THE sudden and unexpected closure of Dongguan Soyea Toys Co. Ltd. in South China’s Guangdong Province has triggered public complaints about government supervision of foreign-funded companies. The company boss, a man from the Republic of Korea (ROK), has vanished without paying employees or suppliers.

    Following a protest by more than 200 Soyea workers in front of the municipal government building of Dongguan, Lichuan Share-holding Economic Cooperative, lessee of Soyea’s plant, has agreed to pay most of their wages.

    On hearing the news, more than 20 suppliers of the company have also begun a search for the boss. One supplier surnamed Deng said that the payment for goods in arrears amounted to 10 million yuan (US$1.55 million).

    In the past few days, these suppliers have also been to Soyea’s factory in Suzhou of East China’s Jiangsu Province and another subsidiary in Dongyuan, Soyea Children’s Goods Co. Ltd. Their efforts however have not yielded results.

    Under Chinese law, unpaid workers rank ahead of goods suppliers when it comes to claiming assets from a bankrupt company.

    Suppliers said they had informed the Dongguan city government of their plight, but received no response.

    Information released by the Dongguan Foreign and Economic Cooperation Bureau shows that Dongguan Soyea Toys Co. Ltd. last operated with 470 employees, and used to be the supplier of America’s second-largest retail giant Target Corporation and exported its products mainly to Japan, Europe and the United States.

    This is not the first time a ROK-funded company in China has defaulted on wages and payment for goods, and many Chinese have recently blogged their support for the out-of-pocket employees and suppliers.

    A netizen called Feifan Laoniu urged on news portal 163.com for the Chinese Government to severely punish irresponsible foreign-invested companies. “The boss should not get out as easily as this!”

    Another netizen from Shenzhen who did not reveal his name said: “With a poor track record, some ROK investors habitually run away after losing money in China.”

    Official statistics show that in Qingdao, a coastal city in eastern China’s Shandong Province, 206 ROK-funded companies illegally pulled out of the country from 2003 to 2007, owing a total of 160 million yuan in wages and 700 million yuan in bank loans.

    Halting illegal pull-outs

    To fix the situation, China’s Ministries of Commerce, Foreign Affairs, Public Security and Justice jointly issued in December 2008 a guideline “to advance the international investigation and judicial action on foreign-invested companies illegally withdrawing.”

    The guideline stipulates that if the Chinese plaintiff wins a lawsuit and the guilty foreign party has no assets in China, the winning party can apply to the foreign party’s country to recognize and enforce the Chinese verdict.

    By June 30, China has agreements with more than 70 countries and regions including ROK on the matter.

    Under the 2011 Amendment to the Criminal Law, intentionally defaulting on workers’ wages is a crime. If the company is foreign-funded, however, its representatives can only be detained when they are in China.

    Cai Kang, an official with the Dongguan Foreign and Economic Cooperation Bureau, said that the city had previously established a warning system against illegal withdrawal of foreign-funded companies. Special inspectors were designated to regularly monitor the operation of foreign-invested companies, especially signs of default on factory rent and wages and other abnormalities.

    “The reason why we didn’t detect Soyea was that our inspector in the local village was not seasoned enough. As the company was found defaulting only on factory rent, it was not listed on the bureau’s warning list,” said Cai.

    Cai said the illegal pull-out of Soyea showed the loopholes in the bureau’s daily monitoring, promising to improve the inspection indexes.

    Sources close to the Dongguan Public Security Bureau said they had started to search for Soyea’s legal representative.

    Soyea ‘an isolated case’

    Preliminary investigations have showed that broken capital chains, ill management and recruitment difficulties led to Soyea running out of money, according to Cai.

    Employee Zou Xiaoyuan recalled that some senior workers had felt “something was wrong” back in March. “They also heard some rumors as that the plant had massive debts,” said Zou.

    As Soyea’s pull-out has come after a number of low-end manufacturers folded amid the rising yuan, as well as climbing labor costs and soaring expenditures on raw materials and environmental protection — many people have voiced their concern about the economy.

    Nanfang Daily has published a lengthy feature, saying the difficulties the low-end companies face are as huge as those in late 2008 when the global financial crisis hit.

    But Jiang Ling, Dongguan’s deputy mayor, has stressed that enterprises in Dongguan are comparatively good overall.

    Statistics from the Dongguan Foreign and Economic Cooperation Bureau show that in 2010, about 500 enterprises closed down in Dongguan and 266 in the first half of 2011.

    A survey conducted by the bureau shows that the first half of the year had seen more than 800 overseas-funded enterprises registered in Dongguan, with an aggregate contract investment of US$1.988 billion.

    Cai said that seven companies had come to consult on renting Soyea’s factory plants. “If we were in the doldrums, why have so many companies come to discuss investment?” said Cai.

    (Xinhua)