Thousands of workers at a state-owned steel plant in Anyang, Henan province are waiting for government promises to be delivered after a five-day protest against the takeover of their factory by a private firm.

Dong Zhangyin, a deputy director of the state-owned assets supervision and administration (SASAC) sent by Puyang city to oversee the takeover and was held hostage by workers during the protest, was released at around 3 am on Saturday after the demonstrators reached a deal with provincial authorities.

Henan’s vice Party chief Chen Quanguo and deputy governor Shi Jichun, who arrived at the trouble-plagued Linzhou Steel Corporation (LSC), promised to suspend its purchase by Fengbao Iron & Steel Co. Ltd and give each worker a monthly subsidy of 550 yuan ($80.5) until production resumes.

But the LSC’s vice Party chief and deputy general manager Cai Xinjie later told China Daily he had “never learned of such a subsidy”.

“The workers have misunderstood. They think they should get all the money just because the factory was sold to a private company. It’s not like that. The workers should be happy getting the share they deserve,” Cai said.

Set up in 1969, the LSC boasts 5,122 workers and pensioners on the regular payroll and 2,995 workers on the job. It produces some 400,000 tons of pig iron and 100,000 tons of cement a year, and was China’s only production base of low-titanium iron.

On July 24, almost a year after local authorities unilaterally decided to privatize the firm, the LSC was sold to Fengbao for 258.9 million yuan ($37.9 million), or about 64 million yuan ($9.4 million) less than the initial bid at an auction, without the workers’ consent.

Cai, however, claimed that the bidding was perfectly legal. “Law says any item that nobody bids for can be sold at no more than 20 percent lower than the initial bid,” he said.

No relevant clause exists in China’s auction law.

All LSC employees were forced to accept a compensation of only 1,090 yuan ($159.5) for each year of service before signing a new contract with Fengbao, a debt-rich company with only 1,500 job slots and a reputation for unpaid wages and lack of work insurance.

Eager to take the LSC back in their own hands, the workers say Fengbao is an empty shell with no right to buy a healthy organization like that of their own. 

Shang Xinkai, a worker in her 20th year at the LSC, told China Daily that privatization, or “corporate restructuring” in official terms, should aim for the healthier development for the enterprise, not “selling state-owned assets off to private hands and sending workers home like trash”.

Dong, the Puyang SASAC official who Shang claimed to have treated during his days as a hostage, reportedly acknowledged that all eight state-owned enterprises he helped privatize in Puyang eventually declared bankruptcy.

His SASAC evaluated the LSC’s assets at about 320 million yuan. The workers insist that the enterprise is worth “at least 800 million yuan”. They see the SASAC report, which valued an LSC-affiliated cement factory with an annual production capacity of 100,000 tons at no more than 17 yuan ($2.5), as a joke.

Officials say the LSC’s impending bankruptcy is a core rationale for its restructuring. But a senior employee, who has worked with the factory for 39 years, said its management “deliberately screwed up” to legitimize the LSC’s privatization, which workers see as a move to “sell them out” to fill the pockets of the rich and the powerful.

“It’s a classic model of how state-owned assets are lost in corporate restructuring efforts in China. All 40 years of the LSC’s assets are now in the hands of a single person,” the worker said. He refused to disclose his name.

Liu Junsheng, the LSC’s board chairman, Party boss and general manager, reportedly told an earlier inside meeting that “the more we’re in the red, the more it benefits LSC’s restructuring, and the more it benefits our purchase.”

In the name of restructuring, the plant suspended all operations and sent its employees home in March. Until the latest protest, the workers had tried to resist the privatization by blocking local traffic twice.

Puyang’s deputy mayor Wang Xiangling and police chief Ruan Jinquan reportedly promised the workers to take their concerns very seriously. An anonymous LSC staff recalled the officials as have said they “wouldn’t be able to sleep without dealing this issue properly”.

“But that was the end of it. We never heard anything from them since,” the staff said. Wang, also former chief of LSC’s restructuring team, has been sacked from her post in light of the protest.

On early Saturday, the provincial mediation team held meetings with representatives from LSC and employees about the privatization. But the workers feel they were still left out of the decision-making process, and demand future meetings to be held with representatives of their own.

The current representatives, they say, are cadres who “can no way” stand for their interests. “We must reelect workers’ representatives,” a senior staff said. “Not one among us has ever agreed to privatize or sell off the enterprise.”

The LSC restructuring plans, dated May 31, cited the strong wills of its employees as the top reason for the privatization.

The workers claim they never wanted violence and dared not stand out before. “We’ve all been compelled to come this far,” said Fu Linxue, a LSC guard for 16 years.

On Thursday night, day 3 of the protest, local police cut off all phone signals around the factory, triggering frustrated workers to smash two government cars inside the LSC compound.

Cai, speaking on behalf of LSC management, said he doesn’t know who blocked the signals. “I don’t know who did something like that,” he said.

“We don’t trust them anymore. This has been going on for too long. They’ve lost our trust,” said Wang Mingxian, 39. He has been working at the factory for 21 years and, like many others, pulls in no more than 800 yuan a month.

A banner hanging outside the LSC compound reads: “Learn from the Tonghua steelworkers. The 40 years of wealth accumulation is not up for grabs.”

LSC’s auction came on the same day as a protest against private takeover erupted at a steel factory in Tonghua city of the northeastern province of Jilin, where workers beat the newly appointed general manager to death after he threatened to downsize them all.

Workers said they were left in the dark of a deal that was about to see Jianlong, a large private steelmaker, take control of Tonghua by increasing its stake in the plant to 65 percent from 36 percent.

The incident has forced Jianlong to terminate its merger plans and the leadership of Tonghua to reshuffle.

On Friday, the All-China Federation of Trade Unions said all corporate restructuring plans must be passed by the workers’ representative meetings.

“Any layoff and resettlement plans as well as relevant issues related to the workers’ interests are not to be implemented if they were not passed by these meetings,” the federation said in a circular.