Threat of Mass Layoff Leads to Death of Factory Manager

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By Chris Devonshire-Ellis

Jul. 27 – The beating to death of a factory manager in North-East China by workers has raised fears of a resurgence of the type of violence once encouraged by the Communist Party against capitalists during the Cultural Revolution. Chen Guojun was beaten unconscious by a mob of disgruntled employees then later died of injuries.

State-owned enterprise, Tonghua Iron & Steel had been scheduled for privatization by the Jianlong Group, who were  also in discussions with the Jilin Provincial government. A Beijing-based executive of Jianlong, Chen, had been there to prepare the company for the takeover and told employees that the company would have to cut the work force from 30,000 to 5,000 workers.

When layoff plans and the size of Chen’s annual salary was revealed – said to be about RMB3 million per year – the workers rioted and Chen died as a result of beatings inflicted upon him in his own office. The same workers prevented medical assistance reaching him and blocked the way for ambulance crews and police.

China’s iron and steel industry has been restructuring and with it comes private businesses beginning to take over inefficient state-owned enterprises. However, liabilities from the planned acquisition are often the issue of the pension fund, staff retrenchment plans and the perceived ‘bleeding’ of the company assets by a more capitalist motivated management. The company’s retired workers were receiving about RMB200 a month as pension.

Much of North-East China was heavily influenced during the Cultural Revolution with some of the worst atrocities made against landlords and the so-called bourgeois intellectual elite such as teachers, doctors and professors. They were deemed to have been influenced by the West and standing in the way of progress of the masses.

Many cases of schoolteachers and businessmen being killed by rampaging mobs, often encouraged by government-backed sources occurred during this period. Some of them are still in employment, or retired and now dependent upon the so-called communist utopia promised to them to live out the rest of their lives. Seeing their livelihood being threatened in such a manner can lead to the type of violence that occurred during the 1970’s; a nostalgic yet bloody reversal to the past.

The problem is still prevalent in China. Previous murders or violence against successful businessmen went unpunished during the Cultural Revolution, and regrettably many are still in employment today. For them, the Communist Party had educated them in the concept of class struggle and the fight between socialism and capitalism.

Such beliefs, especially in less wealthy areas, still run strong today. As we pointed out last week on an article regarding China’s judiciary, the law is still engaged in protecting the rights of the Communist Party. The resulting fallout from the case will have repercussions on how China wishes to dismantle the political thinking it instilled in the past and obviously still there today.

How China achieves that represents a potential step backward or forward for how the nation is able to convert state-owned enterprises into efficient businesses. In the case of Chen Guojun, the inability for modern China to tread that line resulted in the ultimate price.

Chris Devonshire-Ellis is the founding partner of Dezan Shira & Associates and publisher of China Briefing. He is an elected member of the United Nations Business Advisory Council for the Greater Tumen Initiative, which includes North-East China.