Nike's difficulties with China highlight the deep
roots of some of the problems businesses face in manufacturing there, particularly at a time of sharply rising costs and a
stiffening legal environment.
HONG KONG (Reuters) - Nike Inc (NKE.N: Quote, Profile, Research), the world's biggest
sneaker and sportswear maker, said falsified documents,
underage workers and unpaid wages were problems encountered at
suppliers in China, despite what experts say is one of the top
social compliance regimes in the industry.
The Oregon-based company's difficulties highlight the deep
roots of some of the problems businesses face in manufacturing
in China, particularly at a time of sharply rising costs and a
stiffening legal environment.
In its first country-specific supply chain report, which it
said focused on China because of the upcoming Beijing Olympics,
Nike detailed the efforts it has been making to get suppliers
to comply with its code of conduct and Chinese law, including a
scheme to monitor Olympics-related suppliers this year.
"As China continues to develop we see progress and best
practices emerging. But like our partners in any other country,
the factories we contract with in China continue to face
challenges as well," said the report, which was released
earlier this month on Nike's Web site.
It listed several labor-related challenges, including
falsification of factory documents, like payroll records, lack
of effective grievance systems for disgruntled workers and
hiring practices that did not ensure minimum age standards are
met.
The report said China is Nike's largest single sourcing
country, with some 180 manufacturers and about 210,000
employees.
Last year, Nike rolled out a scheme to check the identity
of some 150,000 of its workers in China, and found 167 cases of
people who were below minimum age standards when they were
hired but were now 18 or older. Two people were found to be
underage.
Wages in some places were not tracking government mandated
raises, the report said.
"As multiple factors drive up the cost of business, we find
that some contract factories try to avoid making changes to
wages in a timely manner," it said.
In 2005 and 2006, Nike "secured" over 6.53 million yuan
($921,300) in back wages owed to workers in China. Last year,
it said it recovered more than 500,000 yuan in back pay.
Experts say Nike has been an industry leader in corporate
social responsibility. In 2005 it made public for the first
time its entire supply chain.
But the problems the Nike report said it was trying to
tackle were widespread in China.
Last year, a rights group reported that it had found
children working at factories making Olympics bags, caps and
stationary.
About one third of Nike shoes are made in China, as is much
of the apparel and equipment it sells worldwide.
($1=7.088 Yuan)
(Reporting by John Ruwitch; editing by Kim Coghill)
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