updated 9/1/2006 10:17:53 AM ET 2006-09-01T14:17:53

A Chinese supplier of Apple Computer's iPod embroiled in a dispute over its labor policies has been told to let its more than 200,000 workers set up a trade union, reports said Friday.

Hongfujin Precision Industry Co. is on a list of companies in the southern city of Shenzhen that have been ordered to set up such a union, which would be affiliated to the government's All-China Federation of Trade Unions, the official Xinhua News Agency reported.

China does not allow independent labor organizing, but in recent years it has been pushing foreign invested companies to allow the state-sanctioned labor groups. Such groups are not industry-wide, but represent workers in a single company or sales outlet. They traditionally have been allied with management.

Many foreign companies have already allowed such unions to be set up in their China operations.

An operator at the local ACTFU branch in Shenzhen who answered the phone Friday said all staff authorized to speak to media were out of the office.

Earlier this week, amid a wave of bad publicity Apple Computer Inc. announced it was trying to resolve a controversy over a defamation lawsuit filed in a Shenzhen court by Hongfujin against two journalists who wrote a story criticizing treatment of workers on its iPod assembly lines.

Local and international media groups criticized Hongfujin's demand for 30 million yuan (US$3.8 million; ??3 million) in damages as well as the local court's agreement to freeze the personal assets of the two journalists, reporter Wang You and editor Weng Bao of the newspaper China Business News.

The paper has said it fully supports Wang and Weng and stands by their reporting.

On Thursday, Hongfujin _ a unit of Taiwanese company Foxconn Technology Holdings _ reduced its demand for damages to a token 1 yuan (12 U.S. cents; 10 euro cents), saying it was obliged to file the lawsuit to defend its reputation. It also said it retracted its request for freezing the journalists' assets.

The allegations about Hongfujin's labor conditions first surfaced in an article in the British newspaper the Mail on Sunday, which reported in June that workers were being paid below minimum wages and being forced to work 15-hour days making the iconic iPods.

Cupertino, California-based Apple responded by promising to immediately investigate conditions at the factory. It issued a report earlier this month saying that it found some violations of its stringent code of conduct but no serious labor abuses. It pledged to immediately redress some problems with overtime, employee accommodations and administrative issues.

The factory, which also supplies electronics components and accessories to other major companies such as Dell Inc. and Intel Corp., is a small city in its own right, with clinics, recreational facilities, buses and 13 restaurants serving its 200,000 workers, Apple's report said.

The report discounted allegations of forced overtime, noting that a chief complaint among workers was a shortage of overtime during slack periods.

The Xinhua report said the ACFTU initially requested the factory set up a union in late 2004. It said the company recently was reminded to comply before the end of this year. It also said that Foxconn already has a Communist Party branch in Shenzhen.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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