No Way Out page – 2

China Labour Bulletin and Rights & Democracy


In March 2002, Yao Fuxin, an employee at the Liaoyang Ferro-Alloy Factory in China’s northeastern Liaoning province, led over 10,000 fellow workers from across the city in a series of public protests against the alleged corruption of factory managers in the privatization and forced closure of local state-owned enterprises (SOEs). Along with fellow labour activist Xiao Yunliang, Yao was detained by local police and charged with the crime of “illegal assembly and demonstration.” Both Xiao and Yao, however, were eventually tried and convicted of the much more serious crime of “subversion of state power.” Yao was sentenced to seven years in prison and Xiao to four years. Xiao was released in February 2006, but Yao is still being held at the remote and inaccessible Lingyuan No.2 Prison, in poor health and limited to only occasional visits from his family.

Yao and Xiao are among tens of millions of workers and their families whose lives were thrown into turmoil during the wholesale, shock therapy-style privatization of SOEs carried out in China in the late 1990s and early 2000s. The so-called enterprise restructuring (qiye gaizhi) programme was designed to weed out inefficient enterprises by either closing them down or, through a range of new ownership mechanisms, merging them with more productive units. It was officially hoped that the whole process could be over and done within a few years and that everyone, including the workers, would benefit from enhanced efficiency, economic growth and new job and business opportunities over the long term. But the government’s failure to implement clear policy guidelines for the process, combined with a lack of transparency, flawed auditing of company assets and widespread official corruption, left millions of workers out in the cold, with no job and barely enough income to support their families.

Huge numbers of laid-off SOE employees sought redress, both through the official Complaints and Petitions (xin-fang) system and through the labour arbitration and court systems, but in most cases to no avail. Eventually, they were left with little alternative but to demonstrate publicly to bring their plight to the attention of local governments. However, many local officials perceived these worker demonstrations as posing a threat either to “political stability” or to their own positions, and saw to it that the activities of the protest leaders were banned or arbitrarily punished. Both Yao and Xiao, for example, were tried and convicted of involvement in the banned China Democracy Party, a charge they have consistently denied.

Disputes arising from the privatization of SOEs have typically dragged on for many years, sometimes even for decades, as local governments, the courts and official bodies such as the All-China Federation of Trade Unions (ACFTU) failed to address the widespread injustices committed against workers in the course of SOE restructuring. Indeed, these long-running collective labour disputes amount to a festering wound at the core of China’s economic success story. Workers’ leaders who fought for the rights of their colleagues have been persecuted, silenced or imprisoned, while the grievances of those they represented have been all but ignored by the authorities and the laid-off workers have been left to fend for themselves in an increasingly cutthroat market economy.

The Labour Rights Litigation Project

Initiated by China Labour Bulletin in 2003, the Labour Rights Litigation Project seeks to enable Chinese workers to obtain redress for labour rights violations through the dispute mediation, arbitration or court systems. The People’s Republic of China (PRC) has a wide range of labour legislation dating back to the 1992 Trade Union Law and the 1995 Labour Law, and these formal rights have been further enhanced by the new Employment Promotion Law and Labour Contract Law, which went into effect in January 2008, and by the Labour Dispute Mediation and Arbitration Law, enacted in May the same year. The problem for workers in China is not a lack of legislation, but rather that employers routinely ignore these laws and local governments then fail to implement and enforce them. Many workers believe, therefore, that the law lacks real force to protect their rights.

Providing legal advice is useful, but what most workers need is help in actually resolving their cases. Through the Labour Rights Litigation Project, CLB seeks to demonstrate that, even if local government agencies are unwilling to enforce the labour laws, ordinary Chinese workers can still use that legislation to protect their rights in a court of law. We collaborate with lawyers in China who specialize in workplace discrimination, work-related injury cases, disputes over the nonpayment of wages, and pension, redundancy and economic compensation cases. By mid-2008, CLB had taken on more than 250 labour dispute cases, and the great majority of cases concluded to date have been successful and produced substantial compensation for the plaintiffs. We provide workers with local lawyers to represent them, on a pro bono basis, in civil and administrative actions against employers and local government authorities, and also – in cases such as those discussed in this report, where labour activists have been detained by the police – in mounting an effective court defence against criminal charges.

In this report we follow five illustrative cases, dealt with under CLB’s Labour Rights Litigation Project, that track the typical trajectory of SOE restructuring or forced bankruptcy, leading to collective labour dispute, worker protest, and arbitrary detention or criminal trial. All the worker activists discussed below, apart from one, were subjected to arbitrary or judicially imposed periods of detention. The final case illustrates an alternative and more commonly used means by which local authorities can retaliate against workers who insist on securing redress for labour rights violations: namely, harassment and persecution short of actual detention.

The report analyzes the overall process of SOE restructuring or bankruptcy, and shows how workers’ rights and interests were systematically discarded during this process. Workers’ rights to be kept informed of restructuring plans and proposals (freedom of information), to be involved in such plans (the right to participate), and to have a fair share of the economic benefits (property rights) were generally all ignored as enterprise managers proceeded to plunder state assets for personal gain. Since independent trade unions are legally proscribed in China, the SOE workers were denied freedom of association as a channel for self-defence, and the official trade union – the All-China Federation of Trade Unions (ACFTU) – did little or nothing to provide such support.

Workers thus naturally turned to the government for help in safeguarding their rights and interests and in bringing corrupt and larcenous enterprise managers to account. However, the official complaints and petitions system not only lacked the ability to solve these problems, it often further exacerbated them. Likewise, the labour arbitration committees and the courts, for their part, were in many cases so cowed by the local governments and the Party that they dared not interfere in cases where official vested interests were at stake. Ultimately, China’s Supreme Court arbitrarily denied laid-off workers the right to pursue legal redress for rights violations arising during the SOE restructuring process. Meanwhile, despite the gradual reduction in overt official repression against worker activism that has occurred in China over the past decade or so, in a significant number of cases the government and Party’s control over the criminal justice system allowed officials to frame and imprison worker activists or subject them to prolonged detention without trial.1

The report concludes that now, more than a decade after SOE managers and government officials tried to take an economic shortcut and avoid paying the full social cost of enterprise restructuring, it is high time that all those in China whose livelihoods were ruined or derailed in the process were properly compensated.



1- For a partial list of labour activists currently jailed in China, see CLB website, Imprisoned Workers,