The privatisation of a state steel group has been scrapped after an executive was beaten to death by workers angry at the threat to their jobs from a takeover of their company, according to a Hong Kong rights group.
The violent riot in north-east China late last week involved up to 30,000 workers, a reminder of the ongoing sensitivity about lay-offs from state companies in industries targeted for consolidation.
The government laid off about 50m workers in state enterprises in the 1990s, equal to the combined workforces of Italy and France at the time, but many companies still retain bloated staffing rosters.
Tonghua Iron & Steel, a traditional state enterprise, has about 50,000 workers and has struggled to make consistent profits in recent years, making it a prime target for restructuring by its owner, Jilin province.
The privately held Jianlong Group, one of China’s largest private steel companies, had first proposed taking over Tonghua in 2005, backed out of the deal when the economy slowed last year, but re-entered negotiations recently when industrial demand picked up.
Propelled by the government’s stimulus package, China produced steel at an annualised rate of 545m tonnes in June, a record level of output.
The interim general manager sent by Jianlong to run Tonghua, Chen Guojun, had infuriated the workers with his high-handed attitude, according to comments posted on internet bulletin boards in China.
He had reportedly said that he would re-establish Tonghua “under the name of Chen” and lay off almost all the employees.
“With Tonghua Steel’s retired workers each receiving only Rmb200 ($29) a month for living expenses, Chen Guojun was paid an annual salary of Rmb3m,” the rights group reported.
When Mr Chen returned to the plant late last week, a large crowd of workers surrounded his office and beat him unconscious, according to a report issued by the Hong Kong Information Centre for Human Rights and Democracy.
Outside the factory, mobs of workers stopped an ambulance and police from entering the compound to rescue him. The thousands of riot police then mobilised by the authorities took several hours to bring the situation under control.
Staff at Jianlong’s headquarters in Beijing confirmed Mr Chen’s death but declined to give any further details.
Zhang Zhixiang, the owner of Jianlong, was China’s 10th-richest man in 2008, according to China’s most widely quoted rich list, with a fortune estimated at $2.9bn.
Private entrepreneurs in China have made substantial inroads into the steel sector in the past decade, usually by buying up and restructuring tottering state-owned companies such as Tonghua.
By Richard McGregor in Beijing
Copyright The Financial Times Limited 2009
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