Steel mill takeover bid sparks riots in China
Updated
An executive at a steel mill in north-eastern China has been beaten to death, after 30,000 steel workers reportedly clashed with riot police over a proposed takeover deal.
News that Beijing-based Jianlong Steel Holding Company would take over the state-owned Tonghua Iron and Steel Group triggered the protest in Jilin province. The privatisation deal has since been scrapped, but Friday's riot was a reminder of the sensitivity of lay-offs from state-owned companies trying to remain financially viable.
Presenter: Sen Lam
Speakers: Dr Pradeep Taneja, political economist at Melbourne University
TANEJA: Well the streamlining or restructuring of state-owned companies has been fraught with risk from the start. And remember the risks are not just economic, they are also social and political. And although the political constituency in favour of retaining loss-making enterprises and state ownership has weakened over the years, the social risk is still quite considerable.
LAM: Mmm, and as you say, it's nothing new, because since the 1990s, the Chinese Government has laid off something like 50 million workers. Do you think Beijing has learnt any lessons from those lay offs?
TANEJA: I think the Central Government is certainly more alert to these problems, but at the local level, these issues are sometimes much harder to handle. Local issues often complicate matters as each case is different. Also, the Central Government is trying to create a social security system to alleviate some of these problems that laid off workers face. But the system is still in its very rudimentary stage, so it's not able to cope with the pressures that these workers face. And although laid-off workers are paid a pension and some severance pay, that is often not enough to cover the rising living costs in China. And with the one child family policy, most workers can no longer rely on their children either.
LAM: And do you think there is some evidence that the Chinese authorities are having problems finding this social safety net that you're talking about, due partly to the global financial crisis?
TANEJA: Well, that certainly has been a major issue and although in China, many Chinese economists were advising the government to spend more on such things as social security network and health issues, but the majority of the opinion within the Chinese Government seem to be that they need to spend more on infrastructure, to restart the economic growth process. And I think the government has basically chosen the latter option and we're seeing that a large amount of money is being invested in building infrastructure - roads, railways and new office complexes all over the country.
LAM: And Dr Taneja, do you think Chinese workers are also increasingly frustrated with the wealth gap, given that the owner of the Jianlong company, which is poised to takeover the Tonghua steel group, that owner is reputed to be China's tenth richest man?
TANEJA: Well wealth gap is a big issue and particularly, for Chinese workers who have been laid off from state-owned enterprises or unemployed workers, when they see some rich people flaunting wealth, it does cause a lot of concern amongst people, and perception is that the government policy has allowed this to happen and therefore there is a lot of frustration indeed.
