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Liaoning Province - An overview

Since the 1930's, Liaoning Province has historically been a province with a heavy concentration of heavy industry. Before the start of the Sino-Japanese War, an extensive network of railways was built in Liaoning and two neighboring provinces. In 1949, Liaoning Province was chosen as an ideal area to continue developing heavy industry and manufacturing. In the early years of the People's Republic of China, many of the Soviet Union construction and aid projects were also based in Liaoning given its proximity to the Soviet border.


Starting from 1958, migrants from central China began to move into Liaoning concentrating industry and urbanization in the area. The province currently has a population of some 42 million people, predominately located in urban areas where industry is also concentrated. In many cities, it is common to find that all residents work for one single industry and in some cases, one single state owned enterprise.


Liaoning Province has the largest number of state-owned enterprise (SOE) employees in China, and therefore also the largest number of retrenched and retired SOE workers in the country.


Restructuring


After 1998, SOE reform was placed high on the government¡¯s reform agenda with restructuring seen as the way forward. SOEs throughout China were sold off either as a whole or in parts - in many cases, the people who could afford to buy these enterprises were the previous managers, officials and their families. After selling the SOEs to private owners, the owners are then entitled to lay off huge numbers of the original staff in order to maximize the labour force and reduce costs.


Both the factory and the local government are responsible for contributing to the compensation. However it is quite common for new owners to claim that they do not have the money available to compensate laid-off workers and then the government in turn refuses to pay their share and appears to do little to chase money from the enterprise. In many instances, a failing enterprise or a newly restructured enterprise simply stops paying wages to the workers, ignores requests for back pay and at the same time the enterprise does not declare any formal move towards restructuring or bankrupt, leaving the workers in limbo without wages or compensation. Workers in these factories are not eligible to apply for any government social security allowance as they are still technically registered as working and the factory is technically not bankrupt.


Poverty: relative and absolute


Throughout China, in most major cities there is a minimum living allowance and people earning less than the standard are considered living under the absolute poverty line. In Liaoning, the minimum living allowance is about 300 Yuan. Those earning less than 50 percent of the average wage in the city are considered as living under the relative poverty line. In Liaoning, the official average GDP per month is 840 Yuan which means that anyone earning less than 420 Yuan a month is considered "poor".


According to official statistics in the 1990s, given by Chinese academics, nationwide there are some 30 million people living under the absolute poverty line. One quarter of these people are located in the three Northeastern Province. Of these people, a half are located in Liaoning -a total of some 3.75 million are in Liaoning.


In the northeastern provinces, a major cause of increasing poverty has been the exhaustion of natural resources, the subsequent closure of coal mines and the closure of steel, iron and other related industries. Another major cause in the past decade or so has been the enforced closure or bankruptcy of state owned enterprises which has seen many thousands of large enterprise closed down or restructured to form smaller private companies.


For the majority of people in Liaoning, retrenchment from a former SOE means a one off payment ranging from 7,000 Yuan to 20,000 Yuan (US $845 to 2,414). Despite a lifetime of work in an enterprise, a worker may only receive the minimum compensation. When they receive compensation, workers still pay pension premiums for the remaining working years and the compensation is usually not enough to cover this.


In order to obtain the 260 Yuan monthly Minimum Living Standard Benefit from the provincial government, people are required to undergo stringent requirements, leaving most laid off workers ineligible for receipt of the benefit. According to one source, recipients are required not to own pets, televisions or telephones. In addition, they must sign up as a volunteer and undertake tasks such as street cleaning, without the right to refuse any tasks assigned to them. Because of the nature of industry in the urban areas, the failure or restructuring of an enterprise usually affects the whole family - laying off both breadwinners and often the children as well. This means that most families are unable to provide support to their family members and are heavily dependant on compensation from the enterprise, and devasted when the promised payments fail to materialize.


The situation of retrenched workers is further complicated by the differing categories of employees. For example, "collective staff" in the large SOEs are people who had returned to the cities from rural areas during the 1960s and 70s. As they returned SOEs provided them jobs and they were called collective staff. Before the economic reforms, they were treated exactly the same as regular staff, earning the same wages. However, when retrenchment is carried out, this category of workers is not covered by any compensation package and they receive nothing for their years of service.


Complaints


According to internal records from the Letters and Complaints Office, as quoted by a Chinese academic, most of the complaints in Beijing are made by Liaoning people. The two main causes of Liaoning petitions are the restructuring of enterprise and the forced demolition of housing. Many workers throughout the province have fund that their local governments are unreceptive or hostile to their complaints and requests for missing compensation or other dues owed to them and they travel to Beijing to seek the attention of the central authorities. As the number of protests increase in step with the rise of bankruptcies, local authorities are hardening their opposition to worker demands and using threats of meager compensation or nothing to deter further protests.


Re-employment


It is not easy for middle-aged workers to find new jobs, especially in the face of competition from fellow workers and younger people. After several decades in an SOE, their skills are seen as too specialized and in modern private factories, their skills are considered outdated. Many workers are relatively uneducated and are forced to seek work in low paid, unskilled factory work - an increasing rarity in the northeast. One interesting phenomenon is that many former "model workers" have especial problems in finding re-employment as their professionalism in one work area is equated with a lack of professionalism in other skills. For many workers, the modern Chinese idiom that "if you are a man over 50 or a woman over 40 you cannot hope to find work" is becoming increasingly true. Some laid off workers are unwilling to migrate to the economic boom areas of southern China and compete for low paid jobs with ex farmers - they tend to remain jobless in their home towns and attempt to survive on what little benefits they can receive. For the elderly and laid-off workers, medical expenses are the biggest cause of concern. The cost of medicine continues to increase with the growth of unregulated charging systems. Many workers try to ignore their illnesses; even if chronic or serious as they know they are unable to afford proper treatment.


Provincial Government


At the beginning of 2001, Bo Xilai was appointed as the governor of Liaoning Province. Bo, a member of the CPC central committee, had enjoyed high acclaim as a 'clean' and competent top official. Before he was promoted to head Liaoning Province, he was applauded for his success as the top official of Dalian City which had developed a relatively modernized port and a well-run commercial city. Bo claimed, in an interview in March 2002, that he needed at least five years to solve the immense problems of structural reform in Liaoning, which would involve 10 million workers.

(See: http://www.chinanews.com.cn//2002-03-10/26/168412.html; http://www.unn.com.cn/GB/channel286/287/695/200301/27/241468.html.)


He said his government had already spent Rmb 16 billion in improving the social security system in the province, and achievements included the creation of jobs and re-employment for 830,000 workers. According to Bo, by end of 2001, 510,000 workers who were removed from their enterprise-based social security systems had been transferred into the public social security system; but the remaining 60 percent of workers' accounts had yet to be transferred. Six million workers were registered in the social medical insurance scheme by end of 2001; while the other 30 percent of the total workforce had yet to be registered. (See: http://www.chinanews.com.cn//2002-03-10/26/168412.html.) Nearly five million workers have reportedly set up personal pension accounts, to be administered by the local government; but nearly two million more workers' accounts have yet to be processed.


Corruption is rampant throughout China and Liaoyang province has been hard hit by the corruption of high level officials and their links to underground criminal gangs. In Shenyang, the capital of Liaoning province, the Mayor, Mu Suixin was arrested and tried for corruption after investigations uncovered an extensive symbiotic interlinking of City officials and local criminal gangs. Mu was sentenced to the death penalty with a two year reprieve in late 2001 and Ma Xiangdong, the deputy mayor was executed along with one other official. In total 15 top officials were removed from their posts along with 500 others. However, two of the people who had helped expose the scandals were imprisoned. Bo Xilai has himself been the subject of allegations of corruption by several journalists outside China.


According to a Xinhua report on 24 February 2004, the previous Hubei provincial committee deputy secretary and ex-governor of Hubei Province, Zhang Guoguang, was expelled from the Communist Party of China (CPC) and turned over to the judicial authorities on charges of accepting bribes. Zhang was the governor of Liaoning between 1998 and January 2001 and later became the governor of Hubei. The report stated that Zhang "took 960,000 Yuan in bribes and gifts while he was working in northeast China's Liaoning Province. In return, he used his power to help people obtain benefits illegally."


Tian Fengqi, former head of the Liaoning Provincial Higher People's Court (June 1999 to August 2001), was charged with taking bribes. He was sentenced to life imprisonment on 15 May 2003. Tian exploited his office and accepted bribes amounting to 3.3 million Yuan.


Liaoyang Ferro-Alloy Factory


The Ferro-Alloy Factory was an old enterprise which started out as a small-scale smelting workshop producing phosphorus-based products. It was developed into a medium-sized SOE in the 1950s. The factory has faced financial difficulties since the 1990s, just like tens of thousands of other SOEs. In 1995, a new official, Fan Yicheng, was appointed as the plant's Party Secretary and Director. In collaboration with the former mayor and Party Secretary of the city of Liaoyang, Gong Shangwu, Fan introduced measures to rescue the company by spinning off several production lines into independent companies.


By the late 1990s, however, Fan Yicheng had gained a reputation among the Ferro-Alloy workers as being little more than a self-interested manipulator of the factory's resources. They accused him of having misappropriated over Rmb 100 million to spend on his lavish lifestyle, including sending his children to study abroad, and moreover of having links to local triad criminals. Most seriously, the workers later found out that between 1995 and 2000, Fan had stopped paying contributions to the plant's pension and medical funds, leading to a deficit totaling Rmb 27 million. This later prevented 6,000 members of the workforce from drawing any pension payments or other social security benefits when they were made redundant.
Eventually, in late 2001, Fan Yicheng attempted to apply for bankruptcy, and in September 2002 he was taken into police custody on charges of corruption.


The Ferro-Alloy Factory was formally declared insolvent by the Liaoyang government and the court on 5 November, 2001, and shortly thereafter, several constituent parts of the factory were sold off to contractors who had close personal links to the Director, Fan Yicheng, and to various local government leaders. The workers thereupon requested access to an official investigation and assessment report that the government had prepared on the Ferro-Alloy insolvency, but this request was never met. Three days later, all equipment, materials, and other assets at the plant were removed by the local authorities.


The factory's bankruptcy package - unilaterally decided upon by management - pledged retirement benefits of Rmb 300 a month to all workers who had worked for the company for over 30 years and also to those workers who had suffered serious (grades 1-6) industrial accidents; the remaining workers were offered retrenchment compensation of Rmb 600 for each year of service. In addition, workers who had incurred permanent injuries from less serious industrial accidents were each to receive lump-sum compensation of between Rmb 3,000 and 6,000. The Director also promised to reimburse at least half of the long-standing wage arrears owed to workers by the end of 2001. Around half of the workforce, including over 100 management cadres (among them the official "trade union"chairman), were re-employed by the plant sections that had earlier been sold off. However, for the most part, the terms of this settlement package turned out to be little more than empty promises. Over 3,000 Ferro-Alloy workers found themselves left without a job and with many months of unpaid wage arrears still owed to them. They were also unable to draw any pension or unemployment benefits beyond 182 a month - the city's then minimum living wage level. Contrary to what had been promised in the official bankruptcy package, moreover, families of workers killed in industrial accidents received only the miserly sum of 70 a month.


The workers' demonstrations in Liaoyang were held against the backdrop of the annual convention of the national parliament, the National People's Congress (NPC) and of the government's "united front" body, the National People's Political Consultative Conference (NPPCC). As one of their key demands, the protesting workers called for the resignation of their local delegate to the NPC, Gong Shangwu, who was the former Mayor and Party Secretary of Liaoyang. The Ferro-Alloy workers alleged that Gong had been an accomplice of their plant director in the mishandling of the factory's finances. But in a television interview, made in Beijing at the NPC in March, 2002, Gong claimed that the problem of unemployment in Liaoyang had essentially been solved and that all unemployed workers were receiving a minimum monthly payment of 280 Yuan. Gong's comment outraged the tens of thousands of unemployed and retrenched workers who had suffered months of impoverished living and who had never seen anything like a monthly payment of 280 Yuan.


The Beijing Morning Post of 14 March 2003 reported that on 11 March 2003, the Liaoyang Intermediate People's Court delivered the following verdict: LFFC's former director and general manager Fan Yicheng, had been found guilty of dereliction of his duties and smuggle, sentenced to a 13 year term of imprisonment. The previous manager of the LFFC's import and export department, Liu Yongjia, was charged with embezzlement of public funds, and was sentenced to a 6 year term of imprisonment. The previous manager of the LFFC's resources department, Cao Ce was found guilty of embezzling public funds and was sentenced to a 6 year term of imprisonment. The former LFFC director and assistant general manager, Wang Youguang, who was also the manager of the Liaoyang Iron Ore & Ferroalloy Distribution Company, was charged with negligence at work and illegal operation of the same type of business. He was condemned to a 4 year term of imprisonment.


8 May 2004