ZHANG & LIU. The Social Marginalization of Workers in China's State-Owned Enterprises

The Social Marginalization of Workers in China's State-Owned Enterprises
Author(s): Michael Zhang and Huiqing Liu

Source: Social Research, Vol. 73, No. 1, China in Transition (SPRING 2006), pp. 159-184
Published by: The Johns Hopkins University Press
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Michael Zhang
The Social Marginalization
of Workers in China's
State-Owned Enterprises
THE PROCESS OF RESTRUCTURING CHINA'S STATE-OWNED ENTERPRISES
(SOEs) has seen workers at these enterprises stage repeated collective

actions since the late 1990s. Scholars have attributed these sponta-
neous collective actions - especially the massive protests with more
than 10,000 participants each in 2002 in northeastern and southwest-
ern China - to a number of factors, including a subsistence crisis,
antagonism with capitalist private ownership, and outrage at the
corrupt behavior of SOE managers (Chen, 2000, 2003; Lee, 2005; Pan,
2002; Pringle, 2002). In response to the pressures exerted by these
collective actions, the government, while still maintaining a nega-
tive attitude toward the actions, has become more tolerant. It has
changed its tactics to deal with the workers' actions and has set up
and revised some systems of public administration and social secu-
rity in the hope of nipping such collective actions in the bud for the
general purpose of "maintaining social stability and constructing a
harmonious society."
This paper will use primary data to present a picture of the social
marginalization of the workers in the course of SOE restructuring and
define the aftereffects of this process as the root cause of the workers'
collective actions. The author believes that the workers have been grad-
ually deprived of the rights and interests entitled to them under China's
labor laws. In addition, the rights and interests given to the workers by
the restructuring policies lag behind the restructuring practice. These
social research Vol 73 : No 1 : Spring 2006 159
rights and interests have been eroded by the policy implementers in
the course of execution, thus triggering intense indignation that has
finally evolved into recurring collective actions that are, in fact, the cry
of workers who are being marginalized.
This paper is divided into four parts. Part 1 describes the influ-
ence of the SOE restructuring policies on the social marginalization of
workers and points out that one of the aftereffects of the enactment of
these policies is the deprivation of workers' legal rights and interests.
Part 2 illustrates the damage done to the workers' rights and interests
in the course of SOE restructuring and highlights that the restructur-
ing operators have worsened the marginalization of the workers by
exploiting their own information advantage. Part 3 describes the work-
ers' reemployment after restructuring and points out the consequences
of marginalization. In the last part, the author concludes, based on a
summarization of the foregoing discussion, that the social marginaliza-
tion of the SOE workers is the root cause of the collective actions taken
by Chinese workers at the beginning of this century and that those in

power should adopt a tolerant attitude and provide such "disadvan-
taged groups" with substantial assistance when such marginalization
has become irreversible.
The author's analyses and discussions are mainly based on the

records of interviews with workers by Han Dongfang, founder of China
Labour Bulletin. Since its launch in 1994, China Labour Bulletin has been
concerned with protecting workers' rights and interests in the course
of China's economic reform and is devoted to promoting a true work-
ers' movement in China. Han Dongfang has interviewed hundreds of
workers by telephone since 1998 and the records of approximately 400
such telephone interviews (some of which have been transcribed) have
been broadcast on Radio Free Asia and are also published on the China
Labour Bulletin website (http://big5.china-labour.org.hk/public/main).
These interview records reflect the workers' psychological changes
during the restructuring and their situation since it took place. They
also reveal the deep-seated cause of the collective labor actions that
have taken place in the course of restructuring.1
160 social research
SOE RESTRUCTURING POLICIES HAVE HAD SIGNIFICANT
EFFECTS ON THE SOCIAL MARGINALIZATION OF

WORKERS
China has entered the final stage of its SOE reform, with a maj
of the small and medium-sized SOEs undergoing bankruptcy, clo
or privatization. The reform is intended to lead either to the st
retreat of the state-owned economy by turning small and medi
SOEs over to private management by means of sales, transfer, or
stock system or to convert large and medium-size SOEs into joint
companies. This type of reform, called "restructuring" in the C
media, will lead to the dominance of non-state-owned enterp
the Chinese economy while the restructuring policies will push
millions of SOE workers into the margins of society.
What concerns the workers is the financial compensation t
are entitled to by the restructuring policies. The essence of the
cies is to "purchase" the workers' identity of being an "SOE work
is true that over the past two decades of economic reform SOE
ers have been much better paid than they were during the era
planned economy. However, after deducting price increases,
still exists an extremely large difference between the actual pay
workers and their labor. Only a very minor part of this differen
been reimbursed to them in the form of social welfare and social secu-
rity. The greater part of the difference has been used by the workers
to obtain from the government and the enterprises a kind of commit-
ment to or a guarantee of their occupational and life security. And the
evidence or proof that this commitment or guarantee is being complied
with is their identity of being an "SOE worker." Theoretically, the work-
ers must give up this identity after the SOEs have been restructured.
And for giving up this identity, they are entitled to the corresponding
compensation. Since such compensation is calculated on the basis of the
length of service of the workers (years of service), this "identity replace-
ment" process is informally referred to as "buying out one's years of
service." Once the workers have received the economic compensation,
they no longer have the right to put forward any economic require-
The Social Marginalization of State-Owned Enterprise Workers 161
ments in the capacity of an "SOE worker" to the government or the
enterprises concerned. To the workers, the financial compensation is
the very last time for the government and the enterprises to honor the
aforementioned commitment or guarantee. On the other hand, if the
workers are not sufficiently employed in the future, the compensation
will also be something that they can rely on to cope with their difficult
life and to continue to pay their old-age insurance. However, as a result
of the dramatically different standards and power of payment in differ-
ent regions, industries, and enterprises, even the minimum amount
justified is barely achieved in the policies and actual payments of such
financial compensation.
The core of the financial compensation policy is comprised of the
compensation standards, which vary dramatically between regions and
industries. The people who created these standards did not consider
the accumulative difference between the labor of the workers and their
wage income, let alone their future needs. Constituted simply on the
basis of the fiscal capacity of the enterprises and the local governments,
these standards allow compensation of several hundred yuan to several
thousand yuan for each year of service, the latter being rare. According
to a survey covering 66 cities and launched by the Ministry of Labor
and Social Security in December 2002, 13,603 yuan is the average
financial compensation and relocation allowance (ILSS Task Force of
"Study of Labor Relations in Transitional China" 2004). On the assump-
tion that the per capita insurance and welfare fee for state-owned enti-
ties was 2,315 yuan in 1998 and that on average the workers who are
to undergo "identity replacement" have 10 years' time before retire-
ment,2 the workers are entitled to a financial compensation of 23,150
yuan, excluding the expenses that they need to cover their daily needs
and other necessary expenditures. Consequently, the workers are often
dissatisfied with the financial compensation standards determined by
the local government. On August 4, 2003, more than 100 workers at the
Anshan Iron and Steel Group Corporation took part in a sit-in in front
of the state-owned Assets Supervision and Administration Commission
in Beijing. According to a worker who had retired from the corpora-
162 social research
tion, this action took place because the workers believed the financial
compensation paid to them was too small:
The employees believe that the sum they get paid for
buying out their years of service is too small - only three to
four hundred yuan for each year of service - which means
that for 20 or 30 years of service you merely get a bit more
than 10,000 yuan and you are sent home for the rest of
your life. So the workers believe it's too little.
(Question: Do you think the workers' requirements are

reasonable?) Well, it's difficult to say. Who would be happy
to be sent home for the rest of his days with a compensa-
tion of 10,000 yuan after having been working for 20 or 30
years? Is it a small compensation in your mind? Last year,
Angang did quite well (financially), you know. And, the
workers have worked hard all their lives, right? And they
only get such a little compensation. Now they are in their
forties or fifties and no longer competitive enough to find a
new job out there. What are they going to do? They've got
parents and children to take care of and medical and hous-
ing expenses to cover. . . ("An Issue Crucial, 2003).
The workers are dissatisfied with the standards of financial
compensation because their past contributions have not been taken

into consideration when such standards were designed, said a manage-
ment cadre from the petroleum industry:
There exist a great many problems in the design of the plan

for restructuring the entire petroleum industry. As you may
know, the petroleum workers are doing outdoor operations,
which in fact are very backbreaking. The drillers, for exam-
ple, have been working hard in a world of ice and snow for
20 or 30 years and have contributed their youth and their
best years to the enterprises. They are now in their forties
or fifties. But, in the end, they get kicked out with a little
compensation and the whole of their surplus value is gone.
Something is definitely wrong with such a design ("An In-
Service Management Cadre from Chuandong Oil Drilling
Company Talks about the Policy of Buying out One's Years
of Service in the Petroleum Industry (II)," 2002).
Apart from the excessively low standards of financial compen-

sation, quite a number of restructured enterprises do not have the
ability to pay such compensation. Most of the enterprises that are
instructed to restructure are small and medium-size enterprises that
were already insolvent and in arrears to their workers for wages and
social insurance before restructuring. Some had even stopped produc-
tion wholly or partially or were on the verge of bankruptcy before
restructuring. A survey conducted by the Labor and Social Security
Bureau of Heilongjiang province reveals that only 1.4 percent of the
province's SOEs that have laid-off workers have the ability to pay
the financial compensation and meet their liabilities; 20.2 percent
of such SOEs only have partial ability to pay while the remaining
78.4 percent have no ability to pay at all (Yi-ning, Xinhui, and Li,
2002).[3] According to a survey conducted by the Ministry of Labor
and Social Security in December 2002, 24.3 percent of the work-
ers in the SOEs directly affiliated with the central government and
42.1 percent of the workers in the SOEs directly affiliated with local
governments have not received their financial compensation, while
up to 57.8 percent of the workers of collectively owned enterprises
are not compensated (ILSS Task Force of "Study of Labor Relations in
Transitional China," 2004).
If an enterprise does not have the ability to pay, the restructuring
policy requires that the local governments raise the money to cover
the financial compensation or that the workers may use this fund to
buy stocks of the enterprise as a condition of keeping their jobs in the
enterprise. On this account, the workers are often found hesitating on
164 social research
whether they should take their compensation and lose their jobs, or
convert their financial compensation into stocks and keep their jobs. A
worker from Anshan, Liaoning said:
They (the factory management) won't give you the money

for "buying out your years." They want you to buy shares.
And, if you don't agree, they will only give you a little bit,
maybe only 500 yuan for each year of service, and then
you will be dismissed and be unemployed and entitled to
unemployment insurance for two years thereafter. If you
want to stay, you have to buy shares. If the factory makes
money (profits) in the future, you may get some dividends,
but if it loses money, your money will probably never be
returned and you will end up with nothing.
(Question: Does that mean you may get some dividends if
the factory makes money?) So to speak, but it's hard to say.
The (factory) finance is not open, not transparent, is it? The
books are cooked and the workers have no way of finding
whether it makes money or not. True, they don't force the
workers to buy shares, but we have to take this road in the
end because it's not easy to find a job once you have left the
factory ("A Talk with Anshan Workers about Compensation
and Share Buying" 2003).
From October 19 to 22, 2003, about 300 employees of the People's

Department Store of Chengdu, Sichuan province, went on a strike,
complaining that, although the store was making a profit, the stan-
dards of financial compensation were excessively low, with only 917
yuan for each year of service. And that compensation could be obtained
only when the workers reached the age of retirement:
You are not allowed to take the money (the financial

compensation) with you. They (referring to the manage-
ment) are going to use it for capital operation and how
will you be repaid if the operation fails? However, they
don't make you a shareholder, you will only get the bank
interest, which is very low, as you know. So, the workers
are certainly not satisfied ("300 Workers of a Department
Store Went on Strike in Chengdu, Protesting against the
Government's Compulsory Buy-out," 2003).
Some restructuring SOEs even concoct various pretexts to take

back the very limited financial compensation in the name of "reform,"
thus arousing dissatisfaction among the workers. On November 18 and
1 9, 2005, the road and rail traffic in Xiangfan, Hubei province was blocked
for two consecutive days by nearly 10,000 workers from Xiangyang
Bearing Factory asking for higher financial compensation. According
to the workers, the financial compensation standards proposed by the
government was 914 yuan for each year of service. However, at the same
time the government also released a housing reform policy asking the
workers to pay 35,000 yuan per household to buy the old houses they
had been living in for more than two decades, when a couple who had
been working for 20 years could only receive compensation of around
40,000 yuan. So, the workers believed that the government was actu-
ally taking back the compensation money paid them ("Talking with
Xiangfan Woman Workers about SOE Reform," 2003).
In the course of SOE restructuring, another dilemma that the
workers have to face is whether they can keep their jobs. In this regard,
the restructuring policy is often in conflict with the related provi-
sions in the labor law. In the 1990s, in order to fully enforce the labor
contract system in SOEs, the government promised that the elderly
workers with a long history of service might "sign labor contracts of no
fixed period of validity." This promise is recognized in the labor law (see
article 20 in the "Labor Law of the People's Republic of China"). These
laws have provided workers with job security and prevented the "unim-
peachable" workers from having their labor contracts cancelled or
terminated. However, according to the local documents on restructur-
ing policies, the restructuring enterprises are required to terminate the
166 social research
labor contracts signed with the workers. On the other hand, the condi-
tions for termination of labor contracts as stipulated in the labor law
and the local labor regulations do not exist and the performance of the
labor contracts shall not be affected even in cases as special as restruc-
turing.4 The author cannot make any presumptuous comments on the
considerations of the policymakers without any further background
information. What needs to be pointed out is that such policy arrange-
ments have supported the smooth implementation of the restructur-
ing actions. One of the fundamental goals of enterprise restructuring
is the privatization of the SOEs, which is not easily realized in prac-
tice. The purchasers from the private sector would often flinch at the
debts, the redundant employees, and the social security burdens in the
to be restructured SOEs. In order to accomplish the restructuring goals
as soon as possible, the operators generally resort to practices such as
underestimating enterprise assets, underselling the enterprises, and
so on. During the restructuring of some labor-intensive enterprises or
enterprises with low-technology intensity, the purchasers would often
treat the workers with labor contracts of unfixed period of validity as
a kind of "burden." If the governments do not include any actions in
the restructuring policies to alleviate such "burden," the restructuring
of such enterprises would still be difficult to accomplish; policies that
require the cancellation or termination of labor contracts have the same
objectives as the underestimation of enterprise assets. If the workers
are "lucky" enough to keep their jobs in the restructured enterprises,
they will have to renew their labor contracts with the management. At
this moment, the latter will have the power to decide the availability of
a "labor contract of unfixed period of validity," the likelihood of which
is, in fact, very small.
INFORMATION ASYMMETRY DURING RESTRUCTURING

HAS ACCELERATED THE MARGINALIZATION OF
WORKERS.
The process of transforming the Chinese economic system

market economy is designed, launched, and propelled by the go
ment. During the initial stage of the market economy, the govern-
ment usually constructs, develops, and regulates the market by means
of policies. These policies are expedient measures of the ruling party
and the government at a certain stage or during a given period of time
instead of a supplement to and an embodiment of the laws. These poli-
cies may change as time goes on and embrace specific ad hoc value
criteria and objectives, all of which are variable. These policies are real-
istic, pragmatic, and practical. But not much attention has been paid
to their value rationality and normativeness (Hongqiang, 2001: 104-
111). A serious consequence of neglecting their "value rationality and
normativeness" is "information asymmetry" in the course of enterprise
restructuring.
Both the central government and the local governments require
in their restructuring documents the submission of the restructuring
plans to the workers' assembly or the workers' representative assem-
bly for discussion and approval (see, for example, "Suggestions on
Regulation of SOE Restructuring," 2003). Governments at all levels state
that the workers should exercise a certain degree of supervision over
the restructuring operators by means of the workers' representative
assembly, which could mitigate the conflicts arising in the course of
restructuring. However, this mechanism of supervision does not work
in China, where there is no industrial democracy in the enterprises.
And what is more, what the workers' representative assembly needs
to supervise is not a common ordinary activity of production and
management, but an activity propelled by the government and closely
connected with the personal interests of the enterprise management.
When a labor union that is truly independent of the enterprise manage-
ment and able to represent the workers' interests does not exist in
an enterprise, the workers' representative assembly organized by the
labor union is nothing but a show staged by the policymakers for the
restructuring procedure. It will not be able to deliver the workers from
their passive role in the restructuring process. The enterprise restruc-
turing needs to accomplish two kinds of "replacements": "property
right replacement" and "identity replacement." Therefore, just like the
168 social research
property rights, the workers have also become an object of restructur-
ing. As this is the case, the workers, in the minds of the restructuring
operators, need not know about the restructuring, but need only to
obey the restructuring arrangements. In fact, information asymmetry
is a serious problem in the restructuring process of the great majority
of the enterprises. Such information asymmetry has enormously facili-
tated the operators in realizing the restructuring goals. First, they can
work out the restructuring plan with little external resistance and then
call for a "workers' assembly" or "workers' representative assembly"
to "pass the restructuring plan." Sometimes this practice also arouses
strong dissatisfaction among the workers. In August and September
2004, more than 100 workers of Tongda Chemical Co., Ltd. in Dazhou,
Sichuan province, blocked the main gate of the living quarters of the
factory staff and attempted to stop them from going to work because the
workers believed that the Dazhou municipal government had breached
procedures and even suspected it of illegal activities in the operation of
enterprise structuring. One of the company workers said:
Do you know how they (the government) did the restruc-

turing? A restructuring plan was first worked out secretly
by a group consisting of the vice secretary of the Municipal
Party Committee of Dazhou City and people from the
Economic and Trade Commission of Dazhou City and our
factory manager. Then the workers' representative assem-
bly was called. You know, there has been no reelection or
verification of workers' representatives for many years.
Some of the original representatives are gone, some are ill,
and others have retired. So they just gathered up a bunch
of people and rented a meeting room and a teahouse some-
where else. At the meeting, the factory manager said: we
are now to be restructured and you are here to sign the
documents so that they can be submitted. Some of the
workers' representatives are on good terms with the factory
manager, so they won't raise any objections. Some others
may disagree with the plan, but they have no choice but
to sign. The representatives were promised (by the factory
manager) that they would keep their jobs if they signed.
The management team of the restructured enterprise was
composed of the former factory manager, vice manager,
chief of the finance department, chairman of the trade
union and chief of the labor and salary department. They
will spend 2 million yuan to buy the enterprise's assets
("Staff Quarters Blocked by Workers Dissatisfied with the
Anti-Procedural Restructuring Practice of Tongda Chemical
Co., Ltd. in Dazhou City, Sichuan Province," 2004).
In addition, information asymmetry also provides the operators

with a chance for fraud so that they may deliberately keep back or modify
some information and even "cook up" some information. What is worse,
the restructuring operators will cooperate with the future purchasers (or
they may even themselves be the purchasers) and, by taking advantage
of their information monopoly and their authority, very quickly buy out
the enterprise at a veiy low price. In addition, information asymmetry
may also mislead the workers to ignore or underestimate some variables
but give more weight to other variables in the estimation of the gains
and losses of different alternatives of arrangement (for example, whether
they should make claims for the one-off financial compensation or use
such money in exchange for a job opportunity). They might be misled
into thinking that one option is more favorable than the other. However,
the option that the workers deem "favorable" is often the one that the
operators would like to have the workers choose and is not necessarily
the most favorable option to the workers (Xiuyin, 2002). In the restruc-
turing process of the China National Petroleum Corporation in 2000, a
large number of workers were laid off and lost their jobs, but after that,
one after another oil fields throughout China raised the income of the
remaining employees, leading to further expansion of the income gap
between the laid-off workers and those in service, the management in
particular, and finally resulting in collective labor actions in 2002 in vari-
170 social research
ous oil fields. The workers felt that they had been cheated because the
oil fields had, by fraud and magnification of the difficulties facing them,
been persuaded to give up their jobs and buy out their years of service
and forced to terminate their labor contracts with the enterprises. A
worker of Sichuan Chuandong Oil Drilling Company who had bought
out his years of service told us:
(Question: Was there a mobilization meeting to prepare the

workers for buying out their years of service?) There was a
meeting, yes, but it's not a mobilization meeting, it was a
situation analysis meeting. The workers were supposed to
volunteer to "buy out" of their own free will. But, after the
situation of the factory was analyzed (by the manager), you
were left with no choice. If you don't buy out, you will not
get a job and get paid. What can you do? The manager said
the company would have a very hard time in the future.
Everyone here may be laid off because the company is
overstaffed ("Workers were Forced to Give up Jobs after a
Situation Analysis-An Interview of Sichuan Workers Buying
out their Years of Service," 2002).
Finally, information asymmetry makes it easier for the operators to

have their own way in the restructuring process. They may hold back the
true causes of bankruptcy, asset assessment results, debt and credit infor-
mation, the identity of the actual purchaser of the enterprise, as well as
the key applicable policy stipulations. As a consequence, they are enabled
to design the restructuring plan according to their own interests and
wishes. The restructuring of Chongqing Wanzhou District Department
Store started in 1999 and was completed in early 2003. In this period of
time the restructuring went through two phases, starting with the stock
system and ending up in a merger in early 2003. During this process,
the will of the workers was at the mercy of the enterprise management
and local government officials. A worker from this company said that
the company was once planning to practice the stock system in 1999 as
instructed by the local government. However, the management of the
company suspended the stock system reform, afraid that they might
lose their positions after the workers became shareholders. When the
restructuring resumed in 2002, a serious disagreement arose between
local government officials and the company management and the work-
ers. The government officials and the company management, for their
personal gain, hoped that the company would be merged with a private
enterprise. The workers, however, held out for the stock system. More
than 90 percent of the workers voted for the stock system at the workers'
assembly at the end of 2002. However, the voting result and the stock
system reform plan were not approved by the government officials, who
stated that if the stock system was to be adopted, the company's assets
would require reassessment, and claimed at the same time that the work-
ers would not be competent to operate the company under the stock
system. The company was finally merged with another company recom-
mended by the local top leader and the workers never were able to learn
the logic behind the operation.
A CONSEQUENCE OF RESTRUCTURING: THE SOCIAL

MARGINALIZATION OF SOE WORKERS
After restructuring, reemployment of the unemployed has alway

a hot potato for governments at all levels. At least nine policies
reemployment of the laid-off workers were promulgated by the C
Committee and the State Council from September 2002 to early
in which they instructed local governments to use multiple chan
to help the unemployed find jobs. However, the employment cha
and support provided by such policies are not even close to m
the labor market demand. For instance, the Chinese government r
to the development of the private economy for a proper solution
the reemployment problem. However, on the labor market, whic
already become a demand-constrained market, private entrepren
are looking for labor with regard to their production activities and
expected surplus value. The employers' conditions for potential em
ees are generally: at or below the age of 35; fit and healthy; junior
172 social research
or above education; and technical competence certificates. The majority
of the unemployed do not meet these conditions. The government has
also encouraged the unemployed to start up their own businesses by
availing themselves of preferential policies that include the reduction of
and exemption from the business tax and income tax and administrative
charges. However, according to workers, not many of the unemployed
have access to these preferential policies, and small businesses find it
difficult to generate profits in the intensively competitive commodity
market. A woman who had "internally retired" (carried out the formali-
ties for retirement before reaching the official age of retirement) from
Liaoyang Paper Mould Factory and sells daily necessities on the open
market told us when she was asked about her business:
Just keep the pot boiling! My husband is also internally

retired and we two get a total of retirement pension of a bit
more than 400 yuan a month. What can you do with 400
yuan? No job can be found. Who wants to employ a woman
in her forties like me! Fortunately, the vegetables and rice
are cheap here, so we can manage and make do. Nowadays,
there are more sellers than buyers and you've got a lot of
taxes to pay! In the past I only needed to pay 1 yuan tax a
day, but nowadays I have to pay tax for every kind of good
I sell. I've got three kinds of goods on the shelf, so I have
to pay three shares of tax coming to a total of 5 yuan a day,
at least. They (the tax collectors) don't care whether you
have sold anything or not. You have to pay taxes to be here
("Living Conditions of Liaoyang Workers (III)," 2002).
An unemployed worker of the Fushun Mining Bureau of Liaoning

province said that it was extremely hard to find a job and that he had
lost the "sense of glory" of belonging to the working class:
They (the employers) want somebody below the age of 45,

so no chance for me at my age. They can find a young guy
and pay him 10 yuan a day. I said I would take the job for
8 yuan a day, but they don't want me! It's so hard to find
a job out there! Back in the 1970s, I felt like a true worker
and there was nothing to worry about after work! But now,
I dare not to think about tomorrow if I make do today. They
say that the living standards are higher. It's true for the
wealthy, but not for people who are penniless like me and
have no decent food, let alone the articles for daily use! You
can come to my home with me and see for yourself if you
don't believe me. My refrigerator is down because it has run
out of freon. You only need 80 yuan to refill it. It's been two
years, but I have no money to buy the freon, not even this
much ("A Conversation with Fushun Workers (II)," 2002).
The difficulties associated with reemployment have produced

apprehension about the future among workers who may become
unemployed at any moment. They no longer readily accept any prom-
ise made by enterprise management and even government officials.
In July 2002, workers at Changzheng Brick and Tile Factory in Baotou
City, Inner Mongolia, blocked the streets in a three-day protest. Local
officials said that the factory's land was taken back by the local govern-
ment to construct an eco-industrial park. This meant the factory had
to terminate workers' labor contracts. The government was to provide
the terminated workers with a monthly minimum of 156 yuan. Upon
the completion of the eco-industrial park, the workers would be given
priority in job placement. However, according to the workers, the so-
called monthly minimum was actually in several grades and the high-
est was 156 yuan a month. Ordinary workers could get only 40 yuan a
month while the eco-industrial park "where the workers will be given
a priority in job placement" was to be completed five years later ("Huge
Dissension Still Exists between Protesting Workers & a Baotou Factory,
Several Workers Still Locked up," 2002).
Cases of reemployment of laid-off workers do exist, but most of
such reemployments are in some non-normal sectors where employ-
174 social research
ment is unstable, no social insurance and welfare are available, and
wages are low. According to a sample survey of 66 cities by the Ministry
of Labor and Social Security in 2002, 85.4 percent of the reemployed
have temporary jobs and only 9.4 percent have regular jobs. These
survey results have revealed that the professional status of the reem-
ployed has dropped significantly (ILSS Task Force of "Study of Labor
Relations in Transitional China," 2004).5 This fact does not seem to
be in agreement with reports in some media that "the workers have
enjoyed unprecedented rights of choice while faced with great pres-
sure of competition" (Jin, Gang, and Li, 2002). The reemployed expe-
rience a series of changes, including occupational transformation,
lower income, and lower social positions, that leave them in a process
of regression from "masters of their enterprise" to employed laborers
who are no longer entitled to the occupational security and indefinite
labor contract provided by the SOEs. Instead, they have not only to
work for private entrepreneurs who regard profit as their only busi-
ness objective, but must also accept wages lower than the average level.
According to a survey by the All China Federation of Trade Unions in
2002 in six subdistricts or communities in six cities, 76.8 percent of
the reemployed have a monthly income of less than 600 yuan while
the monthly income of 36.5 percent of the reemployed is less than 400
yuan. The survey also shows that 80 percent of the laid-ofF workers had
worked 20 years or more in public-owned enterprises (ILSS Task Force
of "Study of Labor Relations in Transitional China," 2004).
The workers who remain in the restructured enterprises gener-
ally have a feeling of pressure or "oppression" that had never haunted
them before. Workers of Hubei Zaoyang Chemical Plant, which has been
restructured into a private enterprise, complain that they are forced by
plant management to work overtime but do not get paid accordingly as
required by the labor law:
We were promised 600 yuan a month for our job (at the
beginning), but we could only get 300 or 400 yuan a month
on pay day. They (the factory management) promised that
The Social Marginalisation of State-Owned Enterprise Workers 175
the weekends would be off days, but actually we don't
even get one day off. When we asked them why we are not
allowed to take a rest on the weekends, they said that we
would be paid 10 yuan extra per day if we worked on the
weekends. We asked: "Shouldn't you go by the labor law
and pay us at least 200 percent of the wages for overtime
work (on off days)?" They said, "Our words are the law. If
you are not pleased, go away!" ("Over 1,000 Workers of
Hubei Zaoyang Chemical Fertilizer Plant Went on Strike
Protesting Against Unreasonable Working Conditions,"
2003).
On November 28, 2004, a major accident with a death toll of 166

people occurred at the Chenjiashan coal mine in Tongchuan, Shaanxi
province. One of the causes of this accident was that the miners had
been instructed by the boss to continue mining after the mine was
already on fire. According to the family member of a miner, the terms
of employment for workers of the state-owned mines have changed
dramatically with restructuring:
All the miners in the pit said that this accident was caused
by human factors. The household living on the third floor
of the building where I live has a son working in the exca-
vation area or coal face. He told his mother after work that
there had been fire in the mine these few days. Sparks kept
dropping down, but the mine (the mine management) had
taken no action. His mother said: "Kid, mind your own
business. If you dare to make any remarks, you will be
fired. Then, without a job, how will you feed your kids and
wife? . . . The boss will immediately swear at you and kick
you out if you dare to say anything!" So, the workers cannot
but choke with silent fury and keep silent. No one dares to
say anything. If you do, the boss will get very brutal and
slap you in the face.
176 social research
(Question: How can he raise a hand to the workers?) If you
cannot meet or satisfy his requirements, beatings and scold-
ing are normal treatment. You are not treated as a human
being ("Disaster in Chenjiashan Coal Mines in Tongchuan,
Shaanxi Province-Workers Rage in Silence at the Big Boss
(II)," 2004).
On February 1, 2005, more than 2,000 workers at the Dazhou

cotton mill in Sichuan province went on strike with a request to be laid
off so as to draw the minimum living allowance of 130 yuan a month.
According to a woman worker who was also on strike, the workers
requested to be laid off because they could no longer put up with the
excessive fines imposed on them by the mill contractor. After the fines
were deducted, they only had 300 yuan left as their monthly pay. In this
case, the workers would rather have been laid off so that they could
draw the minimum living allowance of 130 yuan a month and then
look for work ("Over 2,000 Cotton Mill Workers Launched a 4-day Strike
in Dazhou, Sichuan Province," 2005).
The sense of "enterprise master" among SOE workers has been
washed away almost completely by the SOE restructuring. Even in
enterprises offering an employee stock ownership system, workers still
do not have the feeling that they are the true masters of the enterprise.
In these enterprises, where the majority of the shares are held by one
or several managers, the workers deem themselves as identical to the
hired labor of a private enterprise. A woman worker from a paper mill
in Suichang county, Zhejiang province, told us she had anything but
the feeling of a master, although she held a small quantity of shares of
the enterprise:
(Question: Do you think that your rights are more secure after
restructuring?) Well, actually less secure, quite the contrary.
Everybody felt that they had rights in the past. But now,
after the restructuring, the rights have become personal or
private, owned not by us but by a few potentates.
(Question: How is that?) Oh, well, now it is a joint-stock
enterprise and the majority of the stock is held by these
potentates. We don't seem to have the sense of being
the master as before. They are the decision-makers for
everything and we feel just as if we were their temporary
employees. I cannot explain it very clearly. Anyhow, this
mill has become the private property of a few people after
restructuring. It's supposed to be a joint-stock enterprise,
but to us it is just like a private enterprise ("We've Lost our
Rights-A Discussion on SOE Reform with Women Workers
in Zhejiang Province," 2003).
CONCLUSION
The social marginalization of the workers during the restru

process may be attributed to four causes. First, the original inte
the restructuring policies is not to defend the workers' rights an
ests; that is, these policies are designed to complete the restru
process at an earlier date instead of safeguarding the workers' i
The value orientation of these policies is not in the interest of th
ers and, as a result, there is a lack of social justice in the conc
substantial stipulations in these policies.
Second, the central government's policies requiring attent
worker rights and interests during the restructuring operatio
been released later than those of the local governments. Altho
SOE restructuring started in late 1990s, the central governmen
not promulgate a single normative document on the regulation
process until November 2003.6 As a result, the central governm
policies failed to provide any criteria for the local governments
to during the formulation of similar policies and local policies
more and more complex and variable. Third, the restructuring
is characterized by malpractice on the part of the restructurin
ators, who take advantage of information monopoly. As a resu
workers have been excluded from the restructuring process w
178 social research
restructuring objectives of the government have been realized. Fourth,
after the workers' identity of "SOE workers" is bought out, the reem-
ployment policies provided by the government cannot guarantee them
secure jobs and wages equivalent to the average. Once the workers have
been expelled from the labor market, they do not have the ability to
come back again. It is observed that the social rights and political status
of the former "SOE worker" class are in continuous decline and that
the workers have been reduced to the status of earning a living by sell-
ing their labor; moreover, some of the workers have been completely
expelled from the labor market.
If the restructuring process is deemed to be the process of social
marginalization of the workers, the workers' dissatisfaction should be
deemed to be the root cause of the recurring collective actions that
they have undertaken at the beginning of this century. It is true that
the workers in these actions did shout slogans such as "We Want a
Job! We Want Food! We Want to Survive!" but most of them are not
actually already in a subsistence crisis. Instead, what they hoped for
was that such actions would show the mental pressures that had been
imposed on them. After the SOEs have been restructured or become
bankrupt, the jobless workers not only have to face the fact that they
are jobless, that their family living standards are declining, and their
marital relationships are strained or even broken - they also become
deeply worried about their future, for those workers who struck, the
combined pressure of life and psychology finally evolved into an idea of
"a final battle cry" and the workers at last took to the streets.
As the SOE restructuring wanes to a close, the social marginaliza-
tion of the workers has become an irreversible fact. Recognizing this fact,
the government should take a tolerant attitude toward and accommo-
date the workers' collective actions. The term "accommodate" contains
multiple implications. First, the Government should acknowledge the

reasonable and positive aspects of these actions. Compelled by the quan-
titative restructuring objectives in the SOE reform, the restructuring
operators have disregarded the workers' interests for the sake of their
own selfish purposes. Indeed, it is these selfish purposes, which are mixed
into the restructuring process, that are the most powerful impetus to
infringements of the workers' rights. Collective actions have become the
inevitable and only choice of the workers who find that the channels for
airing their views have been blocked, their right to speak has been taken
away, and their right to subsistence has been seriously endangered. These
actions are positive in that they will further drive the reform of the admin-
istrative system and trigger the establishment of an external supervision
mechanism. Second, these actions should be used as an opportunity to
set up a dialogue mechanism between the workers and the government,
in addition to the systems of complaints, appeals, and labor dispute arbi-
tration. The government should adjust its posture in this mechanism
and government officials should maintain an attitude of equal dialogue.
Only when a status of equality for both parties has been established
can they look forward to a dialogue satisfying both sides. Third, major
reforms and improvements should be made to the existing systems of
complaints, appeals, and labor dispute arbitration. Workers should be
allowed to take collective actions regarding complaints and appeals or
deliver their complaints and advice to a higher level of authorities in the
name of a collective party to a labor dispute. The government may spec-
ify the preconditions for such collective actions, restrict them within a
certain scope, and provide necessary protections to the representatives of
such collective actions. Fourth, impartial assistance should be made avail-
able in the social security system to the "disadvantaged groups" that have
been pushed to the margin of the society. Not only should consideration
be given to the workers' present and future living needs, but also recogni-
tion should be given to their contributions in the past.
Translated from the Chinese by Huiqing Liu.
NOTES
1 . The author has revised the Chinese wording of some of the interv
records that are too colloquial to be directly translated into English. For
the original records, please refer to the "Voice of Workers" publish
on the China Labour Bulletin website at <http://big5.china-labour.org.h
public/broadcast/list>.
180 social research
2. Calculated according to page 1 3 and page 551 of the China Labor Statistics
Yearbook 1 999, which was compiled by the Population and Social Science
and Technology Statistics Department of the National Statistics Bureau
and the Planning and Financial Department of the Ministry of Labor
and Social Security and published in October 1999 by China Statistics
Press. According to the "Explanation of the Major Statistics Indexes" of
the yearbook, "The sum total of security welfare fees refer to the fees
that employers give in addition to the wages to the employees and the
retired for individual and collective security welfare, including medi-
cal service fees, death funeral relief fees, living allowance subsidies,
retirement fees, transportation subsidies, etc." This statistical index
was deleted in the subsequent issues of the yearbook.
3. The year to which this figure is applicable is not known, which could
be 2000 to 2001 based on the date of publication of this article.
4. For example, it is prescribed in Article 44, paragraph 2, of the General
Principles of the Civil Law of the People's Republic of China that
"when an enterprise as legal person is divided or merged, its rights
and obligations shall be enjoyed and assumed by the new legal person
that results from the change."
5. In 2002, the average annual salary was 12,422 yuan, equivalent to a
monthly average salary of 1,036 yuan.
6. The General Office of the State Council did not officially circulate the
"Suggestions on Regulation of SOE Restructuring" issued by the state-
owned Assets Supervision and Administration Commission of the
State Council until November 30, 2003. This document requires that
the SOE restructuring plans must be submitted to the workers' assem-
bly or the workers' representative assembly for review and discussion
so as to sufficiently incorporate comments by the workers.
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The Social Marginalization of Workers in China's State-Owned Enterprises

Author(s): Michael Zhang and Huiqing Liu

(SOEs) has seen workers at these enterprises stage repeated collective

social research Vol 73 : No 1 : Spring 2006 159

by Chinese workers at the beginning of this century and that those in

The author's analyses and discussions are mainly based on the

160 social research

EFFECTS ON THE SOCIAL MARGINALIZATION OF

The Social Marginalization of State-Owned Enterprise Workers 161

162 social research

(Question: Do you think the workers' requirements are

The workers are dissatisfied with the standards of financial

compensation because their past contributions have not been taken

There exist a great many problems in the design of the plan

The Social Marginalization of State-Owned Enterprise Workers 163

Apart from the excessively low standards of financial compen-

164 social research

They (the factory management) won't give you the money

From October 19 to 22, 2003, about 300 employees of the People's

You are not allowed to take the money (the financial

The Social Marginalization of State-Owned Enterprise Workers 165

Some restructuring SOEs even concoct various pretexts to take

166 social research

INFORMATION ASYMMETRY DURING RESTRUCTURING

The process of transforming the Chinese economic system

The Social Marginalization of State-Owned Enterprise Workers 167

168 social research

Do you know how they (the government) did the restruc-

The Social Marginalization of State-Owned Enterprise Workers 169

In addition, information asymmetry also provides the operators

170 social research

(Question: Was there a mobilization meeting to prepare the

Finally, information asymmetry makes it easier for the operators to

The Social Marginalization of State-Owned Enterprise Workers 171

A CONSEQUENCE OF RESTRUCTURING: THE SOCIAL

After restructuring, reemployment of the unemployed has alway

172 social research

Just keep the pot boiling! My husband is also internally

An unemployed worker of the Fushun Mining Bureau of Liaoning

They (the employers) want somebody below the age of 45,

The Social Marginalization of State-Owned Enterprise Workers 173

The difficulties associated with reemployment have produced

174 social research

The Social Marginalisation of State-Owned Enterprise Workers 175

On November 28, 2004, a major accident with a death toll of 166

176 social research

On February 1, 2005, more than 2,000 workers at the Dazhou

The Social Marginalization of State-Owned Enterprise Workers 177

The social marginalization of the workers during the restru

178 social research

multiple implications. First, the Government should acknowledge the

The Social Marginalization of State-Owned Enterprise Workers 179

180 social research

Chen, Feng. "Subsistence Crisis, Managerial Corruption, an

Modern China 29:2 (April 2003): 237-262.

The Social Marginalization of State-Owned Enterprise Workers 181

General Office of the State Council. "Suggestions on Regulation of SOE

ILSS Task Force of "Study of Labor Relations in Transitional China"

Should Investigate - Retired Anshan Steel Workers Discuss the

182 social research

"Over 1,000 Workers of Hubei Zaoyang Chemical Fertilizer Plant

Pringle, Tim. "Industrial Unrest in China: A Labor Movement in the

The Social Marginalization of State-Owned Enterprise Workers 183