Pink Slips Provoke China's Once-Red Workers

Communists approve plan this week to cut state factories. Support for party may decline.

The white-haired worker, his thin body still drenched from a thunderstorm, pleaded for hours not to be thrown off the train.

Caught during a postmidnight ticket check, the laid-off worker stood with a crowd of destitute passengers who had boarded the train by stealth.

As the lurch of the train knocks his hungry and weak body into the wall, he produces a letter from his defunct factory asking that he be given free passage to Shenyang. The man, who had worked in a state-owned plant for decades before it stopped production last year, said he had not been paid in months and that he had no money left for food.

Old Ma, as he calls himself, is not alone. With nearly half of China's state-owned companies running in the red and no national unemployment system, the Communist Party faces the prospect of alienating the workers who helped bring it to power. During an ongoing Communist Party Congress, the leadership startled the country by announcing Sept. 12 it would gradually release its control of most failing state enterprises. But it did not outline steps to help millions of laid-off workers make the transition from a socialist safety net into the swirling currents of Chinese capitalism.

"I cannot believe the [Communist] Party can just forget about us," said Mr. Ma of his plight as he traveled to the provincial capital to petition authorities for unemployment compensation.

Millions of workers like Ma have already been suspended from ailing government-run firms with a fraction of their former wages.

"These days, you can see more and more unpaid workers from state firms in every Chinese city who are finding it difficult to survive," says Lu Guigui, an entrepreneur on the train. "Many laid-off workers, especially the elderly, feel like they have been abandoned by the same system they contributed their lives to," adds Ms. Lu, who rescued Ma by giving him money for a train ticket and food.

At the opening of the plenum, held once every five years to map out policy and leadership changes, Communist Party chief Jiang Zemin vowed to revamp government firms through mergers, selling stock, downsizing, and bankruptcy.

But he has offered little comfort for the tens of millions of urban and rural workers who have been left to fend for themselves in the Darwinist jungle of China's emerging market economy. As China jettisons most vestiges of its state-planned economy, a surplus army of labor is rapidly being formed on the ruins of dismantled collective farms and factories.

Many, like Ma, decades ago entered a massive government-managed system that promised cradle-to-grave welfare benefits, but they have now been ejected into a labor market.

Ma says party officials who headed his factory, long used to state support regardless of profits or losses, had failed to navigate the plant into the rapids of the market. Although the firm closed in 1996, he says, its managers avoided declaring bankruptcy hoping they could persuade officials to fund a bailout.

The letter from his party secretary said the plant had no funds to compensate its suspended employees, and asked that compassion and aid be given Ma during his quest for either unemployment or retirement benefits.

The plight of Ma's factory is repeated endlessly throughout the industrial "rust belt" that stretches across northeast China from the Great Wall to the border with Russian Siberia.

When Ma entered the plant more than 40 years ago, the northeast's huge government-run industries were considered models for Mao Zedong's vision of an egalitarian, socialist powerhouse.

Yet Shenyang's skyline of smokestacks and socialist match-box buildings, which once formed the backdrop for propaganda posters of a Communist Utopia, now illustrate the region's decline.

Many of Shenyang's plants now lie dormant and laborers stand on street corners holding painted signs asking for work.

In cities throughout the northeast, elderly men dressed in blue Mao suits collect cans from garbage cans for recycling or hold out rusty wash-basins as they seek alms from passersby.

To tour the area is to travel back in time, before Beijing launched its drive for market reforms and integration with the global economy. Those reforms have transformed other sections of the country into dynamic centers of trade and light industry.

But moribund state companies and their party-appointed leaders still dominate the northeast, with many turning out products that cannot compete in the shifting tides of the market.

Government enterprises, even while still claiming the lion's share of loans from China's state banks, have seen their share of output drop to just one-third of gross domestic product during nearly two decades of reforms.

The private sector, including foreign firms and joint ventures, is about to overtake the state as China's leading manufacturer, says Dong Furen, a leader in the Chinese parliament in Beijing. Although more than 40 percent of state companies lost money last year, "the government will not resort to full-scale privatization," he said in an interview recently.

Despite the mounting losses, the party has hesitated to release its grip over the state sector, partly due to fears of worker unrest but mainly due to apprehensions that loss of its economic control could translate into erosion of political power.

While Ma vowed to petition for compensation, others are employing more strident measures in protesting.

"More and more workers are staging demonstrations against being cast off by state factories," says a university official in Shenyang who asked for anonymity. "Others have resorted to acts of sabotage."

While Beijing officially states that only 4 million urban workers are unemployed, says Dong, 20 million more belong to unprofitable state firms that pay reduced or no salaries.

Cao Siyuan, who helped draft China's bankruptcy law a decade ago, says although the government long feared implementing forced bankruptcies, Beijing's coffers cannot keep the growing number of loss-making state firms afloat. "The only alternative," he says, "is privatization.

"Of course the party cannot openly call the new plan for mergers ... 'privatization,' " he says.

When China's congress passed the bankruptcy law in 1986, he says, it also approved a little-publicized bill on a national unemployment-benefits scheme. But, he adds, the second bill has never been implemented.

Yet no one has offered even a guess as to when such a safety net might be in place to help discarded workers like Ma.

Ma, when asked about the chances of success in appealing to the government, seemed pessimistic. "When Mao was still alive, the party still seemed to be communist. These days, it's hard to tell what they believe in."