Gurao Protest Follow-up: Protests Against Illegal Land

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