"dangerously high" (Note:  The Gini index measures a country's level 
of inequality.  Many African countries have indices around 0.40. 
End Note) -- while average wages in China have increased, minimum 
wages remain relatively low.  According to Liu, the average monthly 
minimum wage for workers in the PRD increased by only 68 RMB (USD 
8.5) between 1992 and 2004.  Internationally, minimum wages are 
typically between 40-60 percent of a region's average wage. 
According to Liu, China has only one city with a minimum wage half 
of the average wage, while Shenzhen and Guangzhou are the lowest 
with minimum wages only 18 and 20 percent of the average wage. 
 
¶5.  (U) Migrants tend to work long hours and some do not even 
receive the minimum wage.  The National Statistics Bureau said that 
in 2004, migrant workers worked an average of 6.4 days a week and 
9.4 hours a day.  Recently, the ICO conducted a survey of 300 
factories and found 50 percent of workers received the minimum wage, 
30 percent did not, and 20 percent received wagers higher than the 
minimum.  Liu said that such harsh conditions have led some PRD 
factories to have turnover rates of 40 percent. 
 
Chinese Law Sound, but Must be Better Implemented 
--------------------------------------------- ---- 
 
¶6.  (U) Roger Plant, director of the ILO's special program on forced 
labor, noted that in 1998, the international community (along with 
China) adopted the Declaration on Fundamental Principles and Rights 
at Work, obligating member-states to uphold four core labor 
principles:  no forced labor, no child labor, no discrimination in 
the work place and freedom of association and collective bargaining. 
 Plant said that the key challenge for China is to guarantee the 
rights of its migrant workers.  Plant believes that child labor is 
less of a problem in China than in other Asian countries, but that 
labor mobility is limited due to China's "hukou" (household 
registration) system. 
 
¶7.  (U) Guo Jianwei, director of Peking University's Women Legal 
Research and Service Center, said that although China has signed 23 
labor rights-related international conventions, China's biggest 
problem remains implementing its international legal obligations. 
 
GUANGZHOU 00032263  002 OF 002 
 
 
When advocating for labor rights, Guo said her group tries to view 
the situation from the enterprise's perspective.  The problem is 
that the Chinese government neither encourages nor punishes 
enterprises that improve labor rights standards.  Guo said the 
situation is different in other countries like the United States, 
where companies receive tax breaks for CSR activities and penalties 
for breaking the law. 
 
Multi-National Companies Remain Cynical of CSR 
--------------------------------------------- - 
 
¶8.  (U) Renmin University's Chang Kai, one of China's leading labor 
experts, admonished multi-national corporations (MNCs) because, 
based on his research of hundreds of factory manuals, many MNCs 
merely strive to meet the lowest labor standards allowed in China. 
Kai urged MNCs not to rely just on the Chinese government to make 
changes, but also to strive for higher international standards. 
Moreover, CSR should increase benefits (such as higher pay) and 
respect workers' rights, such as collective bargaining and 
permitting dissent. 
 
¶9.  (U) Kai also argued that MNCs in China have merely been public 
advocates for CSR and have not tried to address systemic problems. 
Kai pointed to the recent Foxconn (a Taiwan electronics 
manufacturer) scandal as a "typical" example of MNCs views toward 
CSR.  In June, two Mainland journalists published an expose on the 
labor conditions of a Foxconn subsidiary in Dongguan, Guangdong 
Province.  Kai said the reaction by Foxconn and local authorities 
was excessive and "unnatural."  Foxconn immediately sued the 
journalists for RMB 30 million (USD 3.8 million), making it the 
Mainland's largest defamation case in history. In the pre-trial 
motions, the Shenzhen courts decided to freeze the journalists' 
assets.  In the end, Foxconn admitted it had labor problems and 
dropped the libel suit.  Kai said that Foxconn then came out with a 
CSR-type campaign that expressed its "admiration" for the media 
coverage and "thanked" the journalists for their efforts.  Kai 
argued that Foxconn never resolved its labor problems, but instead 
focused only on good public relations. 
 
Workers Want to Learn, but Government Won't Pay 
--------------------------------------------- -- 
 
¶10.  (U) According to the research by Peking University's Wang Rong 
on migrant workers in Shanghai, workers were willing to personally 
pay RMB 2,000 (USD 250) a year for education.  Wang was surprised by 
these findings, as the current tuition for adult education in 
Shanghai is around RMB 3,000 (USD 375).  Wang highlighted the gap 
between worker's demand and Central Government spending on 
education.  In 2005, the Central Government allotted RMB 10 billion 
(USD 1.25 billion) on education for migrant workers, but according 
to Wang's research, the market demand from migrant workers is near 
RMB 350 billion (USD 43.75 billion).  Wang said most workers do not 
study because they lack access to information and transportation, or 
they are simply too tired from working long hours. 
 
Positive Examples from the Private Sector 
----------------------------------------- 
 
¶11.  (U) Topy He, leader of a team of 28 CSR workers at Nike's Yue 
Yuan Industrial Plant (YY) in Dongguan, described Nike's strategy to 
improve worker conditions.  YY (reftel) is one of South China's 
largest factories with over 90,000 workers.  Factory laborers work 
six days a week, but are not allowed to exceed the maximum 36 hours 
overtime per month.  When the workers approach the overtime limit, 
the factory foremen are given a warning to ensure compliance.  Some 
workers can earn up to RMB 1,300 (USD 163) per month, including 
overtime pay.  In addition to fair wages, Nike also provides 
training in English and computers skills, as well as access to 
games, television, a library and a park.  As a result of these 
benefits, Topy He is proud that Nike has kept its turnover rate to 
around three percent annually. 
 
GOLDBERG