This is one of the most entertaining Internet stories to come out of China in a while, and it is really full of Chinese characteristics – all the bad ones, unfortunately. Tang Jun, who was once heralded as the “emperor of professional managers” for his high profile roles – former president of Microsoft China (NASDAQ: MSFT) and ex-CEO of Shanda Interactive Entertainment Ltd. ((ADR) NASDAQ: SNDA) – is currently at the center of a massive controversy over his diploma.

QQ has a short summary (link in Chinese) of the event’s development – on July 1st, Fang Zhouzi, a biology PhD who is famous for exposing plagiarism and fabrications in Chinese academia, commented in a series of posts on his Sina Weibo (microblog) that Tang Jun had lied about his education and his patents in his autobiography, “My Success Can Be Replicated” (book name my translation). In the book, Tang had said he held a PhD from Caltech.

Tang initially refused to respond to Fang’s allegations, but on July 6 he stated in public that he has never claimed to hold a PhD from Caltech; instead, his doctor’s degree is from Pacific Western University. Unfortunately, that only fueled the flame, as Fang quickly pointed out that Pacific Western University is a “fake” university with a controversial history and was shut down by the State of Hawaii (check out the wikipedia link) – essentially, this is an institution engaged in the business of selling diplomas and wasn’t accredited. Tang then responded that he went to the other Pacific Western University, the one in California, not in Hawaii; but Fang quickly responded that the two shared the same ownership prior to 2006 (as the wikipedia articles show).

Then Chinese netizens jumped in and started digging out other dirt around Pacific Western University, and in the past week netizens have been circulating “manifests” of notable Chinese businessmen who are rumored to be Tang’s alumni at that institution.

Perhaps also very damaging evidence is Tang’s own LinkedIn profile. Currently the education section lists “Pacific Western University, PhD”, with no timeline attached; but just a few days ago the education section looked like this:

(image courtesy of Dongxi.net – this is an edited version of the screenshot that has basically been cropped to highlight the education section of the profile)

Notice how on the education section it still clearly stated a PhD from California Institute of Technology. A search on Baidu Inc. ((ADR) NASDAQ: BIDU) for the keywords “Tang Jun linkedin” (the name in Chinese) also reveals a whole range of blog posts and discussions which expose Tang’s LinkedIn profile change.

Fang also raises the interesting issue of the legal repercussions of Tang’s controversy – he points out in Shanda’s F-1 filing with the SEC before its IPO, it states,

JUN TANG has served as our president since February 2004. Prior to joining us, Mr. Tang served as the president of Microsoft China Co., Ltd. from March 2002 to January 2004 and the general manager of Microsoft Asia product support and service and Microsoft Global Technical Engineering Center from January 1998 to March 2002. Mr. Tang holds a doctorate degree in electrical engineering from University of Pacific Western, a doctorate degree in electronics from Nagoya University, Japan, a master’s degree in electronics from Nagoya University and a bachelor’s degree in physics from Beijing University of Posts and Telecommunications.

Obviously, this is another version of his education – the part where it states that he has a PhD from Nagoya University. It doesn’t indicate that in either the current or earlier version of his LinkedIn profile. Fang therefore raises the interesting question of whether Tang is liable for lying to the SEC.

Questions about Tang’s fake diploma and personal integrity aside, what I find to be really interesting is the surprisingly divided reaction of Chinese netizens. Indeed, there’s one camp of people who are vociferously defending Tang, saying “don’t ask about a hero’s roots”, or “you shouldn’t judge a manager by his education background”. As the other camp rightfully points out, we’re not attacking Tang because of his (relatively) poor education achievements; we’re attacking him because he lied about it.

But the drama doesn’t end there. In the past few days, discussions have intensified around the mystery of Tang’s education history in Japan – he went there to pursue a PhD, but according to most versions of his education background, he did not finish the PhD and went to the US instead in 1990. There were immediately speculations that he went to the US to get what Chinese netizens call a “blood card” – a green card issued by the US to Chinese students abroad who sought political asylum from the Tiananmen incident of 1989.

On this last point, I don’t think there is enough data to support the claim, and even if it were true, I don’t see it as a breach of integrity (I think a lot of Chinese people look at such cases as profiting from the bloodshed). But a consequence of such discussions is that there has been a crackdown on Chinese microblogs, for the obvious reason that the June of 1989 is a banned topic. So right now all the major microblogs are running with a big “beta” sign on the front page, and trending topics of Tang Jun are being harmonized (they have resurfaced on Sina).

Interestingly, netizens are now speculating that Tang has used his influence to get the authorities to censor the topic – another conspiracy theory thrown into the mix. I think the censorship is still more to do with discussions of 1989, rather than Tang’s powerful connections. But such are the dramatic twists of everyday Chinese Internet soap opera.

And before I end – the most recent rumor is Tang’s current employer, Newhuadu Industrial, has fired him. Totally unsubstantiated, but I won’t be surprised if Tang does lose his job because of this.

Well, that was a temporary fix, as Google’s China ICP license is up for renewal, and they need to appease the Chinese government. Google is again trying to do so with a half-measure.

The Atlantic has a good summary of major tech blogs’ response. Opinions are somewhat divided on how things will progress, but if anything no one is talking about how moral and upright Google is, this time around. Good. In my original piece back in January I had argued how dubious Google’s stance was:

… a cyber-attack is illegal by any country’s law, whereas what is censored and what is not censored can be different due to country-specific issues like religion or in the case of China, politics. So for Google to use the hacker attacks as justification that it can’t tolerate Chinese censorship anymore is somewhat dubious, since this is not exactly the same issue.

Google’s latest announcement just further confirms my position. It seems that, after all, Google does care about its business prospects in China; but it appears to be too smart for its own good, trying to get away with both being morally righteous and doing business as usual.

Read this together with another piece of news today, which talks of Google’s ambitions for Android in China and India, and I’m starting to feel that Google internally does not have a coherent strategy for China. Obviously, having a row with the Chinese government is not good for business, especially when looked at from the Chinese perspective – nothing had changed in the government’s policy throughout the years of Google China’s existence, and Google’s January fit seemed completely out of left field (again, cyber-attacks and government censorship are very different things).

I remember a few months back, at an investors event in San Francisco, Kai-fu Lee, the former head of Google China, had mentioned in passing how his company – Innovation Works, a early stage VC / incubator – had a few projects that were basically picking up the development of Android in China after the Google debacle (if my memory serves me correctly). Essentially, quite a few Chinese companies are interested in Android, but dealing with Google has become a politically charged issue, so you’d almost have to have an intermediary. This is especially true of the major Chinese carriers – it is unthinkable to see China Mobile do a high profile partnership with Google while this political spat is ongoing.

Google needs to work out its priorities. If it wants business in China, it needs to drop its high talk and start showing genuine long-term commitment to the market – otherwise it will be hard to retain its Chinese business partners, and it will always be a distant second.

Global media attention over Foxconn Technology Group (PINK: FXCNY | (part of Hon Hai Precision Industry Co. Ltd.) TPE: 2317) has gradually subsided, after the company aggressively raised wages and efforts at curbing the suicides have taken effect. Foxconn management hasn’t stopped adjusting their strategy though. Xinhua News Agencyreports (link in Chinese) on June 25 that Foxconn has offloaded the management of its employee dormitories in Shenzhen to two local property management companies.

According to Xinhua, Foxconn employs 450,000 people in Shenzhen, of which 220,000 live in company dormitories, and 230,000 live in rental housing near the production facilities. By exiting the management of the dormitories, Foxconn has largely relieved itself of the responsibility of any future suicides at these dormitories. Foxconn is clearly in the process of reversing its prior strategy of providing a closed environment for workers – its sites are basically self-contained towns, complete with dormitories and recreational facilities.

Another Chinese newspaper, Economic Observer, also has an interesting article (link in Chinese) on Foxconn’s two wage hikes. The article claims that the first hike, raising Foxconn’s mainland China employees’ wages from RMB 900 (US$132) to RMB 1,200 (US$177) per month, was largely planned to match the anticipated minimum wage increase of the Shenzhen government – in other words, this hike had been in planning for some time, and it was not originally in response to the suicides, but Foxconn made the most of it PR-wise.

What was really surprising though, was the second wage hike just a few days later, from RMB 1,200 (US$177) to RMB 2,000 (US$295), this time specifically for Shenzhen employees. According to the reporters’ sources, this decision was made by Chairman Terry Gou individually, and had not gone through senior management discussion. The thinking behind the move is threefold:

1. First of all, Gou does indeed plan to move production away from Shenzhen and to cheaper locations inland – it is rumored that he will only keep the Apple production site (employing less than 100,000 people) in Shenzhen, and move the whole production of mobile handsets (non-Apple brands) elsewhere. Therefore, the impact of the hike is much more limited compared to if Foxconn would maintain its current scale in Shenzhen.
2. Secondly, Foxconn is trying to maximize its short-term opportunity to re-negotiate contracts / pricing with its clients, thanks to the high profile suicides which is putting pressure on these high profile global brands. The second wage hike would therefore serve as an additional bargaining chip at the table, again from a PR perspective.
3. Third and perhaps most importantly, the hike is an aggressive strike at Foxconn’s major competitors. Foxconn has the financial muscle and the scale to quickly relocate, but many of its competitors are concentrated in the Pearl River Delta region. Foxconn’s second wage hike has started a chain reaction where workers are demanding higher wages, thereby dealing a heavy blow to competitors. As we’ve already discussed in a previous post, economists are speculating whether the end of the Pearl River Delta’s traditional growth engine – low cost labor – is here. Foxconn is in a position to accelerate this macroeconomic shift, to its own benefit.

Still, the second wage hike is a bold gamble. It’s clear that Terry Gou is aggressively reassessing his firm’s strategy to maintain its leadership position in electronics manufacturing. Perhaps an even bigger question is, should Foxconn try to move up the value chain, and try building its own end-customer brand, the same way HTC has reshaped its corporate strategy? Otherwise the company seems likely to always face the issue of razor-thin margins, which would prompt it to try to squeeze its labor force as much as possible – this is perhaps the root of its struggle.

After Doug’s piece reviewing the year’s events atFoxconn Technology Group (PINK: FXCNY | (part of Hon Hai Precision Industry Co. Ltd.) TPE: 2317), I wanted to comment on some of the broader implications for the Chinese economy and the Chinese worker.

CHANGING ECONOMY – CHANGING WORKFORCE

I want to call attention to a series of recent articles in Chinese media. The first comes from economist Andy Xie’s latest column (link in English) on Caing.com, the hard-hitting Chinese economic news outlet. Mr. Xie’s basic argument is that the Foxconn suicides, and the Honda worker strikes, signify that the new generation of Chinese migrant workers – unlike previous generations – are no longer content with income levels that cannot sustain an urban way of life. While their fathers’ generation were culturally willing to accept low wages to support their families back home, the new generation is more individualistic in their dreams and aspirations. In turn, Mr. Xie argues that the wage increases that have occurred en masse in recent years will drive the collapse of the growth model of the last two decades in the Pearl River Delta region – economic growth fueled by aggressively suppressing labor costs.

The logical question, if we accept Mr. Xie’s point of view, is what’s next? The new cover story (link in Chinese) of New Century weekly, the publication under Caing.com, is on this very topic. The lengthy article first argues that unlike its smaller counterparts, Foxconn is actually relatively well-positioned, in that it has turned the incidents and the wage hikes into a bargaining chip to renegotiate with its clients. In the face of the huge media scrutiny, it would be really hard for a western company to say “we won’t accept your modest price increases, which were caused by the wage hikes to prevent employees from killing themselves.” In the case of the smaller manufacturers, they have lower profits (due to smaller scale), and less bargaining power.

TRANSFORMATION: FROM LABORERS TO INNOVATORS

The much talked about shift of production to inland areas or to cheaper countries such as Vietnam is not exactly feasible either, at least in the short run. While western and central China have much cheaper labor costs, they are geographically far from both the suppliers and the markets (in the case of electronics, the export ports). That means extra costs and time to ship components and finished goods around. While in the long run the whole industry value chain will be migrating to lower labor cost areas, that transition takes time. This is why it’s not entirely surprising that Foxconn has told the Wall Street Journal that it “will expand ‘extensively’ in China, both at its existing locations and in new ones, dismissing recent media reports the firm might pull out of the country.” (Perhaps not exactly contradictorily, the above New Century article states that there is a temporary hiring freeze for Foxconn in Shenzhen, since May 29.)

The New Century article ends with a discussion on how manufacturing in the Pearl River Delta region will undergo transformation. Similar to Mr. Xie’s viewpoint, it forecasts the end of the current business model, and sees analogies to the past growth transitions of other Asian economies such as South Korea and Taiwan. Essentially, China will have to move up the value chain, competing on innovation as opposed to cheap labor.

Personally, I feel that while these articles offer interesting analyses and insightful takeaways, the actual development will be painful. It does seem that China is at a very precarious stage of growth – on the one hand, it has strong incentives to keep doing what has made it successful in the past few decades, especially in light of the global recession; on the other hand, it is clear that the old model is getting out of date and perhaps creating more problems than wealth for society.  Add to this the myriad political complexities (central and regional governments have different interests, for example, which stifle the implementation of a national policy), the social grievances, the lack of welfare and the host of other issues, and suddenly it’s really hard to be bullish about China’s near-term prospects. The next decade will be an incredibly important and tough transition for China, and perhaps in future history books, the Foxconn suicides will be one of the signature events that mark the end of an era and the beginning of a more prosperous future.

Related Digital East Asia posts include:

• FOXCONN SUMMARY: Chinese Authorities Seek to Quell Rampant Speculation on Suicides – June 14th, 2010
• Foxconn Suicides May Impact the Bottom Line; Company Suspends Stock Trading as it Announces Wage Increases – June 8th, 2010
• The Chinese Internet Rumor Mill is in Full Swing as Stories of More Deaths at Foxconn Spread– May 28th, 2010
• Foxconn Suicides: A Solemn Timeline – May 28th, 2010
• A Solemn Count Goes Up Again – 11th Suicide Jump at Foxconn Warrants More Questions – May 25th, 2010
• 10th Suicide in 2010 at Foxconn; Incidents Finally Begin to Gain Wider Media Coverage – May 22nd, 2010
• An All Too Familiar Story: 9th Suicide Jump at Foxconn this Year – May 16th, 2010
• Suicide Jump Number 8 at Foxconn This Year – May 12th, 2010
• Another Death at Foxconn; That Makes Five in Just 4 Months – May 8th, 2010
• Third Death at Foxconn in 3 Months; Should Apple, Sony, Nokia and Others Be Concerned? – March 30th, 2010

Just hours after Terry Gou, the CEO of troubled manufacturer Foxconn Technology Group (PINK: FXCNY | (part of Hon Hai Precision Industry Co. Ltd.) TPE: 2317), concluded a large PR crisis management effort which included a tour of their Shenzhen plant for close to 300 journalists on May 26, Xinhua news agency reported that there had been another death.  This piece of news has already been widely covered in the media globally, such as this WSJ opinion piece.  Furthermore,news has spread of another (unsuccessful) suicide attempt, in which an employee had cut his wrist.

Read more about our timeline of the suicides at Foxconn so far this year.

But to make matters even more worse, Chinese “netizens” are spreading stories on Chinese microblogs, bulletin board systems and other forums of “14th”, “15th” and “16th” attempts.  As Chinasmack, a popular China blog, reports, the current rumor is that the “14th” and “15th” had jumped together; and that the “16th” was in a standoff on the roof (with a blurry photo attached as evidence).  As of now these rumors have not been validated by any major media outlet.

Foxconn has taken drastic measures as of late to control the “suicide cluster”.  It got into a bit of a PR firestorm with its alleged “non-suicide pact” with employees (full translation of the documentavailable at Shanghaiist).  It was also reported that they were erecting 2 meter (6 feet 6) high walls on top of buildings and installing safety nets; one twitter post claimed that insiders were saying windows were being locked down (only able to open about 10 centimeters, or 4 inches).  And employees were being urgently organized into small groups.  There were also reports (link in Chinese) that Foxconn was considering 20% wage increases, which they claim had nothing to do with the recent suicides.

On another note, noted Chinese intellect and blogger Hu Yong urged in a blog post (link in Chinese) for the public to stop using “xx consecutive jumps” to discuss the incidents.  He said this was inhumane and also as if people were expecting “records to be broken”.  Leading Chinese blogger / writer Han Han, who came in 2nd on the Time 100 poll last month, also wrote a new blog post (link in Chinese) on Foxconn.  Han’s main point seems to be (if I may summarize) that for the “ordinary people“ of China, who can’t afford the ever-increasing housing prices and barely make a living on their meager incomes, there isn’t hope for a better future.  They are the “low cost” that fuels China’s growth, and it’s not really surprising that when they see no hope they see suicide as a way out.

Reuters and many international media are reporting the latest death in the string of suicide jumps at Foxconn Technology Group (PINK: FXCNY).  The incident occurred on the morning of May 25, and a 19 year-old employee fell from a building in Foxconn’s Shenzhen base.  While police have not ruled out the incident being an accident, Xinhua news agency reports that there was a suicide letter in which he apologized to his father.  The employee was reported to have only been working at Foxconn for one and a half months.  He came from Central China and graduated from a vocational school.

There are not a lot more details about this most recent incident in Chinese media, although I noticed two news articles of interest.  The first article (link in Chinese) describes a group of Chinese “netizens” teaming up to do their own undercover investigation of Foxconn’s labor conditions.  The netizens started the effort via postings on the popular BBS (bulletin board system, discussion forums hugely popular in China) Tianya.  According to the lead organizer, over 100 people phoned him, and 8 traveled to Shenzhen.  They met up with 4 Foxconn employees to form a group of 12, all of which are migrant workers.  In terms of profession, 2 worked in human resources, 5 were ordinary workers, 2 were in legal, 1 was a teacher, and 2 were “other”.  The average age was 28.

The 8 external netizens all applied to Foxconn, and 3 were hired.  The 5 un-hired did interviews around the production base, while the 3 hired worked for 3 days.  They self-published a report on the Internet of their findings (attached in the article linked above).  In sum, they found Foxconn toprovide good facilities for its employees and observed most Chinese labor regulations (insurance etc.), and paid wages on time (delayed payment is a huge issue for Chinese migrant workers).  They also highlighted several issues that had been pointed out by other commentators previously – Foxconn employees routinely worked more than the 36 hours of maximum monthly over-time mandated by the law (though Foxconn claims employees worked over-time voluntarily, and signed such a contract as proof); Foxconn enforces a “semi-military” management style in which supervisors often verbally (or even physically) abused employees; the lack of a union to protect employee rights; Foxconn’s use of its shady security force (which assaulted a Reuters journalistearlier this year).

The second article, reprinted by QQ Tech, reveals that there had been two other deaths at another Foxconn plant earlier this year.  The incidents happened in Foxconn’s Langfang (in northern China, quite close to Beijing) plant.  The first death was on January 8, and Mr. Rong Bo fell from dormitory building A06; one and a half months later, Ms. Wang Lingyan was found dead in her dormitory bed.  In the case of Ms. Wang, at the time of death she was only 16, so by Chinese law she had been working under-age.  She had used another person’s (Ms. Wang Lingfeng, 22 years old, presumably a cousin or other relative) ID card to apply for the job.  If I read the article correctly, Ms. Wang had only been at Foxconn for a few days and hadn’t even started work before her sudden death (doctors declared her to have suffered a heart failure).

According to the article, Foxconn had communicated with the local government to “control the news”, which is quite common in China.  They settled with Ms. Wang’s family, for a sum of RMB 110,000 (US$16,109), which roughly equates to 5 years of salary at RMB 2,000 per month (US$ 293), although Foxconn tactfully termed the payment a “donation” instead of “compensation”.

I think these reports confirm that while Foxconn might be mostly complying with Chinese labor law, it is not enough due to the scale of their operations; and in some cases, there are some questionable practices and at least a lack of proper oversight.  I hope as these reports continue Foxconn and other companies in China can drastically improve their labor conditions.

A 10th suicide has occurred at Foxconn Technology Group (PINK: FXCNY). As Xinhua news agency reports(article reprinted on Sina, link in Chinese), Mr. Nan Gang, 21 years old, from Hunan province, jumped from a dormitory building around 4:50am on May 21st.

According to Mr. Nan Huan, also from Hunan (appears to be not related to Mr. Nan Gang), Mr. Nan Gang was a logistics employee at Foxconn and earned between RMB 1,000 to 2,000 a month (US$ 147-294).  On the night of May 20, he said his phone had been stolen and he was short on cash.  He was feeling low and said he wouldn’t be spending the night at the dormitory.

Mr. Nan Gang’s colleagues said he was quite open but had a short temper.  His colleagues were alarmed at his behavior a few days before his suicide, and even on the previous day his supervisor had taken him to the counseling services.  However it was not enough to prevent the incident.

It seems Foxconn has a suicide epidemic at its production base in Shenzhen.  It has taken a string of measures, such as setting up more counseling services, a hotline, and even monetary rewards for workers who alert management about their peers, but it is arguable whether these measures address the root causes.  Engadget has published a complete translation of the Southern Weekend article, which I discussed in my previous post, and from the perspective of that article, the lack ofany meaningful social structure is a big part of the root cause.  These 300,000 young workers live together, but they are alone and lack real relationships.  In such an environment, it is very easy to develop severe mental problems when working long hours and under stress.

On another note, it is at least encouraging that the incidents are gaining media coverage globally.  There continues to be an ongoing discussion in the Chinese media, and there has been no signs yet of any efforts by any government organization to censor the subject (it is quite typical for local governments to push for the censoring of such “un-harmonious” news, usually when their interests are directly or indirectly involved, and the argument for censorship is usually to stop copycat behavior).  Both Gizmodo and Engadget have been running articles, and traditional news outlets such as Reuters are also carrying the news.  Hopefully this will push Foxconn’s major clients, such as Apple Inc. (NASDAQ: AAPL) and Sony Corporation ((ADR) NYSE: SNE), to start their own investigations.

The string of tragic suicides at the Chinese manufacturing facilities of Taiwan’s Foxconn Technology Group (PINK: FXCNY) continues.  At 10:50pm on May 14, Mr. Liang, a 21 year old male employee from Anhui province, jumped from the 7th floor of Fuhua dormitory, in Foxconn’s Shenzhen Longhua production base (news link in Chinese here).

There was some initial speculation over the cause of the death, as police found a knife at the scene and 4 knife wounds on the victim.  Shenzhen police has announced that they have ruled out foul play, and sees the knife wounds as self mutilation prior to suicide.  However the victim’s relatives understandably have some doubts over the death, and have told reporters they will push the police to investigate further.

As a reminder, Foxconn is a leading global manufacturer of electronics and computer products for a who’s who of consumer tech companies – Apple Inc. (NASDAQ: AAPL), Sony Corporation ((ADR) NYSE: SNE), Hewlett-Packard Company (NYSE: HPQ), Amazon.com, Inc. (NASDAQ: AMZN),Nokia Corporation ((ADR) NYSE: NOK), Motorola, Inc. (NYSE: MOT), Nintendo Co., Ltd ((ADR) OTC: NTDOY), Microsoft Corporation (NASDAQ: MSFT), Dell Inc. (NASDAQ: DELL) and Cisco Systems Inc. (NASDAQ: CSCO) — and is notorious for its secrecy and alleged excessive labor practices.

COMMENTARY:
I find this string of deaths shocking and tragic, and if anything, they should serve as a prime example of the deep social issues underneath China’s rise.  A detailed discussion of the various factors that caused this tragedy is outside the scope of this blog; however I would like to briefly share some thoughts.

Nanfang Zhoumo (Southern Weekend), one of China’s most liberal and courageous newspapers (so much so that the government locked up their manager and editor-in-chief in 2004), has a series of articles (article #1 | #2 | #3) covering the Foxconn suicides (links in Chinese).  After the incidents in April, a 23 year old Southern Weekend intern, Liu Zhiyi, went undercover to work at Foxconn for28 days and wrote up his thoughts (most full-time journalists at Southern Weekend were too old to be hired by Foxconn, while Liu was a suitable candidate).  In his own words, “the 28 days of working undercover has shocked me strongly.  While I didn’t uncover the truth behind why these employees chose death, I did come to understand how they were living.”

Liu’s account of life at Foxconn was incredibly depressing.  300,000 employees worked and lived on a 2 square kilometer patch of land, crammed with assembly lines and dormitories.  Ten workers shared a dorm.  Employees earned a starting wage of RMB900 per month (US$132), which was the legal minimum wage in Shenzhen; to earn more they needed to work over-time.  Foxconn had workers sign documents stating that they were working over-time voluntarily, in which case the employees could circumvent the government regulation of 36 hours maximum of over-time  per month.  Liu believed that most employees favored this setup – they saw the companies that allowed them to work the most (and therefore earn the most) as the best employers.

Life outside of work was incredibly dull.  The blue-collars, which came from all over China, seemed to struggle at forming real connections.  Workers routinely could not remember all the names of the other dorm mates they lived with, which came and went quite frequently.  The gender ratio meant that even for a talented star employee, such as Lu Xin (who died on May 6), who had won 2nd prize at a Foxconn internal talent show, relationships were a luxury.  In its place were the cheap prostitutes a few blocks away, who offered blue collar prices (RMB90 per session – US$13) to these young twenty year olds.  Employees also loved spending their pay on lottery tickets.

To be fair, Foxconn has taken some measures to stop the suicides.  A counseling hotline was set up; a RMB200 (US$30) cash reward was given out to employees who reported co-workers who were having stress issues.  Besides getting monks to perform a service in memory of the dead, Foxconn chairman Terry Gou had also invited top psychiatrists to come to Shenzhen.  However, none of these measures were enough to stop the momentum of the suicides.

NOTE: Some of these psychiatrists went on the record to state to media that the suicide rate at Foxconn is not above national average – however, I see that as a misleading statement since it’s not an apples-to-apples comparison – the national average suicide rate is in no way a measure of the national average suicide rate of physically healthy blue-collar workers, which would be the real benchmark.

So what are the root causes of these deaths?  Why did so many young people see no hope in life? Some say it is the tragedy of the second generation migrant workers (the first generation migrant workers were those who went from rural areas into the cities in the 80s and 90s), who are the victims of explicit policies aimed at suppressing rural income and raising urban income.  These migrant workers, compared to their fathers’ generation who successfully made a living by leaving farming and going into the cities, earned far less in real terms, and having lost their farm land, could not turn back.

Others say it is the tragedy of the over-expansion of college education, which began in the late 90s and was widely seen as a measure to delay the employment problem of young adults.  As a result, China currently produces an over-supply of college graduates ill-equiped with skills needed by society.  And of course there is the corruption, social injustice, lack of social welfare etc.

In the end, perhaps there is no single cause to account for why these deaths happened.  Maybe Foxconn’s relentless drive for economies of scale was the straw that broke the camel’s back – 300,000 employees crammed in a 2 square km production complex (3 times the population density of the most dense city in the world, Manila, which makes the figure almost impossible to believe) was mentally too much for these young people to bear.  By now I can only hope that this chain of suicides ends here.

Barely three days after our last report on the chain of deaths at major OEM Foxconn (PINK: FXCNY), another employee has committed a suicide jump, making it jump number 8 at Foxconn’s Shenzhen base this year.

As Chinese website HC360 reports (link in Chinese), on the night of May 11, a female Foxconn employee Ms. Zhu, aged 24, jumped from the top of the eight-story residential building she lived in.  While the reporters could not get immediate verification from Foxconn regarding Ms. Zhu’s employment status, they were able to confirm from Shenzhen police that Ms. Zhu was a Foxconn employee.  She had not been to work in the past few days, and had stayed at home, possibly due to feeling low.  The police is still investigating her death.

The irony is that only a day before, Foxconn had invited 3 buddhist monks from Mount Wutai (Shanxi Province, China) to perform a ritual at their production base in Shenzhen.  As Qingdaonewsreports (link in Chinese), Foxconn chairman Terry Gou had first proposed such an idea after the string of deaths in April, though senior management rejected the proposal due to PR concerns.  As one insider commented, “we are concerned people would say, ‘instead of reviewing management practices, Foxconn decided to use monks to dissolve the incident.’”

However, after the death of employee Lu Xin on May 6, Mr. Gou again brought up the proposal, and this time it was executed.  Vice President He Youcheng was reportedly tasked with invitingesteemed monks.  Mr. Gou reportedly also personally telephoned government officials in Shanxi to expedite matters.  Eventually, they were able to invite 3 monks, who arrived on the night of May 10.

Mr. He confesses the stress and tradeoffs:

“Finding monks to perform the ritual is to follow local customs and help people calm down, and not due to superstition… we have been doing internal reviews, and we hope this time the media would not focus on the matter of the ritual.”

HC360 also provided a summary (link in Chinese) of the previous incidents this year:

• May 6: 22 year old Lu Xin, male, jumps from Longhua site hotel balcony and dies
• April 7: 22 year old male employee dies in his residence in Zhangge village, Guanlan
• April 7: 18 year old female Ms. Ning jumps from Guanlan site employee dormitory and dies
• April 6: Ms. Rao falls from Guanlan site dormitory building and is still being hospitalized
• March 29: 23 year old male employee falls from Longhua site dormitory building and dies
• March 17: a new female employee jumps from Longhua site dormitory building, suffering injuries
• March 11: Mr. Lee falls from 5th floor of Longhua site dormitory building and dies
• January 23: Mr. Ma Xiangqian, 19 years old, dies around 4am.  Police autopsy report later determines he died from falling from a high-rise.

Apart from the death of the male employee on April 7, the rest of the incidents are all related to jumps (in some cases media have used the euphemism “fall from building” instead of jumps, probably due to inconclusive evidence of suicide), and as such Chinese media are labeling it “eight consecutive jumps at Foxconn”.

There have been a lot of discussion in the media around the cause of these incidents.  Chinese authorities had investigated Foxconn, but found no evidence of misconduct back in April.  Foxconn management had told media there are deficiencies in their management which they are looking into.  Foxconn does have a reputation of being secretive (their security manhandled a Reuters reporter earlier this year), and assembly workers reportedly get half their income through working overtime.  These would suggest Foxconn employees are working under harsh conditions, albeit perhaps legally under Chinese regulations.

However, broader social issues in China is at least partly to blame.  The Chinese education system, which I am a product of, is adept at feeding students complex formulas, but poor at teaching students how to think independently, and equally importantly, how to handle one’s emotions.  And the growing income disparity, the rampant corruption, the lack of an adequate social welfare system (healthcare in particular), and in some cases the over-supply of labor, have all contributed to high stress among Chinese citizens.  The eight jumps have been a disaster long in the making, and Foxconn’s factories in Shenzhen appear to have been the tragic tipping point for these individuals.  I sincerely hope these series of incidents can at least help raise social awareness on labor conditions as well as the underlying social issues.

Back in March we reported on the series of deaths at major OEMFoxconn (PINK: FXCNY).  Well, the deaths just keep coming.  On May 6 at 4:30am, Lu Xin, who joined Foxconn in August 2009, jumped from the 6th floor of the VIP hotel in Foxconn’s Long Hua site.

Chinese media are reporting (link in Chinese) that Mr. Lu had been exhibiting abnormal behavior prior to his death.  On April 30th he had told his friend, Mr. Zeng Hongling that he was being followed and there were people trying to kill him.  Mr. Zeng reported the situation to his supervisor; the supervisor asked Mr. Zeng and another close friend of Mr. Lu to accompany Mr. Lu.  In the following days, Mr. Lu had stated he wanted to go back home to Hunan province, but when his friends offered to buy him a train ticket he changed his mind.

At the suggestion of a counsel, Foxconn contacted Mr. Lu’s parents and asked them to travel to Shenzhen to visit him. However, due to the May 1st National holiday, his parents could only get tickets for May 5.  They were scheduled to arrive in Shenzhen at 9am on the 6th.

Mr. Lu knew his parents were coming.  Foxconn arranged to have him and his two friends stay at the hotel.  They went to sleep at around 1:30am.  At around 4:30am, Mr. Lu got up and claimedthat the room was too stuffy and wanted fresh air. He got onto the balcony and jumped.  His two friends had tried to stop him but failed.  Mr. Lu was immediately taken to a hospital, but died around noon on May 6.

This marks the 5th death at Foxconn this year, and the 7th serious incident this year (death or severe injury).  The incidents have received widespread coverage in Chinese media, but due to Foxconn’s secretive nature there has been little real insight into the cause of these incidents.  What is widely believed among Chinese netizens though, is that Foxconn has very low margins on its products, and is squeezing profits out of their employees by giving them minimal pay under harsh working conditions.

I believe this is a serious labor scandal waiting to blow up in the face of Apple Inc.(NASDAQ: AAPL), Sony Corporation ((ADR) NYSE: SNE), Hewlett-Packard Company (NYSE: HPQ), Amazon.com, Inc. (NASDAQ: AMZN), Nokia Corporation ((ADR) NYSE: NOK), Motorola, Inc. (NYSE: MOT), Nintendo Co., Ltd ((ADR) OTC: NTDOY), Microsoft Corporation (NASDAQ: MSFT), Dell Inc. (NASDAQ: DELL) Cisco Systems Inc. (NASDAQ: CSCO) and any other brands that Foxconn manufactures for.  These series of deaths have not been covered by western media to date, but it’s hard to believe that a story this big won’t eventually find its way on to the New York Times and other media outlets.  That’s why I believe these companies should act immediately and look into the labor practices at Foxconn, otherwise they may be facing a potentially huge consumer backlash soon.