Labor Law Implementation and CSR Cynicism are Key

UNCLAS SECTION 01 OF 02 GUANGZHOU 032263

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PACOM FOR FPA

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E.O. 12958: N/A
TAGS: ELAB SOCI CH
SUBJECT: Labor Law Implementation and CSR Cynicism are Key
Problems, Say Labor Experts

REF: 04 Guangzhou 27525


1. (U) Summary: Despite China's many international labor
commitments, migrant workers remain poorly trained, overworked and
underpaid, according to experts at a recent conference on Corporate
Social Responsibility (CSR) in Shenzhen. Many legal experts said
that China's labor laws are theoretically sound but in need of
proper implementation through better monitoring and incentive
programs. On the factory floor itself, many migrant workers are
eager for education, but the government provides little support for
such programs. An official at a large Nike factory explained how
offering educational and recreational opportunities can greatly
lower turnover rates that have plagued other factories. End
Summary.


2. (U) On October 26-27, poloff attended a Corporate Social
Responsibility (CSR) Conference hosted by Shenzhen's Institute of
Contemporary Observation (ICO) entitled "Toward the Olympics:
China's Opportunities and Challenges." Since its founding in 2001,
the ICO has audited over 1,000 factories in Guangdong Province's
manufacturing-intensive Pearl River Delta (PRD) and provided worker
training sessions in hundreds of others. In March 2004 the ICO
started a Migrant Worker Community College, which teaches basic
computer skills, English, health care and labor rights. The ICO
conference included academics from China and abroad, private sector
CSR leaders and representatives from foreign governments, as well as
representatives from the United Nations International Labor
Organization (ILO).

Workers: Inexperienced, Overworked and Underpaid
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3. (U) ICO founder Liu Kaiming began the conference by presenting
troubling statistics on general migrant worker patterns and working
conditions. Liu estimated that 200 million farmers have migrated to
urban areas. Fifty-eight percent of migrant workers are in
manufacturing or construction and 82 percent of them work in the
eastern cities of Beijing, Tianjin, Shanghai or the provinces of
Zhejiang, Jiangsu, Fujian and Guangdong. Guangdong alone has 40
million migrant workers (27 percent of the total). On average,
migrant workers are 29 years old, 77 percent have never gone to high
school and 72 percent have no vocational training. As labor rights
awareness increases in China, labor disputes have risen from 19,098
in 1994 to 226,000 in 2003. Liu said China has 560,000 foreign
companies, which employ 80 million Chinese workers in the global
supply chain.


4. (U) China's current "Gini" index is 0.49, which Liu said is
"dangerously high" (Note: The Gini index measures a country's level
of inequality. Many African countries have indices around 0.40.
End Note) -- while average wages in China have increased, minimum
wages remain relatively low. According to Liu, the average monthly
minimum wage for workers in the PRD increased by only 68 RMB (USD
8.5) between 1992 and 2004. Internationally, minimum wages are
typically between 40-60 percent of a region's average wage.
According to Liu, China has only one city with a minimum wage half
of the average wage, while Shenzhen and Guangzhou are the lowest
with minimum wages only 18 and 20 percent of the average wage.


5. (U) Migrants tend to work long hours and some do not even
receive the minimum wage. The National Statistics Bureau said that
in 2004, migrant workers worked an average of 6.4 days a week and
9.4 hours a day. Recently, the ICO conducted a survey of 300
factories and found 50 percent of workers received the minimum wage,
30 percent did not, and 20 percent received wagers higher than the
minimum. Liu said that such harsh conditions have led some PRD
factories to have turnover rates of 40 percent.

Chinese Law Sound, but Must be Better Implemented
-------------- --------------


6. (U) Roger Plant, director of the ILO's special program on forced
labor, noted that in 1998, the international community (along with
China) adopted the Declaration on Fundamental Principles and Rights
at Work, obligating member-states to uphold four core labor
principles: no forced labor, no child labor, no discrimination in
the work place and freedom of association and collective bargaining.
Plant said that the key challenge for China is to guarantee the
rights of its migrant workers. Plant believes that child labor is
less of a problem in China than in other Asian countries, but that
labor mobility is limited due to China's "hukou" (household
registration) system.


7. (U) Guo Jianwei, director of Peking University's Women Legal
Research and Service Center, said that although China has signed 23
labor rights-related international conventions, China's biggest
problem remains implementing its international legal obligations.

GUANGZHOU 00032263 002 OF 002


When advocating for labor rights, Guo said her group tries to view
the situation from the enterprise's perspective. The problem is
that the Chinese government neither encourages nor punishes
enterprises that improve labor rights standards. Guo said the
situation is different in other countries like the United States,
where companies receive tax breaks for CSR activities and penalties
for breaking the law.

Multi-National Companies Remain Cynical of CSR
-------------- -


8. (U) Renmin University's Chang Kai, one of China's leading labor
experts, admonished multi-national corporations (MNCs) because,
based on his research of hundreds of factory manuals, many MNCs
merely strive to meet the lowest labor standards allowed in China.
Kai urged MNCs not to rely just on the Chinese government to make
changes, but also to strive for higher international standards.
Moreover, CSR should increase benefits (such as higher pay) and
respect workers' rights, such as collective bargaining and
permitting dissent.


9. (U) Kai also argued that MNCs in China have merely been public
advocates for CSR and have not tried to address systemic problems.
Kai pointed to the recent Foxconn (a Taiwan electronics
manufacturer) scandal as a "typical" example of MNCs views toward
CSR. In June, two Mainland journalists published an expose on the
labor conditions of a Foxconn subsidiary in Dongguan, Guangdong
Province. Kai said the reaction by Foxconn and local authorities
was excessive and "unnatural." Foxconn immediately sued the
journalists for RMB 30 million (USD 3.8 million),making it the
Mainland's largest defamation case in history. In the pre-trial
motions, the Shenzhen courts decided to freeze the journalists'
assets. In the end, Foxconn admitted it had labor problems and
dropped the libel suit. Kai said that Foxconn then came out with a
CSR-type campaign that expressed its "admiration" for the media
coverage and "thanked" the journalists for their efforts. Kai
argued that Foxconn never resolved its labor problems, but instead
focused only on good public relations.

Workers Want to Learn, but Government Won't Pay
-------------- --


10. (U) According to the research by Peking University's Wang Rong
on migrant workers in Shanghai, workers were willing to personally
pay RMB 2,000 (USD 250) a year for education. Wang was surprised by
these findings, as the current tuition for adult education in
Shanghai is around RMB 3,000 (USD 375). Wang highlighted the gap
between worker's demand and Central Government spending on
education. In 2005, the Central Government allotted RMB 10 billion
(USD 1.25 billion) on education for migrant workers, but according
to Wang's research, the market demand from migrant workers is near
RMB 350 billion (USD 43.75 billion). Wang said most workers do not
study because they lack access to information and transportation, or
they are simply too tired from working long hours.

Positive Examples from the Private Sector
--------------


11. (U) Topy He, leader of a team of 28 CSR workers at Nike's Yue
Yuan Industrial Plant (YY) in Dongguan, described Nike's strategy to
improve worker conditions. YY (reftel) is one of South China's
largest factories with over 90,000 workers. Factory laborers work
six days a week, but are not allowed to exceed the maximum 36 hours
overtime per month. When the workers approach the overtime limit,
the factory foremen are given a warning to ensure compliance. Some
workers can earn up to RMB 1,300 (USD 163) per month, including
overtime pay. In addition to fair wages, Nike also provides
training in English and computers skills, as well as access to
games, television, a library and a park. As a result of these
benefits, Topy He is proud that Nike has kept its turnover rate to
around three percent annually.

GOLDBERG