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Cablegate: Gurao Protest Follow-Up: Protests Against Illegal Land

VZCZCXRO5784
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0722/01 1770904
ZNR UUUUU ZZH
R 260904Z JUN 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6200
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEHC/USDOL WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC
RHHMUNA/HQ USPACOM HONOLULU HI

UNCLAS SECTION 01 OF 02 GUANGZHOU 000722

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SENSITIVE
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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

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