The Dark Side of One Belt, One Road: Chinese Workers Trapped in Saipan

Posted: 2017-12-24 12:25

Last updated: 2017-12-28 12:13

"I'll contact you again this afternoon. We are going to protest at the casino." When our reporter contacted Li Qiang, he was busy preparing for a protest outside a luxury casino called "Imperial Palace" to claim unpaid wages and compensation from the casino.

Five unpaid Chinese workers hold a banner that says [in English] "Pay our wages, we go home!" (Photograph provided by interviewees)

A few days prior, the casino had just concluded a very successful Asian supermodel competition in which a Chinese model won the crown, while five unpaid Chinese workers in shorts and slippers stood outside the grandiose casino holding a banner reading [in English] "Pay our wages, we go home!" According to these workers, they could not recall the number of times they shouted and protested in the burning heat over the past eight months.

Last November, Guo Qinghui received a job advertisement back in his hometown of Feicheng, Shandong Province. (Photograph provided by interviewees)

An electrician named Guo Qinghui found a plum job while in his hometown of Feicheng, Shandong Province last November: a pamphlet titled "Now Hiring in Saipan, United States" listed a full page of vacancies from chefs and construction workers to jobs in the sex industry. The posting said that plumbers and electricians, which suit Guo’s expertise, were "urgently needed", with a brief job description of a nine-hour workday and a base salary of 10,000 yuan (RMB) [approx. US$1,800] not including overtime pay. Another worker in Saipan named Han Dong was promised even better conditions: as the New York Times reported, he was informed not only that he could earn 20,000 yuan a month, but also was likely to obtain a U.S. green card.

After paying a recruitment fee of 40,000 yuan, Guo Qinghui and his fellow villagers were sent to Baoding, Hebei Province for "training", the content of which was not consistent with what the job posting indicated they would be doing in Saipan. The recruiter gave them some colorful new clothes and swimsuits, but these were not work clothes, nor was the swimwear a present. These items were "packaging" given for Guo Qinghui and the others to wear. They were told that Chinese tourists did not need a visa to enter Saipan, which explained why they were being trained on how to disguise themselves as tourists. With the recruitment fee already paid, Guo had to accept the fact that he was going to work illegally in Saipan.

Later, Guo and his three other "trained" companions flew to Saipan, the capital of the Northern Mariana Islands, a U.S. territory. Although it was constantly emphasized in the training that they should claim to be tourists, two workers were immediately repatriated after letting the truth slip out when questioned by local customs officials. "Both of them are from Liaoning Province. They paid a 65,000 yuan (RMB) recruitment fee for nothing."

"After we arrived in Saipan, the local recruiter fooled us into paying another 500 U.S. dollars." And with this local recruiter having confiscated his passport, Guo had already paid a total of US$6,500 as "recruitment fees" before he even started work.

However, according to the Fair Labor Standards Act of the United States, employees who work for more than 40 hours a week (equivalent to 8 hours a day) must be paid no less than 1.5 times the normal wage for the overtime work. The minimum hourly wage set by the Saipan government is US$6.55, which means that a legal wage for the workers would be US$2,000 per month, equivalent to about 13,000 yuan.

Workers in Saipan live in dire conditions. A meal is only for them is only noodles, onions and boiled cabbage. (Saipan Television Station)

The existence of these Chinese illegal workers in Saipan may not have been known even today if not for a Chinese worker who died this March in a site accident. In March, the 43-year-old worker fell from a great height at the construction site, dying instantly. During the investigation of this case, the FBI found hundreds of Chinese workers with tourist visas working on the site. A few worksite managers were subsequently arrested, but several of the subcontractors managed to flee with their funds upon hearing the news. Not being paid their wages and having long been dissatisfied with the working hours and safety problems, these illegal workers began to fight back.

In fact, according to local media in Saipan, there were more than 2,000 Chinese workers on the construction site, over 1,000 of whom were undocumented laborers. Guo Qinghui noted that at least 200 workers out of the 300 electricians were working illegally. The workers were employed by three Chinese companies that had signed contracts with Imperial Pacific: the Chinese state-owned Metallurgical Corporation of China (MCC), Nanjing Beilida and Suzhou Gold Mantis. It was likely that these companies had subcontracted the projects to other Chinese entities.

Exploitation by contractors at all levels, the failure to guarantee workers’ safety and compensation, and ambiguity regarding the responsibilities of various subcontractors all led to a buck-passing situation between the casino and several contractors. Unable to get their pay back, workers have been stuck in Saipan for months.

Several Chinese workers, since being contacted by our reporter, have been sending photos of daily protests and sometimes of fashionably dressed men and women in the grand casino. They are trying to demonstrate the striking contrast between the grandiose palace and their current poor living situation, behind which emerges the unique background of Chinese capital and labor intertwined with those of the United States’ most distant territory.

 

The casino has issued an "ultimatum" to the workers. (Photograph provided by interviewees)

The Big Plan of The Hong Kong-Funded Casino:

Putting the labor problem aside, the casino that the unpaid workers are involved in is quite impressive. The name "博華・皇宮 (Imperial Palace)", which presents an image of luxury and has a meaningless dot between the two Chinese words, sounds like a building in Hong Kong. Indeed, its owner Imperial Pacific International Holdings Ltd. is a Hong Kong-funded company.

The well-known figures behind Imperial Pacific are a billionaire named Cui Lijie (Executive Director) and her son Ji Xiaobo (Project Leader of Saipan Casino Resort). Ji Xiaobo is the CEO of Hong Kong Integration Capital Ltd.  After launching a successful business in Hong Kong and Macao, in September 2013, Ji  spent 300 million Hong Kong dollars buying a controlling stake of  the Hong Kong-listed First Natural Foods Holdings Ltd. through a reverse merger and changed its name to Imperial Pacific. Since then, Ji has gradually shifted the investment focus to the casino hotel to Saipan.

According to a report provided by Imperial Pacific to the Hong Kong Stock Exchange, from 2014 to 2020 they will invest US$7.1 billion (about 55.1 billion Hong Kong dollars) in Saipan's casino and resort project over five phases and once completed the large casino resort will have 1,600 gaming tables and 3,500 slot machines. In addition, they have been granted an exclusive casino resort developer license by the local authorities that is valid for up to 25 years.

Ji's girlfriend Pace Wu, a Taiwanese pop music star, has recently appeared more often in public both at home and in mainland China, taking the opportunity to vigorously promote Ji's tourism business in Saipan. In fact, the frequent appearance of Saipan in newspapers is in line with Imperial Pacific’s development there: this month they spent US$9 million hosting the first Saipan International Film Festival, where the film "Youth" won best director, best film, best supporting actress and best newcomer.  To Chinese netizens' amazement, almost all awards at the film festival were swept by Chinese films. Zhang Han, a young actor from mainland China, received the best supporting actor award for his performance in "Wolf Warrior 2", a film with a strongly nationalistic flavor that won few international awards and failed to be nominated for the Academy Award for Best Foreign Language Film but was a smash hit and critically acclaimed in China.

The fact that the events held by the casino have such a strong "Chinese flavor" has its own reason: as Saipan implements a visa-free policy for Chinese passport holders that is different from that of the U.S. mainland, it attracts a large number of Chinese guests to visit for gambling. According to public reports, 90% of the VIP rooms in Imperial Pacific are taken by Chinese tourists. The casino in turn is dedicated to attracting these VIP customers by providing private jets and yacht services. The super-rich fly to Saipan in private planes and spend their money like water. In the first half of 2017, the rolling chip turnover of the VIP rooms reached an astonishing 190 billion Hong Kong dollars. With the turnover rising so sharply, Imperial Pacific's casino in Saipan makes much more money than that of some of the largest casinos in Macau, the world's largest gambling center. Earlier, citing sources familiar with the matter, Bloomberg reported that the Financial Crimes Enforcement Office under the United States Department of the Treasury had started to investigate Imperial Pacific's involvement in "money laundering", although the company denied the charge.

And yet, the wage arrears scandal in Saipan in the past six months has left relevant projects outside the main casino building suspended until today, with the view of a giant white palace clashing with a skeletal building structure and construction cranes. Imperial Pacific’s report for the first half of 2017 mentioned that due to labor problems with general contractors and several subcontractors, the project was expected to be delayed, clearly dissociating the company's responsibility as a project investor from the complex international outsourcing system.

In a statement sent to Imperial Pacific, Li Qiang, head of China Labor Watch, wrote that in accordance with U.S. federal law, both direct employers and other subcontractors are jointly liable when a labor dispute arises, and they should not pass the buck between each other or require workers themselves to negotiate with these subcontractors.

Five workers face the fate of eviction. (Photograph provided by interviewees)

Buck-passing by the Chinese Companies:

Another force in this case is the three Chinese companies that are the main contractors on the construction project: China Metallurgical International Engineering Group Co., Ltd. (CMIE), the wholly-owned subsidiary of the state-owned Metallurgical Corporation of China (MCC), Nanjing Beilida New Material System Engineering Co., Ltd., and Suzhou Gold Mantis Construction Decoration.  Gold Mantis and CMIE won the tender of the casino project in late 2015; Golden Mantis offered a bid price of 1.1 billion yuan RMB and CMIE won a two-phase bid totaling 3.01 billion yuan RMB.

After the illegal labor scandal occurred, U.S. prosecutors charged a number of individuals associated with two of the Chinese contractors, CMIE and Beilida, of illegally harboring and employing undocumented workers in Saipan. Two executives from Beilida have already pleaded guilty. However, our reporters have learned that all three of the Chinese contractors had employed illegal Chinese workers; it is by no means a problem of Beilida alone. Even so, these companies are still putting the blame on recruiters or subcontractors and suggesting they are "victims" of the incident.

On Imperial Pacific’s media center webpage, there is a very positive article about the company’s participation in developing the maritime Silk Road in Saipan, in which journalists from the China Business Times reported that MCC had already planted roots on the island. The article also says that ordinary construction workers at MCC "actually obtained work visas from the United States and all raw materials were transferred from China, which is the first large-scale construction project invested in by a Chinese state-owned enterprise that obtained US work visas”. This now obviously appears to be a false statement, but it also makes it clear that both Imperial Pacific and MCC paid attention to the issue of employment visas, which means they may be on shaky ground when blaming the subcontractors for the incident and arguing they knew nothing about the matter.

A Chinese labor researcher who asked not to be named said that the hard-working Chinese laborers in such international investment projects with layers of contracting are in an exploitative and vulnerable situation. On the one hand, they have to suffer the exploitation of the several levels of contractors as well as the lack of guarantees or protections regarding their workload and safety. On the other hand, once a legal issue arises, both the casino and the three Chinese contractors tend to place blame on the subcontractors below them, leaving the workers without a clear place to pursue their claim for payment, and leaving them as the biggest victims.

The researcher noted that the casino and the contractors are joint employers of the workers. The contractors would not have been unaware of the existence of illegal workers among their employees. Subcontracting arrangements often serve as an excuse for companies to plead ignorance and duck their responsibilities. Both parties should be responsible for workers’ losses in a labor dispute.

However, even though this wage arrears problem has not yet been solved, there are new job recruitment announcements on the Internet for the MCC Saipan project.

A casino under construction. (Visual China)

Chinese Illegal Workers: The Dark Side of One Belt, One Road

From Gold Mantis and MCC to Imperial Pacific, both private enterprises and state-owned enterprises cooperating in the Saipan casino project made reference to China's "One Belt, One Road" strategy in their promotional materials.

Shen Yan, president of Global Capital Markets at Imperial Pacific, highlighted the significance of its cooperation with state-owned enterprises. "We are implementing a big concept for the tourism industry, by cooperating with the MCC Group, we can put the excessive domestic productive capacity to good use and boost GDP at the same time…Participating in the development and construction of Saipan as a Chinese private enterprise, we are also providing ‘industrial aid to the United States’." This argument is, as a matter of fact, rather in line with the "One Belt, One Road" strategy’s goal of boosting the Asia Pacific region’s development, absorbing overcapacity and expanding China's influence. However, being exposed as an exporter of illegal workers to an Asia-Pacific neighbor by the New York Times certainly does not help that agenda.

Han Dongfang, head of China Labor Bulletin, believes that the “One Belt, One Road” initiative is a development strategy set by China from a fairly strategic perspective. However, when Chinese enterprises participate in international projects and export labor force extensively, they must first figure out the relationship between labor and capital, and avoid extending this type of unprofessional conduct from China to foreign countries.

Broadly speaking, in Saipan’s case, the MCC group involved is a large state-owned enterprise controlled by China SASAC. An illegal labor practice scandal on such a large scale is bound to affect the enterprise itself as well as the reputation and image of state-owned enterprises in general as well as China in relation to the One Belt, One Road initiative.

More specifically, these illegal overseas projects may not only cause a large number of Chinese workers to be trapped in a foreign country after losing everything, they can also mean that local laws are ignored and local workers are also being taken advantage of. If a large-scale protest among workers breaks out, it can easily lead to ethnic conflicts, triggering even greater problems. The demonstration of workers at the port of Hambantota, Sri Lanka at the end of last year is a case in point.

During the Saipan protests, although more than 100 workers received their full back pay and returned home, some workers had to accept partial wages in order to return home as soon as possible. Only five workers, with the help of their relatives in China, insisted on claiming compensation for lost wages as per regulations set forth by the United States Department of Labor.

The construction of Imperial Palace stalls after the illegal labor practice was exposed (left, photograph provided by interviewees). None of the buildings in front of nor behind the palace have been completed. (Photograph on the right distracted from Imperial Pacific’s 2017 Interim Report)

From the casino’s perspective, it had already done a "humanitarian act" by providing the workers with shelter and back pay of eight months. As a result, workers were issued an "ultimatum" to leave their residence. The researcher who has been following the matter challenged the casino’s move: "Why should the payment now of a debt owed eight months ago be considered a humanitarian act? And what happens to the compensation for liquidated damages required by the U.S. Department of Labor?"

On December 22nd, the five workers received another piece of bad news. Although the official investigation into the case was still pending, Vicky Benavente, secretary of the Department of Labor for the CNMI, was clearly standing by the casino in her response to the local media. Regarding workers' demand for compensation for lost wages due to eight months of stalled work, she said that "Imperial Pacific has no obligation to compensate workers for their original wages, not to mention these extra payments that the workers are asking for". She emphasizes that these workers in Saipan are "tourists; it is not our job to help these tourists." The implication is that these workers apparently entered Saipan as illegal laborers, and the local labor department did not have any obligation to help them. Benavente also repeated Imperial Pacific’s claim of having done a "humanitarian" act. Our reporter repeatedly attempted to ask the secretary for clarification over the phone, only to be told each time that the secretary was out of the office. The reporter’s request for response went unanswered.

Han Dongfang says that in these cases, the disadvantaged workers are quite often the first to be blamed. "When approached by workers seeking to defend their rights after suffering work-related injuries, the first response of many trade unions in China is to ask them why they did not sign a labor contract, and then condescendingly criticize the workers who are seeking help." Han points out the absurdity of this, as executing a contract is primarily the obligation of the employer, and that entities enforcing labor standards should not use this as an excuse to refuse to help workers.

Right now Guo Qinghui and his companions are busy preparing for their potential impending deportation and at the same time protesting outside the casino, where the "11th Asian Supermodel Contest" has just been held. The winner of course, is Chinese.

 

The Asian Supermodel Contest was just held at the casino. (Web picture)

The winner of the model contest is a Chinese candidate as expected. (Photograph from People.cn)