VZCZCXRO8906
RR RUEHHM RUEHJO RUEHPOD
DE RUEHGZ #0692/01 3300852
ZNR UUUUU ZZH
R 250852Z NOV 08
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 0021
INFO RUEHGZ/CHINA POSTS COLLECTIVE 0008
RUEHXI/LABOR COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC 0006
RUEHC/DEPT OF LABOR WASHINGTON DC
RUEAIIA/CIA WASHDC 0008
RUEKJCS/DIA WASHDC 0008
RHEHAAA/NSC WASHDC

UNCLAS SECTION 01 OF 02 GUANGZHOU 000692 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM, DRL, INR/EAP 
 
E.O. 12958: DECL: N/A 
TAGS: ELAB PGOV CH
SUBJECT: China Labor Experts Fear Downturn could Delay 
Labor Enforcement 
 
¶1. (SBU) SUMMARY: Doubts about the government's willingness 
to enforce labor regulations and mixed messages from senior 
Party leaders on assistance to failing business have left 
many enterprises in the Pearl River Delta reluctant to 
conform to the Labor Contract Law and related regulations. 
Years of complacency and a dearth of investment in research 
and development have limited the ability of many small and 
medium enterprises to adapt to current economic conditions. 
Unable to issue municipal bonds, cities like Dongguan have 
few options to raise capital to help businesses and shore 
up the local economy.  END SUMMARY. 
 
Betting on Lax Enforcement 
-------------------------- 
 
¶2. (SBU) Doubts about the government's willingness to 
enforce regulations potentially detrimental to business 
have emboldened some enterprises to refuse to purchase 
social security insurance for workers, according to Sun 
Yat-Sen University Department of Public Finance and 
Taxation Dean Lin Jiang.  Lin, who is also an advisor to 
the Dongguan municipal government, said that the 
postponement of new minimum wage legislation has led some 
enterprises to conclude that enforcement of worker rights, 
too, could be postponed in an effort to aid vulnerable SMEs 
in the export sector.  East China University of Political 
Science and Law Professor Dong Baohua, who serves as vice 
chairman of the China Labor Law Research Association and 
who helped pen China's Labor Contract Law (LCL), claimed 
that any decision to postpone implementation of the LCL 
would come from "senior-level leaders" in Beijing, causing 
provincial and municipal leaders to watch the capital 
closely. 
 
Lack of Consensus at the Top 
----------------------------- 
 
¶3. (SBU) Lin said that mixed signals from senior Party 
leadership highlight a lack of consensus on how to deal 
with current conditions.  He juxtaposed statements by 
Guangdong Party Secretary Wang Yang that the PRD 
enterprises that have closed down are mostly SMEs 
representing "backward productivity" -- whose closure is a 
good thing for the economy -- with Premier Wen Jiabao's 
comments that government should lend a helping hand to SMEs 
in order to maintain social stability.  Dong characterized 
the choice for leaders as either "disrupting the economic 
order" by continuing to enforce labor standards or 
"disrupting the social order" by ignoring or permitting 
violations of the law.  Lin disagreed that the LCL itself 
was a major contributing factor to the current economic 
situation, speculating instead that enterprises see an 
opportunity to use the fear of a worsening economy to force 
the law's repeal or postponement. 
 
Complacency, and Missed Opportunities 
------------------------------------- 
 
¶4. (SBU) Municipal authorities in Dongguan and other 
manufacturing bases in the PRD are concerned about their 
ability to remunerate workers subject to surprise layoffs 
or firm bankruptcies, according to Lin, who said that in 
practice such funds might not be made available to "all 
firms," especially in the case of poorer cities likely to 
run out of money.  Due to an inability to issue bonds, Lin 
said that cities like Dongguan have only limited options to 
raise capital for a financial rescue operation. 
 
¶5. (SBU) Shortsightedness on the part of businesses, too, 
will continue to be costly.  Lin accused many of Dongguan's 
enterprises of complacency, saying that a history of 
comfortable profits supplied little incentive to invest in 
research and development.  Now, the opportunity to do so 
was past.  Lin said that "not all" of Dongguan's townships 
were "interested" in examining their existing policies 
toward business, implying that such areas could be hit 
especially hard by the new economic reality. 
 
¶6. (SBU) Dongguan's entire infrastructure development -- 
especially its road network and its ports -- are export 
oriented, thus magnifying the current economic 
difficulties, said Lin.  The Yangze River Delta is better 
 
GUANGZHOU 00000692  002 OF 002 
 
 
positioned than the Pearl River Delta to serve the domestic 
market, according Lin, who added that a number of PRD-based 
companies had already relocated to the YRD, with others 
likely to follow suit. 
 
JACOBSEN