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CHINA: Beijing Games Officials Penalize Firms

by Mei FongThe Wall Street Journal
August 1st, 2007

The Beijing Olympic Organizing Committee said it was taking corrective measures after a monthlong investigation found that four factories making Olympic merchandise were guilty of labor violations.

The incident highlights the rising pressure that China's government faces to improve its human-rights record under increased international scrutiny in the run-up to the 2008 Games.

The organizing committee, known as Bocog, said the violations included the use of child labor at one factory, Le Kit Stationery Co. Bocog is terminating Le Kit's right to manufacture Olympic merchandise and revoking its licensing agreement, said Sun Weide, spokesman for the committee. It is also suspending the right of the three other manufacturers to design Olympic products, though the companies will still be able to make the products, Mr. Sun said.

The committee's investigation appears to support the findings of a June report by the Playfair Group, an international group of trade unions and nongovernmental organizations, which first raised these issues. Playfair has said it hopes the report will lead to clients of these factories increasing supervision and demanding compliance. The labor-rights group doesn't want clients to terminate contracts outright, because that would only result in job losses for factory workers.

Bocog found that Le Kit employed children for a one-month period earlier this year to package non-Olympic-related products. It also found that some of Le Kit's workers were operating without contracts.

The organizing committee said the three other manufacturers -- Mainland Headwear Holdings Ltd., Yue Wing Cheong Light Products (Shenzhen) and Eagle Leather Products -- had made employees work excessively long hours, a common problem in China's factories. It said those factories will be required to improve operations in line with local labor laws immediately.

Officials at Eagle Leather and Le Kit couldn't be reached for comment yesterday. Lawrence Li, spokesman for Yue Wing Cheong, said the company could comment only after speaking to Bocog.

Mainland Headwear co-founder Pauline Ngan said the problem was the result of misunderstandings over overtime standards. Mainland, with its export-oriented clientele, had maximum overtime rates of 60 hours a month, which is in excess of local labor regulations of 36 hours a month, she said. She said Mainland would comply with local regulations on overtime in the future.

"We've been in the business for 15 years now with many branded Western clients and pride ourselves on our professional standards. We welcome anyone to come and inspect our factories," Ms. Ngan said.

At the time of the report from Playfair, Mainland Headwear's chief executive, Peter Ho, said the report's findings were "groundless" and "outrageous."

Olympic merchandise represents less than 1% of Mainland Headwear's 2006 group revenue, but the negative publicity is affecting its business with other clients. Both Mainland Headwear, which makes caps and visors, and the closely held Yue Wing Cheong, which makes bags, are suppliers for global retailer Wal-Mart Stores Inc., which last week issued warnings to them after finding that they overworked staff.

Another Mainland Headwear client, the National Basketball Association, said it conducted an unannounced audit of the company through licensee Drew Pearson/Concept One and identified several areas that need correction, though the NBA didn't specify what these were.

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