China abandons steel-mill privatisation amid workers protest

China abandoned privatisation plans at a state-owned steel plant for the second time in two months after thousands of workers protested and held a government official hostage for four days, according to government and state media reports.

The Chinese government called off the plans to privatise state-owned Linzhou Iron & Steel Co. in Henan province on Sunday after some 3,000 workers, demonstrating since Tuesday, held Dong Zhangyin, a government negotiator from Anyang city hostage in the plant for four days.

Workers at Linzhou Iron and Steel held mass demonstrations against the government move to sell the steel mill to a private company, Fengbao Iron & Steel Co. Ltd., as many feared that they would lose their jobs without appropriate compensation and not receive their wages on time.

The workers released Zhangyin only after the government agreed to reconsider the sale and promised to refund the $26.5 million received from Fengbao towards the sale.

Fengbao acquired the Linzhou plant in an auction held by the local government on 24 July with a winning bid of $37.9 million. It had paid the government $26.5 million and the balance was to be paid by the end of this month.

The 40 year-old plant with 2,995 workers and 2,127 pensioners on regular payroll, had been idle since last March due to declining sales that led to financial loss as well as failing to meet the country's environmental standards.