Literally Dying for Privatization in China

♠ Posted by Emmanuel in at 7/26/2009 04:14:00 PM
The transition from mostly state-owned industries to private enterprises is always fraught with difficulty. Add exceptionally difficult times in China's transition to a semblance of a market economy with callous handling of the situation and you get this incident reported by the Financial Times. While the rationale for rationalizing SOEs is sharpened during these these periods, you cannot expect workers to respond too positively:
The privatisation of a state steel company has been scrapped after an executive was beaten to death by workers angry at the threat to their jobs from a takeover of their firm, 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 firms in industries targeted for consolidation...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...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 nearly all the employees. “With Tonghua Steel’s retired workers each receiving only Rmb200 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.
Some thoughts:
  1. It has always interested me how the Communist Party has, for a long time now, stepped into the vanguard of the privatizing bourgeoisie;
  2. While privatizing inefficient SOEs may be the correct path to take, the transition could have been handled with far more sensitivity given that social safety nets are few and far between in the PRC;
  3. Those French "bossnapers" who've held bosses hostage to persuade them to keep their jobs look pretty staid now--the difference here is that the rioters were effective in, er, killing off privatization plans;
  4. Lynching has also happened with a multinational operating in India. My guess is that the China incident will receive less press since it doesn't involve Western concerns.