China's Toy Industry Tinderbox

by Hugh Williamson

If the Workers' Daily says so, it must be true. China's official workers' paper commented recently that "many people say [the foreign-invested economy] is China's burgeoning new heaven. But sometimes, heaven is only a step away from hell."

 The statement rings especially true for 84 former colleagues of Tao Chun Lan, a 20-year-old woman from Zhongyuan, a poor village in Sichuan province in central China. Last year, Tao and many village friends migrated to Shenzhen, the "Special Economic Zone," which borders Hong Kong and exemplifies China's rush to open its doors to foreign business.

 Tao and her friends found work in the Zhili Handicrafts factory, making stuffed toys. They earned poverty wages, about $46 a month. On the night of November 19, 1993, an electrical fault sparked a fire that ripped through Zhili's dual factory-dormitory building. The workers were locked inside - only one of four exits was open. In all, 84 workers were suffocated, burnt or trampled to death. Most of the victims were women, and many were Tao's friends from Zhongyuan village.

Tao was lucky. She survived, although she crushed both ankles jumping to safety from a second- floor window. Hospitalized for four months, she received no compensation from the company or the local government. "They don't care if I'm crippled for life," she told the local press.

 International toy makers and distributors refuse to acknowledge any responsibility for preventing such industrial disasters. When presented with a suggestion to adopt a toy industry code to prevent future fires like the one at Zhili, Dennis Ting, head of the Hong Kong Toy Council, which represents major investors in China, called the idea "ridiculous," and fumed, "someone is out of their minds."

 Ting and others are eager to maintain business as usual. The $40 billion per year international toy industry is increasingly centered on China. The country houses the world's biggest toy manufacturing industry, which continues to expand. The Southeast China province of Guangdong, where Shenzhen and many other special economic zones are located, is the industry's heartland, where at least one-third of the world's toys are made. Neighboring Hong Kong is China's toy export gateway, shipping toys worth $8 billion in 1993, making it the world's leading toy exporter.

 Despite the economic promise of this scenario, toy industry boosters are finding it increasingly difficult to use such statistics to hide the plight of Tao and her fellow Chinese workers. A realistic picture of the Chinese toy industry is emerging - highlighted through profiles of several Asian multinational companies' Chinese operations - revealing that many of the toys that delight children around the world are the product of rock-bottom wages, horrendous working conditions, appalling health and safety risks and a de facto ban on free labor organizing. In opposition to this exploitation, toy workers' demands and protest actions are increasing, supported by international campaigns.

 The toy industry also opens a window into broader aspects of today's China. What is happening in the toy industry may be repeated in other sectors in the coming years. In the face of its ailing state enterprises, many reformers in China see the foreign-controlled joint ventures that dominate the toy industry as the fastest route to economic development. Yet worker hardship and industrial disasters raise questions about the sustainability of this approach.

 Further, most of the foreign companies involved are Asian-based, commonly from Hong Kong and Taiwan. The way these corporations operate in China demonstrates how the world's "new" multinationals may approach labor-management relations in the twenty-first century.

The labor behind the labels

 The toy industry's famous brands - Fisher-Price, Hasbro, Tyco and Mattel from the United States and Europe, Bandai and Tomy from Japan - rarely appear on the name-plates of Chinese factories. These corporate giants rely mainly on original equipment manufacturing agreements with manufacturers, which then have exclusive rights to produce toys according to the specifications set by the brand-name buyers. Some of these local contractors - many of which are also multinationals, with Asia-wide operations - also sell toys under their own brandnames.

 Offering labor unorganized by free unions (explicitly banned in China) at as little as 12 cents an hour, China has come to dominate major segments of the international toy trade. In Germany, the center of the European toy trade, China is the main source of plastic dolls, doll accessories, toy animals, toy musical instruments, motorized toys and toy guns.

 Many toys popular in the United States come from China as well. Over 90 percent of three-to- eight year-old boys in the United States have at least one toy Teenage Mutant Ninja Turtle, according to market research in the early 1990s. Hong Kong-based Harbour Ring International Holdings, the world's leading producer of Ninja action-figures, can be held mainly responsible. While the Ninja craze has now faded, it catapulted Harbour Ring into the ranks of Asia's top toy corporations.

 Harbour Ring, with major investments in southern China, is typical of such Hong Kong-based companies. Combined, these firms employ at least 120,000 workers across the border. Harbour Ring, which made 1993 profits of $30.1 million, started out with factories in Hong Kong, then shifted north in the early 1980s in search of cheaper labor. A family-run business incorporated in Bermuda - for tax purposes and to avoid uncertainty over Hong Kong's handover to China in 1997 - its subsidiaries and contractors operate six factories in Guangdong, employing 10,000 to 18,000 seasonal production workers. They make 300 toy lines, mainly on contract for brand-name toy companies.

 Harbour Ring itself is now moving into sales and marketing in China, where it already has 90 sales outlets and is planning more. "The one-child policy and the overall improvement in disposable income ... create opportunities for the group's business," says Chairman Luk Chung Lam.

 His workers, however, will not be customers. Harbour Ring workers earn on average only $46 to $58 a month, and, as migrants, most send part of this back to their villages, keeping only enough for subsistence needs. Rapid economic growth - reaching 30 percent in Shenzhen in 1993, double the nationwide average - has also fueled inflation, pushing up living costs, especially in industrial areas.

 Working hours are long, overtime and weekend work are common and job security is low. Most of Harbour Ring's Chinese workers are unskilled - they get less than half-a-day's training. In the summer, Harbour Ring works at maximum production and employment levels in order to stock toy store shelves for Christmas. Each winter, it sheds about half its workforce until they need to gear up again the following summer.

 There are also international factors that make this employment insecure. The issue of China's most favored nation (MFN) status has been resolved in favor of investors in China for the time being, but Harbour Ring made contingency plans to relocate investment if the human rights lobby had won, and the company intends to follow through on those plans despite the U.S. decision to renew China's MFN status. The company retains some production in Hong Kong, and is currently building what it calls the "largest OEM hard toy factory in Indonesia." It "promises" to pay minimum wages of $1.30 to $1.50 a day. Meanwhile, production in its Macau plant - currently the largest toy factory in that territory - is expected to expand by 50 percent.

 Yet high-profile plans to build several so-called "toy production cities" show that Harbour Ring's roots remain in China. The first such "city," in Zhongshan, is due to be completed this year, with another planned for Guangdong. With a floor area of around 600,000 square feet, the Guangdong development will be "one of the biggest toy factories in China," according to Chairman Luk.

 He says the factory will bring economies of scale, but will also "improve the workers' sense of belonging in this labor-intensive business. As many workers are from distant provinces, adequate accommodation and welfare facilities in [these] cities should help create continuity in the workforce."

Anatomy of a disaster

 What such promises will mean in reality is as yet unclear. To date, Harbour Ring's labor practices have attracted little critical attention. Its low wages are normal for the industry, and higher than those of Chinese school teachers, say industry analysts.

 Yet Luk's description of the new "city" might ring alarm bells for Tao Chun Lan and her former colleagues in the Zhili factory, since a similar rationale could have been used to justify Zhili's factory design. If so inclined, Harbour Ring and other toy makers could learn much from what happened last November 19, and from the frequent, often fatal safety lapses which continue to occur.

 The Zhili Handicrafts factory was run by a Hong Kong-Chinese joint venture, on contract to produce the Italian "Chicco" brand of stuffed toys. The plant had 472 employees, but more than one third of these were unrecorded casual laborers, a common state of affairs which led to major identification problems after the fire.

 Local Shenzhen authorities had warned the factory managers about safety provisions earlier in the year - it had no fire alarm, no sprinklers or fire hoses, and no fire escapes - but no action was taken.

The windows were fitted with heavy wire mesh and most exits were locked; the bodies of 50 of the victims were found behind a locked gate. "The factory itself had the now-notorious three-in-one design," says a regular visitor to Shenzhen, Wong Wai Ling, of the Hong Kong-based labor advocacy group Asia Monitor Resource Center (AMRC). "Like many factories, the workshops, warehouse and living and eating quarters were all in one building - a major fire risk, especially when flammable materials are on site," she says.

 An investigation by China's official, Communist party-controlled trade union, the All-China Federation of Trade Unions, found the fire started in the warehouse, caused by an electrical short circuit. Raw materials and finished products partly blocked the staircase and exit that was open, endangering more lives, the union investigation found. To make matters worse, in an effort to avoid adverse publicity after the fire, the local authority held 50 or so survivors as virtual prisoners for several days in a local hall, banning them from contacting friends or relatives.

 Relatives of those killed received compensation of between $2,600 and $6,500; those injured received nothing as of June 1994. In mid-January, the factory owner, Lo Chiu Chuen, and three other managers were arrested for violating state safety regulations and two local fire department officers were charged with accepting bribes.

Crisis? What crisis?

 Besides bribery, which is already rampant in Guangdong, the Chinese government blames most accidents on "numb minds, lax discipline, chaotic management and unlawful operation and supervision," but it takes little effective preventative action.

 Official statistics record 28,200 industrial fires in the first 10 months of 1993 in China. These fires killed 1,480 people and injured more than 50,000. There were more than 15,000 officially-recorded work-related deaths in 1992 (the latest year figures were available), and the real figures are much higher, experts say. Fires are by no means the only problem. Poisoning by chemicals and fumes is also common in the toy industry; 81 people were poisoned in three separate toy factories in Guangdong in 1993; three of them later died.

 One executive from a toy industry multinational with "extensive operations" in Guangdong told the Far Eastern Economic Review in 1993 that "industrial safety is the last thing that anybody worries about in Shenzhen, or anywhere else in the province."

 In January 1994, the Zhili fire and other disasters finally provoked the provincial government to pass tighter laws on factory safety. The new laws spell out standards on fire prevention, emergency exits and ventilation and ban three-in-one factory buildings. Lee Cheuk Yan, head of the Hong Kong Confederation of Trade Unions (CTU) and a leading campaigner for labor rights in China, welcomed the laws, but was skeptical about whether they would be enforced. "Although the rules exist, if the safety inspectors take bribes, employers will ignore the rules, and we will have to wait for another tragedy," Lee said in January.

 Sadly, Lee did not have to wait long. On June 4, the workers' dormitory at the Hong Kong- funded Xiecheng Plastics toy factory in Shenzhen collapsed. The factory, which, despite the new laws, retained the three-in-one system, had been illegally built on a crumbling river bed. Eleven workers were killed and 27 were injured.

Live and let die

 Various international labor movement initiatives aim to support Chinese toy workers in their demands for better working conditions. The International Textile, Garment and Leather Workers' Federation (ITGLWF) and the AFL-CIO's youth support group Frontlash have called for "toycott" campaigns to boycott Chinese toys until labor conditions improve. Neil Kearney, ITGLWF general secretary, says "China has a live and let die approach to its workers. The only way to make China listen is to block off markets for products made in such appalling conditions." Lee Cheuk Yan, of Hong Kong's CTU, favors boycotting "products of factories where clear evidence of poor working conditions exists."

 In May, trade unions and other groups in Hong Kong launched a long-term campaign to draw up and enforce a set of "Toy Industry Safety Guidelines," to be implemented by multinationals in China and throughout Asia. The draft guidelines cover factory and job safety, a ban on three-in-one buildings and regular monitoring.

 "Guidelines covering toy safety for consumers already exist in the West," says Tian Chua of AMRC, one of the groups involved. "But shouldn't products be safe for workers too?" he asks.

 It was this proposal that Dennis Ting of the Hong Kong Toy Council found "ridiculous." The fact that 189 workers, mostly women, died in a May 1993 fire at the Thai subsidiary of Ting's Kader Industrial Company - which produces such items as Bart Simpson dolls and toy trains, sheds some light on his ardent opposition to a workplace safety code.

 In China, however, the success of Kader's employees in winning improved working conditions show that while these international initiatives are important, it is workers' own actions, probably backed by broader political reforms, which hold the best hope of sparking widespread improvements for toy industry workers.

 Kader set up a factory in Shekou, Guangdong in the mid-1980s, maintaining abysmal working conditions. A 1993 ACFTU survey identified Kader as one of the province's harshest employers; daily wages were 52 to 64 cents, less than half the official minimum wage.

 In mid-May 1993, the Kader workers refused to work overtime, extending this initiative to an all-out strike two weeks later. The strike brought results. Wages now stand at about $1.70 to $2.30 per day, and canteen and living quarters - other major areas of complaint - have been improved. Workers now occupy separate dormitories, rather than their old three-in-one building.

 Duplicating these results across the toy sector and beyond in China poses an enormous challenge to Chinese workers. Strikes and free union organizing remain illegal, although workers are engaging in both activities with increasing frequency. As many as 800 underground independent labor groups exist in Guangdong, according to newspaper reports in March 1994, and in 1993, China saw 12,358 arbitrated labor disputes, a 50 percent increase from the previous year. Thousands of other disputes did not reach arbitration.

 China's migrant toy industry workers undoubtedly would like to agree with Harbour Ring's 1994 company motto, "The future will be brilliant for the upcoming years, and the sky is the limit." But it will take an uphill struggle before workers can share this assessment.