Steamed Over Sweatshops

Our probe of Chinese working conditions unleashes furyand ideas for reform

Many major American retail chains and brand-name manufacturers have answered criticism that they exploit "sweatshop" labor by adopting codes of conduct and on-site monitoring of their Chinese suppliers. But a BusinessWeek investigation found that in China, many factories have just improved their skill at concealing abuses. Our Nov. 27 Cover Story, "Secrets, Lies, and Sweatshops," revealed that numerous Chinese factories keep fake books to fool outside inspectors and distribute scripts for employees to recite if they are questioned. Local consultants have surfaced to assist suppliers in evading auditors and undermining codes of conduct.

The article provoked an avalanche of reader responses from the U.S. and Asia and stirred discussion on blog sites. Some readers sharply criticized China and U.S. importers. Others argued that Chinese laborers are happy to have jobs fueled by Western demand, even if the hours are long, the pay insufficient, and the conditions unpleasant.

Of the businesspeople and officials with nongovernmental organizations who wrote, most agreed that auditing has failed to detect abuses. Some blame U.S. companies for imposing tough demands on factories, both to cut costs and comply with Western overtime pay standards. Other readers proposed ways to improve conditions. Here are edited excerpts:

Your insightful article on sweatshop labor in China exposed a major ethical dilemma that both consumers and businesses in the U.S. would prefer to ignore. Exceedingly low prices on consumer goods cost us dearly in terms of their impact on our fellow human beings. Yellow Label Kids is one of a growing number of U.S. companies that has committed to purchasing products exclusively through Fair Trade certified suppliers. Significant change will only come about in the marketplace when consumers demand it on a large scale. — Hillary Sciarillo, Yellow Label Kids, San Rafael, Calif.

Do you honestly think U.S.-based companies really want to know all of the details of the operations they purchase from? They want someone to paint a pretty picture for them that they can hide behind, later claiming no knowledge or ownership in the abuses. — Scott Macdonald, Maryland Thermoform Corp., Baltimore

It's unfair to neglect to mention the factories such as ours that operate in China but are not involved in any of the practices you described. We do not give in, at the expense of our employees' welfare, to excessive demands of the retailers mentioned in your article. Our customers respect our quality and know that we maintain high business standards to achieve this quality. — Harold J. Fischel, Vanguard (USA) Inc., Whitmore Lake, Mich.

I am a manager of a China audit team, and this article sums up very nicely what we deal with every day. The reality is that our work is about creating awareness of the importance to improve labor conditions step by step, and this has been successful. But to expect [Chinese factories] to meet the ideal is impractical, unrealistic, and naively Western. When the local government sets the minimum wage at $75 per month, it doesn't expect the factories to comply. They expect the factories will make an effort to stop paying $50 and get closer to $60. American companies must understand this process and allow for continuous improvement. They must stop trying to bully Chinese factories. — Screen name: Mr. Wong (

It seems that the problem could easily be solved by companies like Nike (NKE ) paying enough so that factories could afford 50 cents per hour instead of 42 cents. That would add less than a dollar to a pair of $100 Nike shoes. Are we Western consumers so cheap that we're willing to accept unethical factory conditions to save a dollar here and there? — Screen name: Rich American (

The fact that [Chinese workers] are so complicit in helping to hide oppressive conditions from auditors indicates they're tickled pink to have their sweatshop jobs. They'd be far worse off if Nike bowed to public pressure and moved their contracts to Bangladesh. We'll approach [wage] parity when high demand for Chinese products results in their wages being bid up. If you want to accelerate this process, insist on buying Chinese. — Screen name: Rational Bloke (

As a Chinese who grew up in China, worked in China for several years, and came to the U.S. to pursue an MBA until I was 29, I saw how both systems work. I have seen most of the things the authors describe. However, we need to seriously consider whether U.S. companies are really willing to enforce their Western-style rules on their cheap suppliers. One of the obvious solutions is to increase prices paid to vendors. But no one can afford to do that, since most U.S. companies compete based on lower prices. This is a story of cheating and self-cheating. Second, are Chinese local governments willing to enforce many labor rules? These factories are the backbones of local Chinese economies. — Screen name: Truth (

What the BusinessWeek report says is true. Most Chinese factories have just gotten better at concealment. My previous company in China supplies a big U.S. cell-phone company in China. The cell-phone company's quarterly [requirement to reduce costs] is a killer. — Screen name: Al (

Your Nov. 27 Cover Story highlights precisely what organizations concerned with workers' rights have long argued: that relying exclusively on codes of conduct and auditing has only limited effectiveness. As our recent report, "Offside! Labor Rights in Sportswear Production in Asia," points out, a further step is to prioritize contracts with factories that are unionized. Workers themselves, organized into democratic trade unions, are in the best position to monitor and influence labor conditions in their workplaces. Businesses should recognize this as key to their own success, as improving livelihoods today contributes to making consumers stronger tomorrow. — Raymond C. Offenheiser, Oxfam America, Boston

How about creating a central rating system for Chinese, Indian, Eastern European, and Latin American vendors, like the credit score system? Preferably, one or more global audit agencies could take this up. This would have commensurate rewards and punishments for vendors, and the score could be broadened from labor to other parameters. It would help people get a decent chance as well as reduce the problem of coordination. Vendors with a good score could even charge a premium. — Screen name: Onkar Tiwari (

As a graduate student in a Chinese coastal city university, I think the article is true. Actually, the situation is more serious. Work conditions in sweatshops are unsafe and poor; employees are underpaid. The central government should take measures to protect the disadvantaged, and the international community should press the Chinese government to protect the rights of poor workers. — Screen name: fanzhoucanghai (

By Pete Engardio

    Before it's here, it's on the Bloomberg Terminal.