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UNCLAS SECTION 01 OF 04 GUANGZHOU 032421 
 
SIPDIS 
 
PACOM FOR FPA 
STATE FOR EAP/CM, DRL/IL 
STATE PASS USTR FOR STRATFORD, WINTER 
LABOR FOR ILAB NEWTON, LI ZHAO, SCHOEFFLE 
TREASURY FOR OASIA/ISA-DOHNER AND KOEPKE 
USDOC FOR 4420/ITA/MAC/MCQUEEN 
GENEVA FOR CHAMBERLIN 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ELAB PHUM EFIN PGOV SOCI CH
SUBJECT: Labor Conditions in the Pearl River Delta (Part 1 of 3): 
Continuing Poor Trends 
 
(U)  THIS DOCUMENT IS SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT 
ACCORDINGLY. 
 
Ref:  Guangzhou 21192 
 
¶1.  (SBU) SUMMARY:  Many migrant workers in the Pearl River Delta 
(PRD) - mostly little-educated young people, including some who are 
underage, from interior and western provinces - continue to face 
harsh and unsafe working conditions, long hours, overtime wage 
arrears, child labor, unsuitable living conditions and little 
training.  The PRD has China's highest levels of labor complaints 
and worker injuries; workers who complain may face government 
harassment.  Some local employment laws discriminate against migrant 
workers by imposing hiring caps.  Even subsidiaries of companies 
like Foxconn and Disney have been accused of labor violations, some 
of which have led to violent riots.  Many analysts tell us that 
China's labor laws are sound, but the courts and labor inspectors do 
not implement them.  A government with the best of intentions would 
certainly find itself hard pressed to sort out these multiple 
factors - economic growth, corruption, faulty labor laws and 
environmental standards, which will allow them to make a concerted 
and effective reform of labor conditions.  This is the first of 
three cables examining the continuing poor labor conditions in the 
PRD.  END SUMMARY. 
 
 
Background 
---------- 
 
¶2.  (SBU) The Pearl River Delta (PRD) has been called "the shop 
floor of the world," because of the large number of factories in the 
region.  Though the precise number is unknown, the Guangdong 
Provincial Statistics book estimates that the greater PRD (including 
Huizhou and Jiangmen) has approximately 124,000 factories.  The 
largest numbers are in Jiangmen (24,874), Dongguan (21,868), Huizhou 
(21,149), Guangzhou (20,764) and Shenzhen (16,569).  Meanwhile, the 
South China Morning Post has estimated the number of Hong Kong-owned 
factories, the largest foreign-based investor, at approximately 
70,000 enterprises.  This cable, the first of three, will describe 
labor violations occurring in the PRD, confirmed by government 
investigations and media reports.  Additionally, Congenoff has 
toured several factories and spoken with workers about labor 
violations they endure.  The second cable will examine the 
provincial and municipal-level policies created to improve the 
situation.  The third will analyze gaps in government programs and 
the pressure that non-government, organized labor groups face. 
 
Migrant Worker Demographics 
---------------------------- 
 
¶3.  (SBU) The Institute of Contemporary Observation (ICO), a 
Shenzhen-based NGO led by Liu Kaiming, estimates that Guangdong 
Province has up to 40 million migrant workers, or 27 percent of an 
estimated 150 million migrants in China.  The Guangzhou Labor Bureau 
estimated migrant labor populations for Guangzhou at 1.48 million, 
Dongguan at 3.6 million, and Shenzhen at 3.5 million.  On average, 
migrant workers ages range from 20-28 years old, 77 percent have 
never gone to high school, 72 percent have no vocational training 
and more than half are women.  Most PRD migrant workers come from 
the provinces of Hunan, Sichuan, Jiangxi, Shandong and Hebei.  The 
All China Federation of Trade Unions, China's only legal trade 
union, reported that migrant workers make up 35 percent of 
Guangdong's work force and are responsible for 25 percent of its 
GDP. 
 
Long Hours and Overtime Arrears 
------------------------------- 
 
¶4.  (U) Perhaps the most common problem for migrant workers is 
having to work long hours without sufficient overtime compensation. 
The National Bureau of Statistics reported that in 2004 migrant 
workers worked an average of 6.4 days a week and 9.4 hours a day. 
According to the Xinkuai Bao (XKB), a Guangzhou-based newspaper, 
about 76 percent of migrant workers never receive overtime payment. 
 
 
GUANGZHOU 00032421  002 OF 004 
 
 
 
¶5.  (U) Such gross violations have been confirmed by government 
investigators as well.  On November 4, a Guangzhou Labor Bureau 
inspection team found that 80 percent of the Guangzhou enterprises 
investigated had problems of "excessive" overtime and insufficient 
payment for social security, particularly among labor-intensive 
enterprises.  The team found one factory required employees to work 
16.5 hours a day.  Another factory had no contracts with its 
workers, failed to provide social insurance, and paid workers only 
RMB 684 (USD 85.5) a month instead of the mandated minimum salary of 
RMB 780 (USD 97.5).  In October, the Guangzhou Labor Bureau reported 
that in 2006 it had collected RMB 103 million (USD 12.9 million) in 
overtime wages for 43,000 workers.  According to ICO Director Liu 
such low wages have led some PRD factories to have a 40 percent 
annual turnover. 
 
Injuries:  Rising Numbers and Legal Battles 
------------------------------------------- 
 
¶6.  (U) The New England Journal of Health published a study in 2005, 
reporting that occupational health hazards are the fourth biggest 
killer among men in China (Note: The top three killers in rank order 
were cancer, heart attack and stroke.  End note.).  The PRD in 
particular has a high number of injuries.  According to a two-year 
survey conducted by Li Qiang, Executive Director of China Labor 
Watch (a New York-based NGO), at least 40,000 migrant workers are 
injured every year in Guangdong Province.  As a result, Guangdong 
authorities have announced plans to build the mainland's biggest 
industrial injury rehabilitation center.  Li Qiang wrote that those 
working 12 hours a day accounted for more than one-third of all 
worker injuries.  Moreover, 90 percent of employers provided almost 
no protective gear (excluding most large factories).  According to 
Li, most work injuries occur at metalworks and manufacturers of 
furniture and plastics products where laborers, using moulding 
machines and saws, become exhausted after working for many hours. 
 
¶7.  (U) In early 2006 the Public Welfare Times (a Beijing-based 
newspaper) published a report investigating PRD injuries (Note: On 
February 8, the Public Welfare Times editor, Chen Jieren, was 
sacked.  End note).  According to PRC law, the legal process for 
injury compensation cases lasts a minimum of 200 days - but these 
can taken even longer if any of the multiple agencies involved 
requires more time.  Many workers cannot afford the various fees 
incurred in the process (which is sometimes complicated by the 
collaboration between factory bosses and local officials) and prefer 
to settle the dispute in private for less compensation.  The report 
described one example of this:  after losing three fingers in a 
furniture factory accident, a migrant worker's boss said he could 
either settle for RMB 3,000 for each finger, or sue the company with 
no guarantee of injury compensation.  Eventually the worker received 
RMB 5,000 for each lost finger and was coerced by the factory to 
never mention the incident. 
 
Child Labor:  Less Prevalent 
---------------------------- 
 
¶8.  (U) There appear to be fewer occurrences of child labor, though 
examples do exist.  Recently the Guangzhou Labor Bureau said that in 
2006 alone it had dismissed 45 child laborers from factories in the 
city.  Additionally, some companies are known to exploit young 
"interns" for cheap labor.  On April 20 the South China Morning Post 
reported that a subsidiary of the South Korean company Samsung 
employed about 1,000 underage workers in Dongguan as "interns" to 
staff about one-quarter of its production lines.  Reportedly 
students were hired from vocational schools in interior provinces 
such as Hunan, Sichuan and Guangxi.  The factory's human resources 
chief acknowledged the company's policy, but said the practice was 
legal because the interns were not involved in such dangerous fields 
as mining or chemicals. 
 
Legal Discrimination:  "Migrants Need Not Apply" 
--------------------------------------------- --- 
 
¶9.  (U) The steady flow of migrant workers into the PRD has made 
local residents resentful, leading to the creation of local laws 
 
GUANGZHOU 00032421  003 OF 004 
 
 
that are discriminatory.  The South China Morning Post has reported 
that some PRD establishments have placed want-ad signs stipulating 
that people from Hubei or Hunan "need not apply."  In the book 
"Employment Discrimination: International Standards and National 
Practice," Shenzhen University professor Li Weiwei describes 
discriminatory Guangdong provincial laws.  Examples include 
requiring migrant workers to carry temporary residence cards (in 
Shantou and Shenzhen); requiring migrant workers to be hired through 
local labor administration bureaus instead of directly (Zhuhai, 
Shantou, Guangzhou); and quotas on the number of migrant workers 
(Guangzhou, Shenzhen, Shantou).  Li argues that these restrictions 
give local residents legal advantages over outside migrant workers. 
Furthermore, such laws violate the State Council's 2004 "Notice of 
Improving the Working Condition of Rural Residents in Urban Areas," 
which was designed to eliminate the differences between rural and 
urban labor markets. 
 
High-Profile Cases: Foxconn and Disney/McDonald's 
--------------------------------------------- --------- 
 
¶10.  (U) Most labor experts agree that the worst labor law violators 
are Taiwan-, Hong Kong- and mainland-invested companies, 
particularly of lesser-known brands.  Two recent examples from this 
summer, however, demonstrate that subsidiaries of famous brands may 
also commit labor violations.  First, in June, two mainland 
journalists published an expose decrying the labor conditions of a 
Foxconn subsidiary in Shenzhen, alleging that employees at the 
factory worked 12 hours a day without being allowed to rest or talk. 
 (Foxconn is a Taiwan-owned manufacturer of various electronic 
equipment, including Apple's "Ipod".)  Foxconn immediately sued the 
journalists for RMB 30 million (USD 3.8 million) and the Shenzhen 
courts froze the journalists' assets, though the suit was eventually 
dropped.  Chang Kai, a Renmin University labor expert, called the 
reaction by Foxconn and the Shenzhen courts "excessive and 
unnatural," while the Southern Metropolis Paper (Nanfang Dushibao) 
wrote that the case shows "the power of the rich and the difficult 
situation of mainland journalists, which is only the beginning of 
things to come." 
 
¶11.  (U) In July, a riot occurred at an 11,000-person Dongguan 
factory owned by a Hong Kong-based toy producer for Disney and 
McDonald's.  Approximately 1,000 workers clashed with security 
guards and police officers, resulting in many injuries.  China Labor 
Watch reported that the workers had numerous complaints of poor 
working conditions including:  11 hour work days, six days a week; 
excessive overtime; salary deductions for refusing to work overtime; 
unpaid holidays; limited vacation and sick leave; overtime paid at 
the standard rate (not paid at a premium as required by law); and 
approximately one-fourth of workers' income spent on food and 
dormitory fees. 
 
Complaints and Protests 
----------------------- 
 
¶12.  (U) A report by the All China Federation of Trade Unions 
released in May said that Guangdong had 61,200 labor lawsuits 
submitted in 2005, the highest number for any province in China. 
The lawsuits mostly concerned wages and social welfare insurance. 
The number could be potentially higher; however, according to labor 
rights activists, workers who try to complain to the local labor 
bureau often face harassment from their factory and police.  For 
example, a July 28 Internet open letter specifically mentions 
problems with the Pingdi labor station in Shenzhen.  According to 
the author of the letter, the workers were first cursed at and later 
put under house arrest for trying to report child labor violations 
and forced labor of pregnant women. 
 
Anecdotal Evidence of Labor Violations 
-------------------------------------- 
 
¶13.  (SBU) Various groups of workers have told Congenoff of poor 
labor standards in their factories.  Workers at factories in 
Dongguan and Shenzhen complained of long hours and of often not 
receiving the minimum wage.  The workers were even more upset by 
their living conditions.  The workers live in a building with 20 
 
GUANGZHOU 00032421  004 OF 004 
 
 
dormitory rooms per floor, with one toilet for 100 or more people. 
Others mentioned bad food, which the management refused to improve 
despite complaints. 
 
¶14.  (SBU) Additionally, Congenoff met with underaged workers who 
were tricked into working as interns for a Taiwanese electronics 
factory in Dongguan.  The workers, from Hunan province, all 
approximately age 16, were attending a vocational school when the 
factory approached their school promising internships to work five 
days a week at a "decent" wage and to sleep with four to eight 
people in a dormitory.  The boys' parents agreed and paid the school 
RMB 1,500 to allow the boys to leave school.  In reality the boys 
were required to work 11 hours a day, six days a week at below 
minimum wages (RMB 490 a month, USD 61.25) and sleep with 400 people 
in a warehouse.  The boys said they were given two hours of training 
before starting and the factory has 300 guards who were "very 
violent" at times. 
 
¶15.  (SBU) In October, Congenoff visited the 9,000-person Kingsun 
factories in Dongguan, a mainland-invested manufacturer of Christmas 
decorations and cooking grills.  One Kingsun manager proudly showed 
Congenoff the factory's welding process.  The shop floor was filled 
with strong smells of metal and oil; hot sparks and dust spewed out 
of the welding machines.  Despite the air pollutants, there were no 
working fans in any of the buildings.  Additionally, workers did not 
wear masks, eyeglasses or earplugs, though most did have gloves. 
Workers lived in dorm rooms of eight people per room.  Shop-floor 
workers were paid RMB 700 a month (USD 87.5), RMB 10 more than 
Dongguan's minimum, which did not include fees for room and board. 
Workers are provided social insurance, but no health insurance. 
 
Comment: The Source of Violations? 
---------------------------------- 
 
¶16.  (SBU) Rapid economic growth, lack of government attention and 
corruption are the main reasons for poor labor standards.  The 
problem of labor violations seems similar to intellectual property 
rights violations or anti-corruption campaigns in that the 
government's effort to enforce the law lags considerably behind the 
growth of the problem.  Part of this lag is due to the 
juggernaut-like rapid growth of the Guangdong economy (almost 12 
percent growth for the past 20 years), which leaves government-led 
enforcement efforts, even were there the best of intentions (which 
often there is not), in the dust.  Labor officials in any country 
would find it similarly difficult to monitor companies if thousands 
of new enterprises sprung up in their district each year. 
 
¶17.  (SBU) Moreover, for the past 20 years economic growth itself 
was the sole focus of Guangdong leaders.  Only recently has the 
central government promoted its "Harmonious Society" ideology, which 
considers factors such as environmental safety, health and welfare 
and social stability.  In the past few years, as land prices in the 
PRD have increased and labor and environmental standards have become 
more stringent (reftel) some investors have begun to shift their 
factories outside of the PRD to cities like Qingyuan and Heyuan. 
Rampant corruption, fueled by foreign and domestic investors, occurs 
at many levels of the Guangdong government, leading officials to 
overlook labor violations.  One British diplomat told Congenoff that 
Hong Kong factory owners are known to even ask Hong Kong government 
officials to lobby Guangdong to not enforce labor and environmental 
standards in the PRD. 
 
GOLDBERG