After following one family tradition by joining the military in 1990, Fu Linxue did it again three years later when he started work at the Linzhou Iron and Steel plant in Henan province.

 

For the 39-year-old, it was the logical choice. Even after 14 years of economic reforms, becoming a security guard at the State-owned company would still mean lifelong employment, as well as comprehensive insurance, pension and healthcare packages.

 

"I left the army and returned home to Anyang to take care of my fiancee after she was badly injured in a car accident," said Fu, whose grandfather was a martyr in the War of Liberation (1946-49). "My father had worked at the plant for decades."

 

Like most workers, constitutionally China's leading class, he expected to enjoy a stable life. But just 16 years on, that stability has crumbled into chaos. He was among 3,000-plus workers who this month took a local official hostage and staged a five-day demonstration at the Linzhou Steel plant in a desperate bid to halt a controversial takeover.

 

His anger was fueled by the "shocking corruption" of bosses at the State-owned enterprise (SOE) he said orchestrated a "calculated downfall". He added: "We were a good company but the corrupt managers ruined it all."

 

 

Once hailed as a pillar of the socialist State, SOEs were branded bottlenecks to the country's financial future in 1997, with the central government citing corporate restructuring or privatization as the only tool to ensure they became vibrant corporations.

 

The employees were the hardest hit, with the China Labor Statistical Yearbook estimating that 30 million were laid off between 1997 and 2001, when the country joined the World Trade Organization. However, the nation's social insurance scheme was not extended to include all urban workers until last year.

 

In 1978, when the reform and opening up policy was launched, 99 percent of Chinese firms were State-run. Today, the number stands at just 5 percent, show figures from the State Administration for Industry and Commerce.

 

The workers have not met the changes without a fight.

 

The first mass protest was staged in March 2002, when more than 100,000 sacked SOE workers took to the streets across Northeast China, including in Liaoyang, Liaoning province, where laid-off staff from 20 SOEs held daily demonstrations for 10 weeks.

 

One of the alleged ringleaders, Yao Fuxin, was detained on charges of carrying out car bombings, Zhang Junjiu, deputy chairmain of the All-China Federation of Trade Unions, told media in November 2002. Yao was imprisoned for seven years. But Su Haijun, standing deputy chair of the Liaoyang Federation of Trade Unions, later said "there is no way" Yao was involved in such activities.

 

"The government was far less tolerant of workers' protests back then because we were demanding they right the wrongs, while officials refused to acknowledge they could be wrong," a street vendor in Liaoyang who helped organize the protests told China Daily on condition of anonymity. "Things would've been different if we protested today."

 

The private takeover of Tonghua Iron and Steel in Jilin province hit headlines last month after staff rioted on July 24 and beat executive Chen Guojun to death.

 

That same day, Linzhou Steel, based just 1,600 km south of Tonghua, was sold to Fengbao Iron and Steel - a private firm with a local reputation for unpaid wages, poor insurance cover and illegal possession of farmland - for 20 percent less than the starting price of 329 million yuan ($48 million) after an auction in which no bids were made.

 

Staff at the Linzhou plant, which halted operations in March, said they had no knowledge of the auction until management confirmed the sale days later.

 

Outraged, 3,000 workers sealed off the building on Aug 11 and held capitve Dong Zhangyin, a deputy director of the State-owned assets supervision and administration (SASAC) in Puyang, which authorized the takeover last August after six years of talks over the SOE's restructuring.

 

It followed similar protests in March and April, when 1,000 people twice blocked traffic in the city, which only ended after Wang Xiangling, Puyang's deputy mayor, and police chief Ruan Jinquan promised to take their concerns seriously, said a worker who asked to remain anonymous.

 

"They said they wouldn't be able to sleep until they had dealt with the issue properly. But that was the end of it and we have not heard anything from them since," the worker added.

 

Wang, who also headed Linzhou Steel's restructuring team, was later sacked for misconduct in its privatization.

 

"The managers told us that SOE restructuring was for our own good. How can job cuts possibly be good for us?" asked Zhu Junliang, a security guard at Linzhou Steel. "They told us it was for the greater good, but they sold the company to private hands without us knowing. Privatization only benefits the managers, not the workers or the country."

 

The firm's deputy general manager Cai Xinjie insisted on Aug 16 that the sale had been legal, adding: "The law states any item nobody bids for at auction can be sold at no more than 20 percent below the starting price."

 

As yet, the China Daily has been unable to find any relevant clause in China's laws.

 

Leaflets dated Aug 14 and distributed the next day to plant staff by provincial negotiators stated the protests ended after the provincial authorities promised to halt the takeover and pay each worker a monthly subsidy of 550 yuan until production resumes. Cai, however, denied all knowledge of such a deal.

 

"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 with the share they deserve," he said.

 

Ultimately, it was the attitude of the Linzhou management that triggered the protest, said a Guangdong-based lawyer who represents SOE staff in labor disputes.

 

"They think the workers are inferior and officials don't want to acknowledge compromises must be made," said the lawyer, who withheld his name for fear of reprisal. "The management in this case wants to paint a picture in which the workers ended the protest on their own and the government offered to halt the takeover as a gift."

 

The official version seems to reflect his comments and, on Aug 16, the day following the protest, Xinhua News Agency reported that the decision to stop the buyout had been made that same day by the "provincial committee of the Communist Party of China (CPC) and the provincial government".

 

However, the deal with the workers was brokered 30 hours earlier, with Fu Linxue handing a written copy of the agreement to China Daily on Aug 15.

 

Chief beneficiaries of the privatization of the Linzhou plant would have been its chairman and general manager Liu Junsheng, and Li Guangyuan, chairman of Fengbao Iron and Steel, analysts claimed.

 

A petition signed by 1,800 workers at Linzhou also stated Liu had said in a meeting "the more the plant slips into the red, the more it benefits the restructuring and our purchase".

 

Zhang Zhiguo, a deputy general manager for Linzhou, denied there was any corruption during the company's privatization process, which he saw as a natural progression following years of downturn and inefficiency. But Zuo Dapei, an economist at the Chinese Academy of Social Sciences in Beijing, said: "Hundreds of thousands of SOEs have been sold off or declared bankrupt for purely accounting purposes so former bosses can steal assets."

 

 

Linzhou's assets were valued at 320 million yuan by the Puyang SASAC, but it was estimated an affiliated cement factory with an annual production capacity of 100,000 tons was worth no more than 17 yuan. Workers insist Linzhou Steel is worth 800 million yuan.

 

Fengbao boss Li, meanwhile, has been accused of using his brother General Li Qianyuan's influence to expand his company by force and has faced claims of corruption since 1990 from the villagers of Dingjiao, where he is Party chief.

 

Fengbao's general manager Li Jingmin refused to comment on the July 24 auction or his company's reputation among workers, but revealed his firm planned to sue the Puyang government for its losses.

 

Despite the five-day protest, local government officials said the privatization will go ahead.

 

Puyang's Deputy Party Chief Sheng Guomin, who now heads the restructuring team, said things "had been going smoothly until the protest", while Zhang added: "Restructuring is unstoppable. The workers were just upset about the compensation and because they have a strong 'SOE mentality'."

 

"SOE mentality" is often used by managers and officials to describe the workers' nostalgic sentiments towards a secured life under the planned economy, as well as their resistance to privatization. However, Shang Xinkai, a cashier who has worked at the Linzhou plant for two decades, said it should never be a derogatory term.

 

"For us, the 'SOE mentality' is the opposite of corporate greed," she said. "If privatization is unstoppable, it should be to develop the enterprise, not sell State-owned assets to private firms and treat workers like trash."

 

She said Dong, the SASAC hostage she helped look after during the protest, had told her all eight SOEs he helped privatize in Puyang had eventually gone bankrupt.

 

After the protest, around 5,000 staff at Linzhou Steel called for the re-election of workers' representatives to protect their interests, as well as a top-level independent investigation into the July 24 buyout.

 

Neither will be an easy task, and many have already been angered by the refusal of repeated requests to meet the Puyang government taskforce sent to probe the incident.

 

"It was the workers who stood up and fought. We should be at these meetings," said a senior accountant at the firm. "How are these cadres who tried to sell the company capable of representing us in meetings?"

 

The plant's labor union chairman Guo Jianjun admitted there were a "few more managers acting as workers' representatives than in the past" but was unwilling to reveal the actual number. Instead, he called the workers' attitudes "inappropriate", adding: "They were the ones who recommended these people to be their representatives."

 

However, staff insisted there were no elections held and no votes over the potential sell-off, which contradicts a copy of the company's restructuring plans dated May 31 that cited the will of its employees as the top reason for privatization.

 

So far, no investigation has been launched into the management of Linzhou Iron and Steel or into the alleged "illegal" sale on July 24.

 

"This is ridiculous. The taskforce is supposed to be here to investigate how things went wrong," said cashier Shang. "The group is made up of more than 300 staff members, most of who stayed at the city's luxurious Zhongzhou International Hotel. Who will ensure they don't just leave like nothing happened in a few months?"