Identifier
Created
Classification
Origin
09GUANGZHOU163
2009-03-11 06:57:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Consulate Guangzhou
Cable title:  

Labor Unrest in South China? - Unlikely...For Now

Tags:  ELTN ELAB PGOV SOCI ECON CH 
pdf how-to read a cable
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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.

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