VZCZCXRO2609
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0717/01 1730226
ZNR UUUUU ZZH
R 220226Z JUN 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6195
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHC/DEPT OF LABOR WASHDC
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHGV/USMISSION GENEVA 0454
RUEKJCS/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 GUANGZHOU 000717 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
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 
 
E.O. 12958: N/A 
TAGS: ELAB PHUM PGOV SOCI CH
SUBJECT: Alleged Labor Violations at Yue Wing Cheong 
Factory in Shenzhen 
 
REF: Guangzhou 699 
 
(U) This message is Sensitive But Unclassified.  Please 
handle accordingly. 
 
¶1. (SBU) SUMMARY: Congenoff's visit to a second mainland 
Chinese company (Yue Wing Cheong Manufacturing) cited in 
PlayFair 2008's report ("No Medal For the Olympics on 
Labour Rights") led to conclusions similar to those from 
his visit to Mainland Headwear (reftel).  Yue Wing Cheong 
clearly has problems with regard to wages, overtime, and 
possible "coaching" of employees, but Congenoff did not 
observe egregious violations; some of PlayFair's 
allegations did not appear to be accurate.  END SUMMARY. 
 
Unrestricted Access 
------------------- 
 
¶2. (SBU) Yue Wing Cheong corporate representatives and 
factory managers permitted Congenoff unrestricted access to 
their Shenzhen factory, offices, and worker dormitories, 
allowing him to take photographs and to speak with any 
employee.  In contrast to the visit to Mainland Headwear 
(reftel), unit supervisors or factory managers at Yue Wing 
Cheong stayed close at hand to listen to workers' responses 
to our questions.  While these managers did not prompt 
employees on what to say, the workers did appear more 
nervous or uncomfortable than those at Mainland Headwear 
when answering questions. 
 
Taking It Personally 
-------------------- 
 
¶3. (SBU) Yue Wing Cheong Vice Chairman and co-founder Susan 
So - a Hong Kong resident - along with corporate legal 
representative Leon Nim Leung Chan, repeatedly told us that 
the company categorically denied all accusations in the 
PlayFair report.  So told us that she is offended by the 
allegations and is concerned that the report will cause her 
clients, many of whom are large U.S. retailers, to cancel 
their orders.  So said that a few of their smaller clients 
had already put holds on their orders.  She even half- 
jokingly suggested that unless they could somehow counter 
the effects of the PlayFair report, the company could go 
bankrupt and she would have to retire.  Leon Chan noted 
that the report's accusations are libelous and that he 
intends to pursue appropriate legal action against 
PlayFair. 
 
Alleged Violations - "Wages below legal standards; 
Long working hours" 
--------------------------------------------- ---- 
 
¶4. (SBU) The PlayFair report cites eight alleged labor 
violations.  With regard to the first two, wages below 
legal standards and long working hours, several factory 
employees told Congenoff that they were paid wages of 
approximately RMB 1,000 to 1,500 per month for 200-300 
working hours.  Company representatives allowed us to 
examine pay records from April 2007 which showed a typical 
employee working six days a week for 8-10 hours per day. 
Some pay records showed 10-13 hour work days. 
 
¶5. (SBU) Each worker interviewed told us that overtime was 
voluntary.  Supervisors are paid by the hour, while workers 
are usually paid by the piece.  Most of the workers were 
from rural Guangdong, Fujian, Hunan, or Guangxi and remit a 
portion of their wages to family members in their home 
towns. 
 
¶6. (SBU) Factory managers told us that under the 
comprehensive average overtime plan approved by the 
Shenzhen Labor Bureau, workers can work up to 60 hours of 
overtime per month during peak seasons.  Some pay records 
indicated that employees exceeded this limit.  In addition, 
employees told Congenoff that the peak season is November 
and December; pay records examined were from April.  Susan 
 
GUANGZHOU 00000717  002 OF 003 
 
 
So said that Yue Wing Cheong's overtime practices are 
endorsed and verified by the company's customers during 
regular factory audits (Note: This reflects a gray area in 
Chinese labor implementation.  The Labor Law limits 
overtime to a total of 36 hours per month, a level that 
employers, buyers, and often workers say is unrealistically 
low.  Buyers' social compliance auditors generally accept 
higher levels of overtime as consistent with their codes of 
conduct if the local labor bureau endorses the factory's 
overtime policy, as in this case.  Meanwhile, some labor 
NGOs and business responsibility advocates question the 
accuracy of labor audits altogether; this was a topic of 
lively discussion during the recent visit to Guangzhou of 
DRL DAS Krilla.  End Note).  Employees and managers said 
that piece-rate wages during overtime are higher than 
during normal working hours. 
 
"Health and safety hazards" 
--------------------------- 
 
¶7. (U) Work intensity at the factory did not appear 
excessive during our visit.  Contrary to the PlayFair 
report, no weaving or dyeing is done at the Shenzhen 
factory, and there was little or no ambient dust.  Sewing 
and finishing areas have fans and were slightly cooler than 
the outside temperature.  The factory runs an on-site 
clinic, but the health care worker was not on duty during 
our visit.  Nearly all sewing and finishing workers sat on 
stools without backs, but several sewers interviewed stated 
they had no back problems as a result. 
 
¶8. (SBU) One area used for gluing bag components was poorly 
ventilated, and workers wore ordinary paper surgical masks 
that provide no protection against the strong organic 
solvent odor.  There were 12-16 fire extinguishers on each 
floor of the factory; however, they were placed on each end 
of the floor near the stairs instead of spread out among 
the workstations. 
 
"Difficulty in resigning" 
------------------------- 
 
¶9. (SBU) Ms. So told Congenoff that the turnover rate is 
low; those who do quit are not penalized, and pay is not 
withheld.  However, workers must give one month notice 
before quitting, and employees could lose at least some pay 
if they do not give appropriate notice.  The workers we 
interviewed did not complain of any restrictions or 
penalties for resigning. 
 
"Deceiving the buyers' inspectors" 
---------------------------------- 
 
¶10. (SBU) Company representatives denied that this occurs. 
Congenoff noticed that several employees were visibly 
uncomfortable answering certain questions, particularly 
those concerning wages, but were much more relaxed when 
answering biographical questions.  One unit supervisor who 
previously worked as a sewer told Congenoff during a 
private interview that the company does not tell employees 
to lie to inspectors. 
 
¶11. (U) The report alleges that the factory no longer 
issues pay slips to employees.  However, one worker 
interviewed pulled her most recent pay slip out of her 
pocket to show Congenoff how many days and hours per month 
she had worked and her monthly income. 
 
"Excessive fines and punishments" 
--------------------------------- 
 
¶12. (U) Company representatives deny using punishments 
described in the report for absenteeism, nor did employees 
voice concerns in this regard. 
 
"No legal maternity leave" 
-------------------------- 
 
GUANGZHOU 00000717  003 OF 003 
 
 
 
¶13. (U) Ms. So told Congenoff that the company provides 90 
days of paid maternity leave, adding that not many of their 
workers have become pregnant during their time with the 
company.  The maternity leave policy is explicitly stated 
in the company regulations given to each new employee, 
according to the factory manager. 
 
"No support system, no union representation" 
-------------------------------------------- 
 
¶14. (SBU) Factory managers showed us registration documents 
for the ACFTU-affiliated workers' union organized at the 
factory in October 2005.  The factory manager estimated 
that 60 percent of employees belong to the union.  Some 
workers we interviewed were members of the union, but were 
unable to tell us about the union's goals or activities, a 
not uncommon situation in China. 
 
Comment 
------- 
 
¶15. (SBU) Without knowing the sources PlayFair 2008 used in 
its research into conditions at Yue Wing Cheong, Congen 
cannot comment on whether the report fairly reflects the 
conditions observed by their researchers.  Congen's own 
observations did not track fully with PlayFair's 
assessment.  While labor violations at this company did not 
appear egregious, the allegations PlayFair made are typical 
of reports from other factories, especially small or 
unregistered factories.  With respect to worker 
associations, we note that even when present, ACFTU unions 
usually support company management and plant operations. 
 
¶16. (U) Photographs taken during our visit were sent to 
EAP/CM and DRL. 
 
GOLDBERG