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DE RUEHGZ #0722/01 1770904
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R 260904Z JUN 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6200
INFO RUEHOO/CHINA POSTS COLLECTIVE
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UNCLAS SECTION 01 OF 02 GUANGZHOU 000722 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USDOC FOR 4420/ITA/MAC/MCQUEEN 
 
STATE ALSO PASS USTR 
 
USPACOM FOR FPA 
 
E.O. 12958: N/A 
TAGS: ECON PGOV ELAB EINV CH
SUBJECT: Gurao Protest Follow-up: Protests Against Illegal Land 
Sales Continue But Do Not Upset Business 
 
REF: Guangzhou 544 
 
THIS DOCUMENT IS SENSITIVE BUT UNCLASSIFIED.  IT SHOULD NOT BE 
DISSEMINATED OUTSIDE OF U.S. GOVERNMENT CHANNELS OR IN ANY PUBLIC 
FORUM WITHOUT THE WRITTEN CONCURRENCE OF THE ORIGINATOR.  IT SHOULD 
NOT BE POSTED ON THE INTERNET. 
 
¶1. (U) SUMMARY:  Factories in Gurao, Guangdong - China's largest 
underwear manufacturing base - continue to operate without incident 
despite May protests by hundreds of nearby villagers who claimed 
village officials profited from illegal land sales.  Villagers 
continue to engage in low-level protests, as Shantou city officials 
investigate their complaints.  The owner of Gurao's third-largest 
factory said business is booming, despite U.S. import quotas, labor 
shortages, and rising wages.  END SUMMARY. 
 
On-Going Protests Do Not Affect Business 
---------------------------------------- 
 
¶2.  (SBU) According to Mrs. Chen, the owner of Yili Industrial Co., 
an underwear factory located in Gurao, Guangdong Province, farmers 
from a number of villages protested after local officials bought 
their farmland and then re-sold it to businesses at significantly 
higher prices, pocketing the difference. (Radio Free Asia reported 
that residents of 13 villages attacked village officials and, in 
some cases, broke into and vandalized their residences.)  Some of 
the village officials fled to avoid being targeted.  Mrs. Chen 
criticized the corruption of local officials, but did not directly 
support the villagers.  For their part, the police, who did not want 
the protests to escalate, reportedly avoided direct clashes with and 
did not arrest any demonstrators.  Mrs. Chen said the protesters 
remain suspicious of the investigating officials; small scale 
protests continue but there has not been any vandalizing of public 
factories or obstruction of traffic.  Mrs. Chen said business in 
Gurao continued uninterrupted throughout the demonstrations. 
 
Gurao: Underwear Town 
--------------------- 
 
¶3. (U) Gurao Township one of China's biggest underwear manufacturing 
bases, is situated in a rural area near Shantou.  It has a 
population of 130,000 and is home to more than 1,000 underwear 
factories, most of which are export-oriented.  The town's underwear 
manufacturing industry started up in the early 1980s, and now 
accounts for nearly 95 percent of the town's GDP.  It is relatively 
wealthy compared with nearby towns in Shantou City.  The concrete 
road to the town was completed in 2005, but shoddy construction and 
truck overloads have caused sections of the road to crack.  Roads 
within Gurao itself are in poor condition, with very heavy traffic. 
The black and stinking water in the river around the town points to 
serious environmental problems. 
 
Yili Factory: Growing Rapidly 
----------------------------- 
 
¶4.  (SBU) According to Mrs. Chen, her factory employs more than 600 
workers, mostly women, and is the third largest underwear 
manufacturer in the town.  She manages production in Gurao while her 
husband, who co-owns the factory, is based in Los Angeles developing 
a market in the United States.  Yili produces women's bras and 
underwear and exports most of its products to Africa.  Unlike most 
underwear manufacturers in the town, which make OEM products, Yili 
sells its products under its own "Yili" brand name.  Chen said the 
company would prefer to export more to the United States but quotas 
are difficult to obtain.  The factory has built two new multi-level 
buildings to house machinery, a dormitory building for married 
couples, and is now building an 11-story dormitory.  To counter 
rising wages and shortages of semi-skilled workers, Mrs. Chen has 
increasingly moved to automation, including weaving and pressure 
bonding machines.  Nevertheless, much of the work is still performed 
by individuals seated at sewing machines. 
 
Labor Conditions at the Factory 
------------------------------- 
 
¶6.  (U) Mrs. Chen described her relationship with the employees as 
"harmonious" because she pays more than other underwear factories in 
the area and provides free housing with air conditioning.   Though 
the average monthly wage in the area is slightly more than RMB 1,000 
 
GUANGZHOU 00000722  002 OF 002 
 
 
(USD 130) per month, Chen said her workers earn on average RMB 2,500 
(USD 330), with skilled workers and supervisors earning up to RMB 
4,000 (USD 525).  She noted that the local labor bureau pays regular 
visits to area factories, looking for problems such as child labor, 
excessive overtime, and substandard wages.  Conditions on the 
factory floor that we observed were reasonable, with good 
ventilation and lighting, though excessive raw and finished 
materials posed a fire hazard.  Congenoff spoke with a number of 
long and short-term employees who said they were quite happy working 
at the factory. 
 
Comment: Government Dealing Lightly with Protestors as Long as 
Business Not Affected 
------------------------------------ ---------------------- 
 
¶7. (SBU) Gurao is a classic example of a post-"Reform and 
Development" phenomenon: after one person successfully established 
an underwear factory, many others, including Chen and her husband, 
followed suit (there is a very good article on this phenomenon by 
Peter Hessler of "River Town" and Peace Corps fame, in a recent 
issue of National Geographic.)  Local government officials strongly 
support business expansion and have not hesitated to sell farm land 
to promote the expansion; in the process, it just seems that they 
invariably find ways to enrich themselves.  Police have maintained a 
low profile in their response to the protests, a result likely of 
the overwhelmingly negative international press that resulted from 
previous crackdowns (e.g. the December 2005 Dongzhou shootings). 
Should the flow of business be blocked by protesting villagers, 
however, even sympathetic businesspeople, such as Chen, will likely 
run out of patience. 
 
GOLDBERG