China caves in, buys off protesting coal miners

Mar 15, 2016, 2:05 PM EDT
Chinese coal miners.
(Source: Michael Lau/flickr)

Beijing has put a speedy end to a protest by thousands of Chinese coal miners incensed over unpaid wages and layoffs in the northeast province of Heilongjiang. It started slowly last week and reached critical mass over the weekend, but the government began paying out wages on Monday and by Tuesday the crowd had dispersed.

Shuangyashan mine is part of Longmay Group, which is owned by the provincial government. It is typical of many of China’s state-owned coal and steel enterprises -- bloated, inefficient, and unprofitable. The miners were due two months’ wages, and were outraged when governor Lu Hao said the firm didn’t owe them anything. (Under pressure, he later had to apologize and admit wages were indeed withheld.)

Longmay Group is indisputably in need of restructuring. The firm uses 48 workers for every 10,000 tons of coal it produces -- three times the national average. Unsurprisingly, it has been making losses since 2012, although officials have propped it up for fear of labor unrest. However, the firm said last year that it would adopt a "wartime work atmosphere" to cut its 248,000 headcount by as much as 100,000. The firm has been reducing workers’ wages and hours to try to prod them to leave, but the protest shows the limit of how far that strategy can go.

The Shuangyashan mine protest is also a test case for Beijing’s plan to cut 1.8 million jobs from the coal and steel industries over the next two years, while spending $15.4 billion on workers’ severance, retraining, and relocation in new professions. This will not be a smooth process, since Beijing's worst fears of social unrest have already surfaced. Officials were able to buy off the protesters (backed by threats of a police crackdown for those thinking of lingering on), but future layoffs should be done more orderly, with alternative jobs already lined up. They need to happen though, for China’s economy and Beijing’s finances to remain on sound footing for the future. For more on China’s transforming economy, see the video of last year’s Blouin Creative Leadership Summit panel, Regional Focus: China.