'Made In China' Powered By Smuggled Workers

On a quiet river bend on the China-Vietnam border, a group of people clambered up a muddy bank. They had just glided across the river from the Vietnamese side in a longboat, guided by men on both banks signaling with flashlights.

The passengers scurried over to a group of men standing by their motorcycles, climbed aboard the bikes and disappeared into the night. Two Chinese police officers in uniform, stationed at a small post near the crossing point in the border town of Dongxing, watched impassively as they rode past.

"We come every night," said one young biker with spiky hair before he rode off. "Sometimes we carry (smuggled) goods into town. Sometimes we carry Vietnamese workers."

The bikers’ illicit cargo on that late summer night last year was illegal laborers. They were headed on a 700-kilometre (440 miles) journey to the economic powerhouse of Guangdong. The province, filled with factories making goods for export, has been dubbed “the workshop of the world.”

The smuggling of illegal workers from Vietnam across the 1,400-km (840-mile) border into China is growing. Labor brokers estimate that tens of thousands work at factories in the Pearl River Delta, which abuts Hong Kong. Workers from other Southeast Asian nations are joining them.

Visits by Reuters to a half-dozen factory towns in southern China revealed the employment of illegal workers from Vietnam is widespread, and authorities often turn a blind eye to their presence. Workers from Myanmar and Laos were also discovered to be working in these areas.

Reuters found that employers supply these illegal workers with fake identity cards and sometimes confine them to factory compounds to keep them out of sight of the authorities. Chinese human smuggling syndicates, known as “snakeheads", work with Vietnamese gangs to control the lucrative trade, workers and labor brokers in China said. The syndicates take a cut of the workers' monthly wages - up to 500 yuan ($80) a month in some cases, according to one broker - and charge factory owners a fee.

(For graphic on China's illegal workers, see: reut.rs/1M5YJjd)

INFLECTION POINT

Vietnamese officials express concern at the illegal flow of labor into China. The number of Vietnamese crossing a long border with “complex terrain" has increased in recent years, posing a challenge for both governments, said Pham Thu Hang, deputy spokesperson at the foreign ministry in Hanoi. She did not have figures on the illegal flow. "Taking advantage of this situation, some bad elements have brought Vietnamese to work illegally in China, making it hard for the labor administration in both countries," she said.

A Chinese foreign ministry spokeswoman declined to comment, directing Reuters to other government departments she did not name. The Ministry of Public Security in Beijing did not respond to a faxed request for comment, nor did the Guangdong province Public Security Department.

The growing influx of illegal labor into China is evidence of an economy that has reached an inflection point. Chinese factories have long depended on an abundant supply of cheap domestic labor to power the country’s $2.3 trillion-a-year export sector. But the number of people joining the workforce is declining as China's society ages and wages are rising.

Factory owners are struggling to retain their edge. They face a choice. They can move production from the coast where wages are higher, either to inland provinces or across the border to places like Vietnam and Cambodia. Or they can pay the snakeheads and labor brokers to smuggle in foreign workers who cost less, have no protections and can be easily laid off.

The rest of the world will begin to feel the effects as China transitions away from its cheap labor-intensive export model, says Jianguang Shen, the chief Asia economist for Mizuho Securities Asia Ltd. who wrote a research report in June on China’s slowing supply of internal migrant workers. “China has been subsidizing other parts of the global economy, not only by cheap labor but also (through) very low welfare protection of the workers … In the global sense, if everything else is equal, global manufactured costs may become a little more expensive.”

Across Asia, the search for new sources of cheap workers to power the continent’s low-margin, labor-intensive industries is boosting migration - and along with it, the business of people smuggling and human trafficking. Vietnam, a nation of 92.5 million people, sent 107,000 workers abroad legally last year â€" a 20 percent increase from the year before.

China does not release any official data on illegal foreign workers. One Chinese labor broker estimated "at least 30,000" illegal workers were employed just in Dongguan, an industrial city of 8 million and home to tens of thousands of export-oriented factories. An April report in the official China Daily newspaper said authorities in Guangdong province had investigated at least 5,000 cases last year of illegal foreign workers.

Blue-collar wages in China have nearly doubled in the past five years to roughly 2,800 yuan (about $450) a month for production-line workers, according to China’s National Bureau of Statistics. Some Vietnamese are paid about half of that, labor brokers and workers said. Others make as much as Chinese workers. But even then, manufacturers are saving because they don’t pay medical insurance or pension contributions for these workers.

For factory workers in Vietnam earning $250 a month, the opportunity of better pay across the border is irresistible. One Vietnamese factory worker, who came from a town near the border in Phu Tho province, said by phone half the people between the ages of 30 and 45 in her town had left for China, where wages were "double, or even triple" what they are at home.

JUNGLE PROCESSION

On the Vietnamese side of the border, the city of Lang Son is one of the two main smuggling points into China. A Vietnamese worker in China's Fujian province interviewed by phone said a guide led him and about 1,000 workers in a snaking procession from Lang Son along a barely discernible jungle path across the land border into China last year. They kept out of sight of Vietnamese border officials, he said. But on the other side of the border, Chinese customs officers ignored them, the worker said.

A motor bike rider in Dongxing drove a Reuters reporter along a route used by smugglers to show how minivans and large tourist coaches filled with Vietnamese evaded police and military checkpoints on main roads. At times, the vehicles wind through small villages to their final destination in Dongguan and other Pearl River Delta factory towns. Scouts are stationed along the way to raise the alarm if police are spotted. Local residents provide rest stops where smuggled workers can stay until the coast is clear, labor brokers and workers told Reuters.

If factories place an order for foreign workers, “we can bring in hundreds at a time," said a broker surnamed Zhang. He said he deals directly with the smuggling gangs. Sitting in his office in Dongguan, furnished with a coffee table and black leather sofa, Zhang said “the snakeheads can bring the workers across within a week.”

Many illegal foreign workers are housed on factory premises to avoid detection by local authorities. But in some places that Reuters visited in southern China, the workers seemed to move around unimpeded.

In the Pearl River Delta factory town of Dalingshan, a company called Jia Hao produces wooden picture frames for export to the United States and Europe. There, hundreds of workers, some wearing Jia Hao’s gray polo shirt uniforms, strolled in the streets after work hours. They played pool and ate at noodle stalls along the road. They did not seem to understand Chinese when spoken to. A manager at the plant told Reuters the workers were illegally brought into China from Myanmar.

Local law enforcement officials called "Chengguan” patrolled the area on foot and on mopeds. They showed no interest in the workers.

Jia Hao's factory manager denied the workers were illegal, saying they were ethnic Wa people, originally from Myanmar's northern Shan state but now living in the Ximeng region of China’s southwestern Yunnan province.

“The Public Security Bureau gave us access to a website to check. For every worker, we need to check if their ID is real, and only then can we hire them,” said Zheng Lunshun, the factory manager at Jia Hao. “If their identity cards were fake, we wouldn't be able to find them on the online system.”

A duty officer at the local police branch in Dalingshan said police had inspected the factory and found no illegal workers. Days after contacting the police and the factory, Reuters observed far fewer workers leaving the factory gates after work or milling around the streets than before.

DETAINED AND DEPORTED

Some factory owners take extra precautions. To avoid detection by the authorities, the manager of a furniture factory in Dalingshan said new Vietnamese workers were driven straight into the factory complex to a separate building with its own production line and dormitory. The Vietnamese were allowed outside the factory once a week, accompanied by factory guards, he said.

Employers face fines of 10,000 yuan ($1,600) or more for recruiting illegal workers, according to Chinese media reports.

A manager in a factory making acrylic and gift products, who would only identify himself as "Mr. Li," said his plant employed around 80 Vietnamese and Burmese workers in his workforce of around 600. He said the factory owner saved money, but was constantly anxious about a possible crackdown by the authorities. "All the Vietnamese workers hold false identity cards," Li said, speaking on the condition that his factory not be identified. "So (the boss) has an excuse. But he lives in fear every day.”

Chinese police do occasionally launch crackdowns, workers and factory owners say. At least 20 towns and cities in southern China have seen raids on factories employing illegal workers, according to state media reports reviewed by Reuters.

Hang from Vietnam's foreign ministry said her government has coordinated with the Chinese in "busting many human trafficking rings." Hang did not provide details of these busts.

Those who do get caught are taken to police detention centers, sometimes for weeks, before they are deported back to Vietnam, workers interviewed for this article said. A policeman in the Dalingshan police station who gave his surname as Zhou said illegal workers were held for up to 30 days before being repatriated.

“Most of the illegal workers are from Vietnam, and we will look for these people,” said Zhou, who handles transient population issues at the Dalingshan police station.

In China, few foreign work permits are granted for blue-collar jobs, according to factory managers and labor brokers. Two factory managers in Dongguan said workers were given fake ID cards with fake Chinese names and coached by management at the factories on how to respond if questioned by police. The managers said local authorities were paid to ignore the workers. Chinese police and the Human Resources and Social Security Bureaus in Dalingshan city and Guangdong province declined to respond to faxed questions.

A man who makes fake identity cards told Reuters by telephone from Dongguan that he had processed "large numbers" of fake documents for illegal foreign workers from Myanmar and Vietnam. All he needed was a false name and a photograph of the worker to produce an ID card. The cards typically cost around 100 yuan, or $16, he said.

BUSINESS AS USUAL

Tensions between Vietnam and China over competing territorial claims in the South China Sea have not deterred Vietnamese workers from heading across the border. Foreign-owned factories in Vietnam, thought to be run by Chinese, were attacked last year when tensions flared after China parked a $1-billion deepwater rig off the coast of Vietnam. Four people were killed and hundreds detained for the attacks.

During a visit last year to the Chinese border town of Dongxing, small groups of Vietnamese workers could be seen building a 10-foot (3 meters) high border fence on the Chinese side. Ngoc Duc, 30, said he had come across the border illegally. He said he earned 100 yuan a day in China doing welding work on the fence, compared with about 200,000 dong ($9) a day in Vietnam.

“China is the best place to make money,” he said when asked if he feared being caught by Chinese authorities. “More and more of us will come.”

(Additional reporting by Nguyen Mai in Hanoi, Viola Zhou in Hong Kong and Ben Blanchard in Beijing. Editing by Bill Tarrant and Peter Hirschberg)