SPECIAL REPORT

Qian'an: From steel city to still city

China's once-booming steel industry is bearing the brunt of government reforms

Mr Liu Changliang paces agitatedly outside the entrance steps of the local government building in Qian'an city. For the past five months, the laid-off steel worker has been making weekly trips to the office, desperately seeking help to claim unpaid wages.

If anything, the imposing building in the city's main thoroughfare Gangcheng Dadao, or Steel City Avenue, serves as a painful reminder of how drastically the city's fortunes have reversed. In its heyday decades ago, the heavy industry hub had powered China's massive construction boom.

"The steel industry today is a shadow of its former self, many factories have closed. I've lost all hope in it and will not be looking for another job in the sector," said Mr Liu, 36, as he stood outside the building with hundreds of other unpaid workers.

Many of the steel mills in the city in northern Hebei province have gone eerily quiet, their smokestacks no longer billowing white smoke that had for years framed the city's industrial skyline. Rather, the steel sector, which used to be Qian'an's source of pride, has now become its biggest pain.

As China pushes to restructure its economy, slashing industrial overcapacity and eliminating "zombie firms", Qian'an - the country's largest steel base whose output ranked it on a par with the world's 10th largest producer, Ukraine - has borne the brunt of such efforts.

HARD TO LIVE

How can they expect us to live like this? Many of us are already borrowing money to survive but this is unsustainable.

MR LIU CHANGLIANG, who has been jobless since being laid off five months ago. 

While the reforms are agonising for businesses, what is causing alarm for the authorities are the mass layoffs and the possibility that these might ignite a tinderbox of discontent, sparking social unrest.

The Hong Kong-based China Labour Bulletin (CLB), a Chinese workers' rights group, recorded more than 2,700 strikes and protests last year, more than double the number in 2014. The problem looks to be intensifying, with more than 500 protests in January alone.

FESTERING DISCONTENT

In Qian'an, which falls under the administration of Tangshan city, about 200km south-east of Beijing, the rumble of discontent is growing. Since last November, hundreds, sometimes thousands, of laid-off steel workers such as Mr Liu have held demonstrations at the local government office over unpaid wages and social insurance after their employer, Tangshan Songting Iron & Steel, was forced out of business that same month by massive overcapacity and plummeting demand.

Songting is one of China's largest private producers, with an annual capacity of five million tonnes. Its closure would be one of the biggest in the sector's years-long downturn, fuelling fears that more factories might soon face the same fate.

When The Straits Times visited last month, the police had formed a human barricade in front of the government building to keep workers out, even as hundreds milled outside in a stand-off that occasionally resulted in scuffles.

Workers say they are owed six months of wages, amounting to about 15,000 yuan (S$3,100) to 20,000 yuan each for the "few thousands" who have been laid off.

Mr Liu, the sole breadwinner of a family of five, said: "There has been no accountability whatsoever from the firm or the authorities. Local officials have said only that they're still trying their best to find a solution.

"But how can they expect us to live like this? Many of us are already borrowing money to survive, but this is unsustainable. I hope the government can find us another job."

Another worker, Mr Song Xiaobing, 39, said Beijing's push to slash overcapacity was "just too much for the common people to bear".

He added angrily: "It needs to be done at a pace that workers like us can accept, not in a sledgehammer fashion because we are truly suffering now as a result."

At the Songting factory, blast furnaces sat deserted, although a few workers in charge of maintenance and repairs were still seen entering the building. Streets of vacant shops and restaurants flanked the factory.

A worker, who wanted to be known only as Mr Li, said most of those who were still employed had also not been paid for six months.

"Of course we're worried, but what choice do we have? I've been at Songting for more than 20 years and have seen the rise and fall of the business, even during the last round of reforms in the 1990s, so I just have to keep on going," he said.

For now, workers and their families have borne the brunt of China's economic restructuring.

The policy of reducing overcapacity, while necessary, had failed "to go through national discussion, and thus, did not fully take into consideration the interests of vulnerable groups", said Mr Li Qiang, founder of China Labour Watch, a New York-based Chinese workers' rights group.

SOOTHING THE PAIN

Seven government ministries last Saturday released new guidelines to help affected workers, including matching them to job opportunities in other provinces and free training and career guidance.

Acknowledging the problem's growing scale, Beijing recently announced the establishment of a 100 billion yuan fund to be spent over the next two years to assist workers laid-off during the restructuring process.

But experts are sceptical. It is still not clear how the fund will be administered or if the workers themselves will get the money. There is always a danger that the funds will be siphoned off by government officials or enterprise managers during the lay-off process, said CLB spokesman Geoffrey Crothall.

"The most obvious step authorities can take is to put pressure on businesses... to ensure they pay laid-off workers everything they are owed in terms of back pay, severance pay and social insurance," he added. "The problem is that many local governments do not have the ability or the political will to do so, especially during the slowdown."

Top Chinese officials have, however, played down fears of a crisis, maintaining that China will not experience the extent of layoffs seen during the last major round of state-owned enterprise (SOE) reform under then-premier Zhu Rongji in the 1990s.

During that period, tens of thousands of SOEs were privatised or liquidated, with more than 25 million workers laid off. This time round, according to some estimates, state firms in sectors facing capacity gluts, such as coal and steel, could axe up to six million jobs over the next two years.

Already, the repercussions are being felt far and wide. Apart from Qian'an, reports of steel workers in northern Jilin province and miners in north-western Shaanxi demonstrating over unpaid wages have become increasingly common.

And their voices are growing louder, even as their patience wears thin."If our protests don't work and we don't get paid, we will have no choice but to take our grievances to Beijing very soon," Mr Liu said.

A version of this article appeared in the print edition of The Straits Times on April 19, 2016, with the headline 'STEEL CITY TO STILL CITY'. Print Edition | Subscribe