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August 17, 2009

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Steel factory protest wins reprieve from takeover bid

AUTHORITIES in central China's Henan Province yesterday ordered an immediate halt to the takeover of a state-owned steel factory by a private company after mass protests by workers at the plant.

The decision was made by the provincial committee of the Communist Party of China and the provincial government in an attempt to calm workers at Linzhou Iron and Steel Co Ltd. The company is based in Anyang City, but authorities in Puyang City administer its operations.

The workers had protested a planned takeover by Fengbao Iron and Steel Co Ltd.

Fengbao, which bid 259 million yuan (US$37.9 million) for the plant at auction on July 24, has already paid 180 million yuan.

Fengbao officials were unavailable for comment yesterday.

A working group responsible for the restructuring of Linzhou Iron and Steel was reorganized under the leadership of Sheng Guomin, deputy secretary of the Party's Puyang committee.

The group was originally headed by a lesser official in Puyang.

The decision also requires resumption of normal production at the plant as soon as possible.

"Issues regarding the future of Linzhou Iron and Steel and benefits for its workers should be decided by its workers' congress," the ruling said.

It reiterated that Fengbao should not interfere in the company's internal affairs until all problems concerning restructuring were ironed out.

Before Linzhou Iron and Steel resumes production, each worker will get a monthly living allowance of 550 yuan, according to the decision.

Sheng said yesterday: "Our work for the time being is to solicit workers' opinions on restructuring and the future development path of Linzhou Iron and Steel."

Up to 400 workers and their relatives gathered on Saturday morning inside and outside the plant to press for a suspension of the takeover.

They also demanded higher redundancy compensation and the resolution of issues concerning unpaid wages.

The crowd dispersed after a government mediation team promised to reconsider the takeover.

Saturday's protest followed a mass demonstration that began on Tuesday at the site. Up to 3,000 people were involved in the five-day protest.

Linzhou Iron and Steel, established in 1969, has 5,122 employees and pensioners on its regular payroll, of whom 2,995 are still working.

Bad reputation

It stopped production due to a shortage of cash, falling sales, and failure to meet state environmental-protection standards.

Restructuring of the plant along commercial lines began in August 2008, and the factory suspended operations in March, sending all employees home.

Workers said Fengbao had "a bad reputation for unpaid wages and a lack of work insurance."

It is the second time in less than a month that workers have been able to halt the privatization of a Chinese steel plant as the government tries to overhaul the sprawling and inefficiently run industry.

Last month, a crowd assaulted and killed an executive who was managing the acquisition of state-owned Tonghua Steel in northeast China's Jilin Province.


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