Murder of China Steel Exec Shows Privatization Risks

BEIJING As the amount of Chinese steel workers, meeting with their new boss grew Angri someone throwing a chair. They began to kick and frame him. Finally, Chen Guojun were cast down some of the steps to his death.


Chen's death on Friday when he tried to board a private conglomerate takeover of state Tonghua Steel in north eastern Jilin province, stressed the risk of privatization in China as one million are thrown out of work.

As the new General Manager for Tonghua, Chen had negotiated with the amount of the 30,000 workers shut down most of the area to try to stop the acquisition of Beijing-based Jianlong Steel Holdings.
Workers feared the employees will be reduced to 5000 under the new controlling shareholder, state media said.

"Employees can feel the state has sold them down the river, especially if layoffs or if the private investor moves in their own people," said Wang Erping who studies social unrest in the Chinese Academy of Sciences Institute of Psychology.
"But I've never heard of it coming to a point where one person was killed."

"These protests involve pain for the government - and all potential investors in the privatized steel mills - because China lacks independent trade unions and restrict the legal options for workers to have their complaints heard.
Managing China's rapid transformation from a socialist-style backwater to the world's third-largest economy has been one of the biggest challenges for the ruling communist party.

Nowhere is this more evident than in the giant steel sector, where China, the world's largest producer and consumer of steel, have tried to combine their businesses.
This has meant a select modern facilities and adding of workers in state-owned enterprises and to promote the well-paid managers trained in the capitalist economy, a process that can get ugly, especially in economically disadvantaged areas such as Northeast China.

Many local authorities have resisted top-down mergers to save their own tax revenues, or to prevent the unemployed, unskilled and disgruntled workers on their hands.

The merger Policy
China's official policy is to encourage mergers and acquisitions in the steel sector as well as in other industries burdened with useless capacity and too many workers.
The resulting national winners receive public support to shut down the rusty old plants and build new. Finally, they should be big and strong NOK to challenge the multinationals in the global arena.

"An event like this shows that governments have less power than most people think that when the consolidation. Or rather, that power comes at a very cost on social issues," said Michael Komesaroff of Urandaline Investment in Australia, an expert on Chinese industrial policy.