Factory closings in China arouse workers' fury

By Elisabeth Rosenthal, The New York Times, 31 August 2000

TIANJIN, China, Aug. 29 -- The brick-walled Meite Packaging factory compound is nearly deserted now, its managers and machines hastily transferred in the last couple of days to a special development zone 30 miles outside this industrial city.

Although the closing had long been planned, the sudden departure was prompted by an unusual event here, Last week, desperate Chinese workers expecting layoffs seized six foreign managers from Meite's American parent company and held them hostage in the factory for 40 hours.

In the space of a decade, the Meite plant was transformed from a state-owned company making pipes to a beverage packaging firm jointly owned by the Chinese and an American corporation -- and, just recently, to a factory wholly owned by the foreign partner, the Ball Corporation of Broomfield, Colo.

And so this sweltering summer, middle-aged workers who not so many years ago were promised cradle-to-grave security by the state factory found their livelihoods suddenly threatened by a capitalist corporate restructuring and felt they had no where to turn.

Every day since the beginning of August they were there at the gate, protesting and trying to block deliveries and people from going in, said Liu Qiuling, a retiree who lives next to the factory and knows many who worked there. But the managers didn't meet with them. I think that's why the workers were so mad.

Taking foreign businessmen hostage is rare in China, despite the thousands of often fractious business partnerships between Chinese and foreign companies. But the workers' frustrations that touched off the incident are commonplace, leading to hundreds if not thousands of protests in recent years.

Under government orders to become economically self-sufficient, many formerly state-owned factories have tried to transform themselves, often with the help of foreign partners.

The sink-or-swim strategy promoted by Prime Minister Zhu Rongji, who oversees economic policy, has no doubt rescued thousands of companies from bankruptcy and prepared them to compete in the global market. It has also often enriched many former state factory officials, who are often offered lucrative positions in the revamped business.

But it has been painful and confusing for China's tens of millions of workers, echoing similar privatization efforts in the former Soviet bloc. The workers are unfamiliar with the intricacies of buyouts and severance packages, generally lack effective labor unions and have little outlet for their complaints against new, often absentee, bosses.

Workers' rights are not protected much when this happens, said Anita Chan, a labor expert at Australian National University. These are people who worked for the state and thought they would work and then retire and enjoy certain benefits: health care, pensions, things like that.

But then one day it's just finished. And they are 40 and have many decades of life ahead of them. What will they live on?

She said the workers at Meite, who were offered a severance package, did better than many others who get nothing at all.

The conversion of state factories has often left the workers at odds with new employers, both foreign and Chinese. And protests, though rarely reported in the Chinese media, are a frequent result.

Earlier this month, also in Tianjin, disputes erupted between workers at a state-owned liquor company and its German partner, which wanted to sell factory parts for scrap metal. The workers blocked a truck, insisting that the profits from the metal were rightfully theirs.

Late last year, workers at the formerly state-owned Red Lion Paint Factory in Beijing ended up in a near-fatal standoff with the management after a new private owner, a Chinese company from Shandong Province, wanted to close the plant and sell the land.

When a delegation of workers failed to persuade the management to keep the factory going, some of the workers attempted suicide in the office of the factory's Communist Party secretary, who had sided with the new owners. One women swallowed a bottle of pesticide, and two men slashed their wrists.

Workers are often particularly incensed when factory bosses reap profits from restructuring while the workers suffer.

Opportunities for corruption abound when state property is released into the private market, because it is often difficult to place a value on such companies. Some former factory bosses have managed to buy profitable ventures at bargain basement rates.

What laid-off workers particularly hate to see is their factory taken over by the factory management and converted to private assets, said Dai Jianzhong, a specialist in labor issues at the Beijing Academy of Social Sciences. They see factory assets being used to buy cars and houses.

Often the desperate acts reflect the dire situation of middle-aged workers who find themselves abruptly without jobs in a country still poorly prepared to deal with unemployment.

Until a decade ago, nearly all urban Chinese workers received housing, health care and pensions through state jobs. Although that is changing, China has yet to develop an effective social security net for the unemployed or elderly. Its embryonic welfare system offers no health care or jobless benefits for people like those laid off from Meite.

And the ranks of such workers are likely to grow, because Meite was the victim of what in the West would count as business as usual.

Through a series of joint-venture partnerships in the 1990's, Meite's parent company, the Ball Corporation, has ended up with four packaging plants in Tianjin, mostly making soda and beer containers.

The plan now is to consolidate the four into one -- in the special economic development zone, which offers tax advantages, said Scott McCarty, a Ball spokesman.

Ball has 17 wholly owned or joint-venture companies in China and has been doing business in the country for more than 15 years.

The folding of four factories into one meant layoffs, and the company invited some workers at Meite, mostly people in their 20's, to move with it, a worker who answered the phone at the plant said. The decision is typical for downsizing Chinese companies, experts say, since the younger workers tend to be better educated.

The rest of the workers were offered a one-time severance payment of about $1,200, which many considered inadequate, prompting the protest.

On Wednesday last week, when executives from Ball's Hong Kong office went to post a closing notice in the factory, workers detained them in an office and would not let them leave, Mr. McCarty said. He said that the six men had not been physically harmed, but that the workers were verbally aggressive at times.

Just like in the U.S., people were upset that their plant would close -- that's understandable, said Mr. McCarty. From our point of view the incident is over now and it's fine. Still, he said the company would probably change some procedures, including those for closing factories.

The police did not enter the factory during the ordeal, calling it an internal matter. They would not say today if there had been any arrests.

The foreigners—an American, two Malaysians and three Hong Kong residents—were released after 40 hours early Friday. Mr. McCarty said he was unsure if concessions had been made, although a worker at the factory said the severance payment had been raised a bit.

But in a city with hundreds of thousands of laid-off and unemployed workers, that may provide little comfort. Of 30 jobs listed outside the district employment center near the factory, only one was listed as open to applicants over 35.

People count me as lucky, said Mr. Liu, sitting on his old bicycle cart. I retired a long time ago, so I have a pension. But what will these workers do if they get sick? How will they pay for that?