British newspaper The Sun and the Hong Kong-based Students and Scholars Against Corporate Misbehavior (SACOM) will likely face law suits from a Chinese manufacturer whose board chairman protested Monday for having been falsely labeled as an Olympic mascot "sweatshop".

Gu Feng, chairman of the board of Rainbow Arts and Crafts, blamed the coverage published by The Sun on January 19 and January 23 respectively as "untrue", adding that the Chinese quoted by The Sun as Rainbow's employees did not exist.

Gu said his company had drafted an indictment in preparations to take the two organizations to courts and would claim compensations for the damages it had suffered.

"We will bring the case to the courts in the United Kingdom, the Chinese mainland and Hong Kong, and lodge a complaint to the Chinese Embassy to the United Kingdom if necessary. We have already asked Golden Bear Ltd. to forward our requests to the London organizing committee for the 2012 Olympics," said Gu.

Golden Bear won the Olympic mascots contract in 2010 and outsourced the manufacture to Rainbow Arts and Crafts in Yancheng City of east China's Jiangsu Province.

With 80 employees in total, Rainbow Arts and Crafts, established in February 1997, is also an authorized manufacturer for the mascots of Disney and the Vancouver Winter Olympics, according to Gu.

"I don't understand why the British newspaper would report that way. Before the news came out, we were all happy to get the orders for the London Olympics and hoped to make more money. Now people have started to worry," said Song Yonghua, 36, a Yancheng local who has been working with Rainbow Arts and Crafts for 11 years.

Gu blamed The Sun's jaundiced report to SACOM which collects corporate information and sells them to foreign media. As SACOM is the key source of the false report, Rainbow Arts and Crafts will take it to court, said Gu.

Refuting the coverage which said that workers were paid "just 18 p per item", Gu said for per item of Wenlock and Mandeville, workers could earn 5.16 yuan (51.6 p) and 5.94 yuan ( 59.4 p) respectively.

"If employees are not absent from work, their monthly salary will exceed 2,000 yuan, about 200 pounds for sure. We can substantiate our statements either in term of working hours or pays," he said.

According to the report of The Sun, however, workers in Rainbow Arts and Crafts get only 93 pounds, roughly 930 yuan a month, and has to work 358 hours a month.

Song Yonghua said the newspaper's statement was "really off-the-mark." "Our salaries are paid by the piece, so people work overtime sometimes hoping to earn more. But on average we earn 2,000 yuan a month, those who worked overtime could earn up to 3,000 yuan," said Song.

As for the claim that the Olympic mascots were sold at a price 100 times higher, Gu said it was a "gross distortion of the truth".

"By manufacturing a 20cm Wenlock, our factory earned a profit of only five percent after having the costs of raw materials, packing, equipment, shipping and taxes imposed by the Chinese and British government deducted," said he. For both management and employee of the Rainbow Arts and Crafts, what is so irresponsible of The Sun's report relates to the label of "China slaves."

"The working conditions of our company are up to the international standards for a toy manufacturer," said Gu. "In the sowing plant, ten air conditioning are equipped to secure a comfortable work place in all season. Free lunch is available to workers. Medical kits come handy in plants, but workers never bothered to use them."

All regular staff enjoyed old-age pension, medical, unemployment, maternity and work-related injury insurances, he said.

Over the years, one of the biggest headache of Gu, by his own admission, is the shortage of skilled workers. What Rainbow Arts and Crafts value most is human resources.

"Almost every factory in Jiangsu are in short of workers. If the management did something wrong, workers can protest or vote with their feet. If we failed to meet their salary requirements, they would leave. We are clear that only good pay and good working conditions can retain workers," he said.

As the country is celebrating the Lunar New Year this week, most workers have returned home. To prevent the annual Spring shortage of skilled workers, private companies in China's eastern coast have competed with one another to offer benefit packages.

"The fates of workers and enterprises are bound together. Companies can only develop when they ensure that their employees can work and live with dignity," said Chen Shida, head of the Zhejiang-based Research Institute of Labor and Social Security.

In Rainbow Arts and Crafts, employees receive extra benefits three times a year, about 2,000 yuan for each person, Gu said.