Chinese Oil Country Simmers as Workers Protest Cost-CuttingChinese

Oil Country Simmers as Workers Protest Cost-Cutting

Thousands Laid Off, Benefits Reduced

By John Pomfret

Washington Post Foreign Service

Sunday, March 17, 2002;

DAQING, China, March 16 -- Thousands of workers have surrounded a government

building in the heart of China's oil country for the past two weeks, protesting

the restructuring of one of China's biggest listed companies.

The demonstrations at the Daqing Oil Management Bureau in this northern city

have ranged in size from several thousand people late Friday to 20,000 earlier

this week, witnesses said. Protesters have spilled into Iron Man park, an

adjacent square built to commemorate a working-class hero of the oil fields.

The peaceful protests in the center of Daqing illustrate the tensions that exist

throughout the country as millions of workers are laid off by inefficient

state-owned enterprises trying to adjust to global competition following China's

entry into the World Trade Organization. On top of this already complex problem

are persistent allegations that the restructuring process has been fraught with

corruption. Furthermore it highlights the problems China has faced in creating a

social safety net for laid-off workers. Despite claims by Premier Zhu Rongji on

Friday that the net is almost complete, millions of China's workers are still

without benefits.

Thousands of similar protests have erupted across China in the past several

years. The one in Daqing is unusual because it has been so sustained and because

news of it leaked out before it was over.

The situation is complicated by the fact that PetroChina Co., which owns most of

Daqing's oil assets, is listed on the New York and Hong Kong stock exchanges so

its actions, when dealing with the workers, could be subject to the scrutiny of

its foreign shareholders.

Workers complained today that the city government and PetroChina, one of China's

biggest listed oil companies with operating income of $30 billion last year,

gave thousands of workers severance packages of less than $500 for every year

worked. They said the protest started this month when the government announced

it would stop paying heating bills and insurance premiums for people who had

received severance packages. The protesters' ranks swelled last week when

workers who still have jobs joined the demonstration to protest a tripling of

their pension-plan contributions.

"The managers are getting huge packages and we are getting nothing," said one

worker who identified himself only as Engineer Zhang. PetroChina officials

denied his allegation.

Zhang, a father of two, said he could not support his family with the $6,000

severance package he received. "What happens when the money runs out? What

happens if someone gets sick? What happens if my boys get into college?"

Zhang and others pointed to a scandal that roiled Daqing two years ago as

evidence that the restructuring was tainted by corruption. Thirty-nine

government officials were punished for rigging the listing of Daqing Lianyi

Petrochemical Co. on the Shanghai stock exchange and handing out shares to their

relatives and friends.

"Do you think anything has changed?" asked another worker who identified himself

only as Chen. "They changed the mayor but they didn't change anything else,


Participants and witnesses said plainclothes security forces had detained

several leaders of the ad hoc workers' movement in Daqing. China bans

independent labor unions, and the Communist Party-approved All-China Federation

of Trade Unions generally represents the interests of the security forces rather

than China's laborers.

"Now no one dares to speak in public because of the arrests," said a witness who

used to work for the oil bureau. She said she believed some of the workers had

been roughed up while in police custody. "When those workers were released from

the police station, some of them were in a daze."

Daqing, in far northern Heilongjiang province, is the cradle of China's oil

industry. When oil was discovered here in the 1960s, it was a state secret,

because China's leaders feared an attack by the Soviet Union, just 220 miles to

the north.

The town spawned a series of Communist legends about the superiority of China's

workers, most notably "Iron Man" Wang, who is said to have jumped into a pit of

cement to stir it with his body because of a lack of mechanical equipment.

During China's ultra-leftist Cultural Revolution, Daqing's reliance on heavy

industry, despite its costs, was held up as a model for all of China. But the

full-speed-ahead production techniques that once made Daqing the pride of

China's oil industry have now made it one of China's laggards.

Mayor Wang Zhibin recently told the official New China News Agency that the

outlook for his city was grim. He said that Daqing's aging wells would produce

1.5 million tons less crude oil this year than last. And, he said, Daqing's oil

still costs too much to produce; the cost of oil development in China averages

$1.50 a barrel, compared with $1.20 in most other parts of the world.

China began a large-scale restructuring of its oil industry in the 1980s,

merging companies to create a few large, integrated oil concerns. In November

1999, China National Petroleum Corp. formed a subsidiary called PetroChina and

gave it 480,000 of the parent company's 1.5 million workers and most of its best

assets. PetroChina took over much of Daqing's industry. Crude output from Daqing

reached 56.6 million tons.

By January 2001, 38,000 employees had been laid off. Many of them were from

Daqing, workers said today.

In November 2000, the oil bureau arranged for 50,000 workers to receive

severance packages of $375 to $500 for each year of service. All benefits

supplied by the company -- such as medical care and pensions -- were stopped.

Workers said the government had neither the funds nor the interest to step in

and replace the cradle-to-grave security once offered by Daqing's state-owned


The workers said their protest would continue until the government agreed to

reconsider the severance packages. But that could be difficult. While still

owned mostly by the state, PetroChina also has responsibilities to its


"This is a tricky situation," said a PetroChina executive. "If the government

orders us to back down, our shareholders will be angry. But if we don't modify

the plan, there could be more unrest."

© 2002 The Washington Post Company