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UNCLAS SECTION 01 OF 02 GUANGZHOU 000163 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR FOR KARESH 
LABOR FOR ILAB - LI 
 
E.O. 12958: N/A 
TAGS: ELTN ELAB PGOV SOCI ECON CH
SUBJECT: Labor Unrest in South China? - Unlikely...For Now 
 
REF: A) GUANGZHOU 131; B) GUANGZHOU 57; C) GUANGZHOU 54; D) 
GUANGZHOU 47; E) GUANGZHOU 42; F) BEIJING 448; G) BEIJING 484 
 
(U) This document is sensitive but unclassified.  Please protect 
accordingly. 
 
¶1. (SBU) Summary: Increasing unemployment and isolated labor 
disturbances will not likely translate into broader social 
instability in the near future, according to South China business 
and academic contacts.  Local governments have taken steps to help 
returning migrant workers find jobs and have extracted promises of 
no new layoffs from major local employers.  At the same time, many 
factories have encouraged workers to stay home for "extended unpaid 
holidays" until orders pick up.  Although academic contacts warned 
that unemployed college graduates could be a particularly volatile 
segment, it appears that for the time being at least, workers from 
all segments have individually and collectively reached the 
conclusion that they have nothing to gain from radical action that 
could threaten social stability.  End summary. 
 
Near Term Labor Unrest? 
----------------------- 
 
¶2. (SBU) "We don't think so" was the answer when academic and 
business contacts were asked about the threat of labor unrest in a 
series of recent meetings with econoffs.  Reasons varied, but the 
conclusion was the same: increasing South China unemployment and 
isolated incidents of social unrest will not likely translate into 
broad social instability in the near future.  Professor Ou Jiangbo, 
Vice Director of the Statistics Research Center at Guangzhou Academy 
of Social Sciences (GASS), put the recent rise in unemployment in 
its historical context.  He claimed that although the recently 
reported figure of 20 million unemployed migrant workers was high, 
it might not represent a historically significant increase within 
the context of China's long-term employment trends for the country's 
rural population.  Ou argued that the periodic increase of "a few 
million more" unemployed people had happened more than once in 
China's modern history and the current uptick was not really cause 
for alarm in the short term.  Ou went on to say that the current 
increase would likely accelerate a long-term urbanization trend from 
rural areas to second- and third-tier cities that are expanding in 
areas closest to workers' rural homes. 
 
¶3. (SBU) Business leaders from Dongguan, an export-reliant 
industrial city that has been hit hard by the downturn, agreed that 
social stability is not currently at risk from major unrest.  One 
factory owner, a member of the Dongguan Association of 
Foreign-Invested Enterprises (FIE), described conditions in 
Dongguan's Tangxia District as unusually calm.  He explained that 
the area had previously hosted approximately 700,000 migrant 
workers, but the number had declined by almost half to 
350,000-400,000 because many had gone home and not returned.  Anyone 
driving or walking the streets of Tangxia can see that its 
establishments are very quiet now, he said.  Economic activity has 
dropped substantially from what it was a year ago, according to the 
factory owner, and the decline seems to have affected small shops 
and restaurants most dramatically.  Another factory owner, also a 
Dongguan Association of FIEs member, said the Tangxia police had 
seen an increase in petty crime in recent months but had told him 
that public order was not in jeopardy.  He commented that the police 
seemed very confident in their ability to prevent social unrest. 
Guangdong Development Bank (GDB) President Michael Zink, based in 
Guangzhou, echoed these comments, emphasizing that local law 
enforcement and political leaders had not even begun to use all of 
the tools available for preventing widespread unrest and that 
authorities would be effective in maintaining the status quo for a 
long time. 
 
But Why Haven't the Workers Returned? 
------------------------------------- 
 
¶4. (SBU) Zhongshan University Economics Professor Lu Jun asserted 
that many rural families have sufficient savings to support returned 
migrant relatives for several months at least, and unemployed 
workers might be happy to have a break from their factory jobs until 
economic conditions improve.  Factory owners from the Dongguan 
Association of FIEs also claimed that many factories had agreed to 
pay migrant worker employees a small RMB 10/day allowance (US$ 1.50) 
 
GUANGZHOU 00000163  002 OF 002 
 
 
to stay in their home villages and wait for manufacturing orders to 
recover (the contacts called this a food/subsistence allowance). 
The businessmen claimed that the allowance was effective at 
encouraging unskilled workers to willingly remain at home in rural 
areas on an "extended unpaid holiday."  They said different 
factories took different approaches, but some had paid half of the 
subsistence fees in advance before Chinese New Year, and would pay 
the remaining portion when migrant workers return in April according 
to the agreed plan. 
 
What is Government Doing to Help? 
--------------------------------- 
 
¶5. Professor Peng Peng, also of Guangzhou Academy of Social 
Sciences, told econoffs that government assistance for unemployed 
migrant workers had taken many forms in recent months and would 
continue to evolve along with the economic crisis.  Peng said local 
governments had sponsored free job fairs and expanded employment 
information networks for workers in both urban and rural areas.  He 
also said many entrepreneurs were using the current crisis to expand 
and hire new employees, especially in the service sector as economic 
conditions create new business opportunities.  However, Peng 
cautioned that recent college graduates could form a particularly 
volatile segment of the unemployed population, causing government 
authorities and education leaders to focus on managing the 
continuous flow of new college graduates into the depressed labor 
market (ref F). 
 
¶6. (SBU) Zhongshan's Professor Lu said local government leaders 
across South China had also engaged in a vigorous campaign to meet 
with major employers in their communities and extract promises of no 
new or unexpected layoffs in coming months (ref G).  Lu said 
business leaders cooperate with these types of requests from 
political leaders both because they see it as their firms' 
"contribution to social stability" and because cooperation on this 
point can lead to other government-conferred benefits, either now or 
in the future. 
 
What Happens When Workers Do Return? 
------------------------------------ 
 
¶7. (SBU) Dongguan Association of FIE leaders said they didn't really 
know what would happen when/if large numbers of the unemployed 
workers return to Dongguan later this spring or early summer, but 
pointed out that some factories were considering alternative work 
schedules aimed at keeping their best-skilled workers.  Factory 
owners said many firms would likely offer workers "1/2 or 3/4 jobs" 
when they return; employees would work 3 full days per week, several 
half days, or some other combination that would eliminate overtime 
and retain as many of the best skilled/trained workers as possible. 
The owners still seem to be wishing for a recovery of orders by the 
time workers return from their "extended holiday," but they 
confessed that the chances of such a quick and soft landing seemed 
dim.  In the conversation with econoffs, the factory owners 
repeatedly returned to the skilled worker problem - wondering aloud 
how to avoid releasing, scaring away or otherwise losing their most 
skilled and trained employees but also hoping to avoid paying salary 
levels that the workers had come to expect in early-to-mid 2008. 
 
Comment 
------- 
 
¶8. (SBU) Although academic and business contacts expressed 
confidence in the government's efforts to maintain social stability, 
their analysis is based on conditions that could quickly change. 
Consulate officers have also observed the relative calm in migrant 
worker communities and surmise that for the time being at least, 
workers have individually and collectively reached the conclusion 
that they have nothing to gain from radical action.  Concerns of 
unrest might increase, however, if economic conditions deteriorate 
to the extent that employers are no longer able to keep their 
continued-employment promises or rural families see their savings 
decline so much that they are unable to support returned workers. 
 
GOLDBERG