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Authorities fail to learn the lessons of state-owned enterprise reform

Two major strikes over the last two weeks have shown that some local governments and managements have still not learnt important lessons from the privatization of state-owned enterprises (SOEs) at the turn of the century.

The protests at the state-owned Golden Emperor Group textile plant in Chongqing’s Fuling district on 13 and 14 April, and the former state-owned Yimian textile factory in Baoding, Hebei, in the first week of April erupted for precisely the same reasons as in the majority of SOE privatization disputes a decade ago: wages arrears, inadequate compensation for lay offs and the misappropriation of assets by management.

In Chongqing, nearly all the factory’s 5,000 workers went on strike, with more than 2,000 holding a mass protest at the factory gate, and more than 300 workers staging a road blockade that resulted in extensive tailbacks, after the enterprise announced its bankruptcy and reorganization plans. The workers, who had not been paid for three months, were protesting at wage arrears and a redundancy offer of just 630 yuan for each year of service at the enterprise - less than the monthly minimum wage in Chongqing municipality.

In Baoding, several thousand workers staged a three day strike and mass demonstration at the factory gate, and then attempted to march up the highway to Beijing before the vice mayor of Baoding stepped in to mediate. The workers were complaining at the non-payment of economic compensation and pension benefits promised when the enterprise was privatized and sold to a Hong Kong-based company in 2004. The workers further claimed that nearly 500 million yuan worth of assets mysteriously disappeared at then end of 2008 and remain unaccounted for.

During the shock therapy-style privatization of SOEs in the late 1990s and early 2000s, over 30 million workers were laid off, often with wholly inadequate compensation, and managers were given free rein to plunder state assets. As CLB has shown in its research report No Way Out: Worker Activism in China’s State-Owned Enterprise Reform, the lack of government regulation and transparency in the process, coupled with the wholesale disregard of workers’ interests meant that disputes arising from SOE privatization, bankruptcy and closure often dragged on for many years, and many disputes remain unresolved today.

Yet even now, SOE managers are still trying to take a short cut to economic reform without regard to the rights and interests of their employees, many of whom have worked at the enterprise for decades. SOE workers laid off a decade ago did not simply lie down and accept their fate without a fight, and clearly those laid off today will not either.